D.K Jain, J.— At the instance of the assessee, the Income Tax Appellate Tribunal, Delhi (for short ‘the Tribunal’) has referred the following questions under Section 256(1) of the Income Tax Act, 1961 (for short ‘the Act’) for the opinion of this Court:

“1. Whether on the facts and in the circumstances of the case, the assessee company is entitled to export market development allowance in the sum of Rs. 8,54,984/- or in any other sum, under Section 35-B of the Income-tax Act, 1961?

2. Whether, on the facts and in the circumstances of the case, the assessee company is entitled to deduction/relief in the sum of Rs. 98,396/- or in any other sum, under Section 80-J of the Income-tax Act, 1961?”

The assessee is a private limited company, incorporated on 28th July, 1978 with the object of carrying on the business of deep sea fishing etc. The assessment year involved is 1980-1981, for which the accounting period ended on 30th June, 1979. For the relevant assessment year the assessee claimed weighted deduction under section 35b(1)(b)(viii) in respect of the expenses incurred on payment of charter fees for the fishing trawlers hired by it from one Southern Marine Services Company Limited of Thailand. However, while completing assessment for the relevant assessment year the Assessing Officer held that these expenses being hire charges for the trawlers hired by the assessee for catching fish in Indian waters pertained to the cost of the product which it was exporting and, thus, did not relate either to the supply of goods or performance of services outside India, as laid down under Section 35-B of the Act and, therefore, disallowed the claim. Aggrieved, the assessee preferred an appeal to the CIT (Appeals), who concurred with the Assessing Officer.

Being dissatisfied with the decision of the CIT (Appeals), the assessee took the matter in further appeal to the Tribunal. Before the Tribunal, the assessee's plea was that since the lower authorities had failed to examine the claim of the assessee under sub-clause (viii) of clause (b) of sub-section (1) of Section 35-B, the matter may be remanded back to the CIT (Appeals) for a fresh decision on this aspect. The Tribunal did not accept the said plea of the assessee and dismissed the appeal in the following terms:

“In paying hire charges for carriage of the goods from India to foreign destination what services are performed by the assessee company in connection with or incidental to the execution of the contract for the supply of the goods outside India in question has not been explained to us. We in any case see the items in question namely the carriage of goods falls squarely within sub clause (iii) of clause (b) being the special provision dealing with the carriage of goods. It would not therefore, in our opinion, be proper to relate the expenditure in question to sub clause (viii). The expenditure in question falls squarely within the ambit and scope of sub clause (iii) as such we do not entertain the assessee's request in this regard. There is no merit in the assessee's contention. Accordingly, the plea of the assessee on this point is rejected.”

Thus, though the tribunal felt that the claim of the Assessee might fall within the ambit of sub clause (iii) of clause (b) but since the assessee did not press its claim under the said sub clause, and was infact insisting on remand of the case to the first Appellate Authority for re-consideration of its claim under sub clause (viii), the Tribunal did not deem it fit to do so as it was of the view that the assessee's claim did not fall within the ambit and scope of the said sub clause.

The second question relates to the assessee's claim for benefit admissible to a new industrial undertaking under Section 80-J of the Act in respect of profits and gains derived from catching and exporting fish. Though from the assessment order and order of the CIT (Appeals) it appears that the assessee's claim was based on its stand that it had been operating a cold storage plant for storing the fish on the trawlers, but the claim was not accepted by the said authorities on the ground that mere provision of storage facilities on each fishing trawler could not be equated to operating a cold storage plant within the meaning of clause (iii) of sub section (4) of Section 80-J but according to the statement of the case, the Tribunal examined the case of the assessee from a different angle, namely, whether the assessee was manufacturing or producing any articles to qualify for relief under the said Section. While upholding the disallowance of relief under the said Section, the Tribunal held as follows:

“In the present case, what the assessee had been doing and activity it urges to be proved as an activity of manufacturing and producing an article, was “to catch fish on the high seas”, to clean it from both ends and then to keep it in the cold storage till the customers comes and the same was sold to them. This activity does not in our opinion constitute an act of manufacturing or producing an article, not even an act of processing fish.”

