Dipak Kumar Sen, J.:— S.B Cold Storage Industries Pvt. Ltd., the assessee, owns and runs a cold storage plant for storage of potatoes. The assessee was assessed to income-tax for the assessment year 1979-80, the accounting year ending on December 31, 1978. In the assessment, the assessee claimed investment allowance under section 32A of the Income-tax Act, 1961, contending that it had installed new plant and machinery of the value of Rs. 2,29,315 in the cold storage during the accounting year which had been used wholly and exclusively for the purpose of its business. The investment allowance was claimed on the said amount. The assessee contended that an amount of over 75% of its claim for investment allowance had been debited in its profit and loss account of the year involved under an “Investment Allowance Reserve Account The assessee contended that the operations in its cold storage plant amounted to manufacture, the main operation being processing of potatoes by chilling so that they remained fresh.

2. The Income-tax Officer rejected the contention of the assessee holding that the plant and machinery installed by the assessee were not used for the purpose of any business of manufacture or production of any article or thing but were used only for storage and preservation of potatoes. The claim of the assessee was disallowed. Being aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner (Appeals) held that in order to be entitled to claim investment allowance under section 32A of the Act, the assessee had to establish that its plant and machinery had been used in an industrial undertaking for the purpose of business of manufacture or production of any article or thing. He held that the plant and machinery of the assessee were only for the purpose of storage and preservation of the potatoes. The assessee did not manufacture or produce any article or thing. The Commissioner (Appeals) noted that in section 80J(4)(iii) of the Act, the cold storage plant has been specifically included for the purpose of allowing the relief under the said section. Operation of a cold storage plant was not similarly mentioned in section 32A of the Act. The Commissioner (Appeals) rejected the contentions of the assessee and upheld the decision of the Income-tax Officer.

3. Being aggrieved, the assessee went in further appeal before the Income-tax Appellate Tribunal. It was contended on behalf of the assessee before the Tribunal that storing of potatoes in cold storage was an act of processing of goods. Such processing resulted in production within the meaning of section 32 of the Act. In support of his contentions, the assessee cited a decision of the Supreme Court in the case of Chrestien Mica Industries Ltd., [1961] 12 STC 150. The assessee also cited and relied on another decision of this court in Radha Nagar Cold Storage (P.) Ltd's case, [1980] 126 ITR 66.

4. It was contended on behalf of the Revenue that the processing done by the assessee in its cold storage plant could not be equated with production of an article. The Revenue cited and relied on an earlier decision of the Tribunal in Singhur Cold Storage P. Ltd. 's case.

5. The Tribunal, following its earlier decision, held that processing of potatoes in cold storage could not be equated with production of an article. The appeal of the assessee was rejected.

6. On an application of the assessee under section 256(1) of the Income-tax Act, 1961, the following question has been referred by the Tribunal, as a question of law arising out of its order, for the opinion of this court:

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to investment allowance of Rs. 57,329 on the cost of new plant or machinery installed during the previous year under section 32A of the Income-tax Act?”

7. At the hearing, learned advocate for the assessee submitted that storing of potatoes in a cold storage plant for the purpose of preservation was definitely a processing as has been found by the authorities below. He submitted that as a result of such processing, potatoes stored remained fit to be marketed, which they, otherwise, would not be. He submitted further that as a result of such storage, potatoes underwent a chemical change involving the slowing of enzymatic action, decrease in starch content and increase in the sugar content in the potatoes stored. He submitted that the potatoes stored in cold storage became a commodity different from ordinary potatoes. Accordingly, it was submitted that by processing of potatoes in its cold storage plant, the assessee was involved in production within the meaning of section 32A of the Act.

8. In support of his contentions, learned advocate for the assessee cited the following decisions:

(a) Addl. CIT v. Farrukhabad Cold Storage (P.) Ltd., [1977] 107 ITR 816 (All). In this case, a Division Bench of the Allahabad High Court held that storing of potatoes in a cold storage amounted to processing of goods within the meaning of section 2(7)(d) of the Finance Acts, 1966 and 1967, and an assessee earning income from storing potatoes in cold storage was taxable at the concessional rate prescribed under the said Acts. The High Court noted that in the Acts a distinction had been made between manufacture and processing and that an activity which fell short of manufacture could be described as processing of goods. After considering the scientific text books cited, the High Court came to the conclusion that by storing potatoes in a cold storage, their decay was prevented. The temperature was admittedly regulated by the use of machinery. The fact that the potatoes themselves did not undergo any transformation and remained as they were, did not mean that they were not subjected to any process.

(b) Commissioner Of Income-Tax v. Radha Nagar Cold Storage (P.) Ltd., [1980] 126 ITR 66. In this case, a Division Bench of this court held, following the decision of the Allahabad High Court in Farrukhabad Cold Storage (P.) Ltd. 's case, [1977] 107 ITR 816, that the assessee who was engaged in the business of running a cold storage and who earned income by storing potatoes in the plant was an industrial company within the meaning of section 2(6)(d) of the Finance Act, 1968, and section 2(6)(c) of the Finance Act, 1969, as it was engaged in processing of goods. It was held that potatoes kept in the cold storage preserved their original state and their normal decay was prevented. This amounted to processing of goods within the meaning of the said Acts. It was held further that the expression “processing” was distinct and different from the expression manufacture.

(c) Chrestien Mica Industries Ltd., v. State of Bihar, [1961] 12 STC 150. In this case, the question before the Supreme Court was whether the assessee who carried on business of mining mica in Bihar came within the mischief of the Bihar Sales Tax Act, 1947. Section 2(g) of the said Act laid down that the sale of any goods produced or manufactured in Bihar by the producer or manufacturer would, wherever the delivery or contract of sale was made, be deemed for the purpose of the Act to have taken place in Bihar.