Distinguishing the decision of the Kerala High Court in Cochin Company v. CIT, Kerala (1978) 114 ITR 822, relied upon by the assessee, the Tribunal further observed as follows:

“In the case of Cochin Company v. CIT 114 ITR 822 the starting point for discussion was that “the assessee company was engaged solely in the business of processing and export of fish” (see page 832, 2nd line of the 2nd paragraph). In the present case, there is no such common starting point. The fact is that the only activity done by the assessee company is to catch the fish on the high sea to clean it from both ends and to keep it in the cold storage till it is sold out. Such an activity does not, in our opinion, constitute even processing.” (Emphasis added)

Thus, the Tribunal held that assessee's activity of catching fish and keeping it in the cold storage did not amount to manufacture or production or even processing of goods to fall within the ambit of Section 80-J of the act, to be entitled to relief under the said Section.

We have heard Mr. S.P Mittal, learned counsel for the Assessee and Mr. R.D Jolly, learned Senior Standing Counsel for the Revenue.

Weighted deduction under Section 35-B of the Act can be claimed only in respect of the expenses which specifically fall within the ambit of any one of the sub-clauses from (i) to (ix) of Section 35-B of the Act. In the instant case, according to the Assessee, its claim for weighted deduction falls under sub clause (viii). The relevant provisions of Section 35-B read as under:

“35B. Export markets development allowance:—(1)(a) Where an assessee, being a domestic company or a person (other than a company) who is resident in India, has incurred after the 29th day of February, 1968, whether directly or in association with any other person, any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) referred to in clause (b), he shall, subject to the provisions of this section, be allowed a deduction of a sum equal to one and one-third times the amount of such expenditure incurred during the previous year.;

Provided……..

(b) The expenditure referred to in clause (a) is that incurred wholly and exclusively on:

(i) xxxxxxxxx

(ii) xxxxxxxxx

(iii) distribution, supply or provision outside India of such goods, services or

facilities.

(iv) xxxxxxxxx

(v) xxxxxxxxx

(vi) xxxxxxxxx

(vii) xxxxxxxxx

(viii) performance of services outside India in connection with, or incidental to, the execution of any contract for the supply outside India of such goods, services or facilities.

(ix) xxxxxxxxx

Explanation 1. - xxxxxxxxx

Explanation (2) - xxxxxxxxxxx

1(A) xxxxxxxxx

(2) xxxxxxxxx

From a plain reading of the aforenoted provisions of law, it is evident that the expenditure which qualifies for weighted deduction under sub clause (viii) must be incurred on “performance of services outside India in connection with or incidental to the execution of any contract for the supply outside India of such goods, services or facilities”. It is clear that not only the performance of services has to be outside India, only that expenditure will qualify for weighted deduction which has been incurred for performance of services outside India in connection with or incidental to the execution of any contract for the supply outside India of such goods, services or facilities.

Inviting the attention of the Court to clause 18 of the Charter Party Agreement between the said M/s. Southern Marine Services Company Limited, Thailand and the assessee, which provides for payment of hire charges by the assessee to the said Southern Marine Services Company for giving on hire fishing vessels for deep sea fishing operations at Port Blair, India, it was submitted by learned counsel for the assessee that since all payments were to be made in Thailand upon completion of each voyage and after realisation of the sale proceeds of the catch, the hire charges were being paid outside India for effecting supplies of goods outside India and, therefore, the claim for weighted deduction squarely fell within the ambit of sub clause (viii). Having perused the terms of the aforenoted Charter Party Agreement we are unable to persuade ourselves to agree with the learned counsel. The agreement is a plain and simple agreement for taking on hire vessels for fishing in India and the expenses so incurred on payment of hire charges are in the nature of trading expenses incurred by the assessee in India.

In the alternative, it was submitted by Mr. S.P Mittal, learned counsel for the assessee, that the assessee's claim may be considered under sub clause (iii) of clause (b) of sub section (1) of Section 35B. We are afraid, in the light of the facts stated by the Tribunal to the effect that the assessee did not press its claim before it under the said sub clause, we cannot accept this contention as well. In dealing with a reference under section 256(1) or 256(2) of the act, the High Court is bound to proceed on the basis of findings of fact recorded by the Tribunal and cannot go behind the agreed statement of the case and answer the question on different circumstances and assumptions, which the Tribunal had no occasion to consider. (See: Associated Clothiers Ltd., v. CIT, Calcutta (1967) 63 ITR 224 SC and Karnani Properties Ltd. v. Commissioner Of Income Tax, West Bengal (1971) 82 ITR 547 SC). In view of the said settled position in law with regard to the scope of the reference before the High Court, we cannot entertain the alternative prayer urged on behalf of the assessee. Accordingly, we are of the opinion that the assessee is not entitled to export market development allowance in the sum of Rs. 8,54,954/- or in any other sum under sub clause (viii) of clause (b) of sub section (1) Section 35-B of the Act.

This brings us to the second question. Relevant portion of Section 80-J of the Act reads as follows:

“80J: Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases:—(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by the deduction, if any, admissible to the assessee under Section 80HH or Section 80HHA) of so much of the amount thereof as does not exceed the amount calculated at the rate of six percent per annum on the capital employed in the industrial undertaking or ship or business of the hotel, as the case may be, computed in the manner specified in sub Section (1A) in respect of the previous year relevant to the assessment year (the amount calculated as aforesaid being hereafter, in this section, referred to as the relevant amount of capital' employed during the previous year).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

(4) This section applies to any industrial undertaking which fulfils all the following conditions, namely:—

(i) xxxxxxxxxxxx

(ii) xxxxxxxxxxxxx

(iii) it manufactures or produces articles or operates one or more cold storage plant or plants, in any part of India and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of thirty three years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking;

(iv) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx”.

From a bare reading of the above-noted provisions, it is evident that the benefit of exemption under Section 80J of the Act, facetiously styled as “tax holiday” is confined only to the profits derived by an assessee from an industrial undertaking which is engaged in the “manufacture” or “production” of an article. So we are concerned with the question whether the assessee is an industrial undertaking and whether by catching fish it ‘manufactures’ or ‘produces’ an article as contemplated in clause (iii) of subsection 4 of Section 80J.

The terms “manufacture” or “produce” appearing in the said Section have not been defined and there is a considerable amount of divergence of opinion between the Courts on the issue. However, the broad principle which can be deduced from various judicial pronouncements on the subject is that it is only when a change or series of changes take the commodity subjected to such processes to a point where it can no longer be regarded as the original commodity but is instead recognised as a new and a distinct article, that such a process can be said to have resulted in a “manufacture” or “production” of an article. In other words, what is to be seen is whether the article claimed to be manufactured or produced is commercially different from the commodity out of which the same has been produced. As noted above, in the present case, the Tribunal has found that the assessee's activity is restricted to catching of fish on the high seas, cleaning it from both the ends and then keeping it in the cold storage till the same is sold to various customers. So far as the process, the assessee puts the fish to, is concerned,. the aforenoted finding, one of fact, is not sought to be challenged in the question referred to this Court. Applying the above test to the facts found by the Tribunal, we are of the opinion that by mere cutting of head and tail of the fish, it does not become other distinct commodity. In common parlance it continues to be known as fish and, therefore, the assessee company cannot be said to be an industrial undertaking engaged in the manufacture or production of an article to be entitled to any relief under Section 80J of the Act.

The view we have taken finds support from the decision of the Supreme Court in Sterling Foods v. The State of Karnataka & Anr. (1986) 63 STC 239, wherein it has been held that the processed or frozen shrimps and prawns are commercially regarded as the same commodity as raw shrimps and prawns. When raw shrimps and prawns are subjected to the process of cutting heads and tails, peeling, de-veining, cleaning and freezing they do not cease to be shrimps and prawns and become other distinct commodities. There is no essential difference between raw shrimps and prawns and processed or frozen shrimps and prawns. In common parlance they remain to be known as shrimps and prawns. Following the said judgment, in a recent decision in Commissioner of Income Tax v. Relish Foods (1999) 237 ITR 59, the Apex Court has affirmed the decision of the Bombay High Court in CIT v. Sterling Foods (Goa) (1995) 213 ITR 851, wherein it was held that activity of processing of prawns is not an activity of manufacture or production. A similar view was taken earlier by the Bombay High Court in CIT v. Fazalbhoy Ibrahim and Co. P. Ltd. (1995) 214 ITR 239, wherein it was held that “catching fish” did not amount to “manufacture” or “production of fish within the meaning of Section 80-J. Both the decisions of the Bombay High Court are apposite to the question before us.

In the light of the aforenoted judgments of the Supreme Court, with respect, we are unable to subscribe to the view taken by the Calcutta High Court in CIT v. Union CArbide India Ltd. (1987) 165 ITR 550, relied upon by learned counsel for the asses-see. We are of the view that the assessee is neither an industrial undertaking nor is it engaged in the business of manufacturing or producing any article and consequently it is not entitled to deduction under Section 80J. Accordingly, the second question is also answered in the negative i.e in favour of the Revenue and against the assessee. The reference is answered accordingly. There will, however, be no order as to costs.