The assessee contended that the operations carried out by it in Bihar consisted of taking out crude mica from the mines which was thereafter processed into split mica. The assessee contended that it did not produce or manufacture any article as the only operation carried out by it was splitting of mica from crude mica without any change in the product. The Supreme Court considered standard text books and literature on mica and noted the operation of obtaining split mica from crude mica in some detail. The Supreme Court distinguished the expressions “production” and “manufacture” and observed as follows (p. 153):

“Neither of the words ‘production’ or ‘manufacture’ is defined in the Bihar Sales Tax Act but according to the Oxford English Dictionary‘production’ means amongst other things that which is produced; a thing that results from any action, process or effort, a product; a product of human activity or effort.”

On the basis of the observations of the Mica Enquiry Committee Report, the Supreme Court held that the operation of obtaining split mica from crude mica amounted to production within the dictionary meaning of the said term.

(d) Chowgule & Co. P. Ltd. v. Union of India, [1981] 47 STC 124 (SC); (1981) 1 SCC 653 : AIR 1981 SC 1014. In this case, the Supreme Court held that blending of different qualities of ore, possessing different chemical and physical compositions, in order to produce ore of a particular specification could not be said to be a process of manufacture as the ore which was the result of such blending could not be regarded as a commercially new and distinct commodity from the original ore of different specification, but this operation of blending amounted to processing of ore within the meaning of section 8(3)(v) of the Central Sales Tax Act, 1956, and rule 13 of the Central Sales Tax Rules. The Supreme Court observed further that whenever a commodity underwent a change as a result of some operation performed on it or in respect of it, the same would amount to processing of the commodity and a commodity subjected to a process or treatment with a view to its development or preparation for the market, e.g, sorting and repacking of fruits and vegetables, would amount to processing within the meaning of the said section and the said rules.

(e) Brooke Bond India Ltd. v. Union of India reported in [1984] TLR 2593. In this case, it was held by me sitting singly that under item 3 of the First Schedule to the Central Excises & Salt Act, 1944, tea as such and tea packed in containers containing up to 27 kg. of tea were treated as different articles or goods. Accordingly, it was held that packing tea in containers up to the prescribed limit would amount to production or manufacture of excisable goods and made the article so produced exigible to excise duty.

(f) Empire Industries Ltd. v. Union of India, [1986] 162 ITR 846 (SC). In this case, the question before the Supreme Court was whether the petitioners which claimed to be a processing unit engaged in job activities of dyeing, printing and finishing of man-made and cotton fabrics was carrying on manufacture or production of goods. The Supreme Court held that the processing activities involved were not outside the concept of manufacture. The Supreme Court noted with approval a decision of a Division Bench of this court in Aluminium Corporation of India Ltd. v. Coal Board, AIR 1959 Cal 222, and observed as follows (p. 870):

“The objection of the petitioner in that case was that although coal might be a material or a commodity, it was not something which was produced and, therefore, the entry which applied to the goods produced in India could not apply to coal. No question of manufacture obviously arose. It was submitted that coal produced itself. This was rejected. The word ‘produced’ appearing in Entry No. 84 of List I of the Seventh Schedule is used in juxtaposition to the word ‘manufactured’ according to the Division Bench and used in connection with duty of excise and consequently it would appear to contemplate some expenditure of human skill and labour in bringing the goods concerned into the condition which would attract the duty. It was not required that the goods should be manufactured in the sense that raw material should be used to turn out something altogether different. It would still require that these should be produced in the sense that some human activity and energy should be spent on them and these should be subjected to some processes in order that these might be brought to the state in which they might become fit for consumption. To speak of coal, the Division Bench was of the opinion, as produced in the sense of its being made a material of consumption by human skill and labour was entirely correct and had sanction of approved usage… expenditure of human skill and material have been used in the processing and it may not be that the raw material was first transformed but over the transformed material, further transformation was done by human labour and skill making it fit for human consumption.”

(g) An unreported judgment dated June 9, 1986, in Income-tax Reference No. 91 of 1983 intituled Commissioner Of Income-Tax v. Union Carbide India Ltd. since reported in [1987] 165 ITR 550. This is a judgment of this Bench. The assessee in that case in its Deep Sea Fishing Division used trawlers and equipments for fishing shrimps in deep sea and thereafter decapitated, peeled and packed the shrimps in special containers and froze them in quick freezing chambers for being marketed. It was held on the basis of the finding of the Tribunal that as a result of the aforesaid operations by the assessee, a commercially new product came into existence. It was also noted that in Schedule V to the Income-tax Act, 1961, processed fish (including frozen) and fish products were included as an article coming into existence as a result of production or manufacture. The assessee was held to be entitled to relief under section 80J of the Act as an industrial undertaking carrying on production.

9. Learned advocate for the Revenue contended, on the other hand, that it has been found as a fact in the instant case that the assessee did not produce any new article. The activity of the assessee in storing potatoes in its cold storage plant may result in some sort of processing but as a result of such processing no new goods came into existence. Therefore, it was submitted that the assessee was not entitled to claim the allowance under section 32A of the Act. In support of his contentions, learned advocate for the Revenue cited the following cases:

(a) North Bengal Stores Ltd. v. Board of Revenue, in [1938-50] 1 STC 157 (Cal). He relied on the following observations in the judgment of Das J. as his Lordship then was (p. 163):

“When a dispensing chemist mixes different drugs according to the prescription of a physician, the drugs may or may not be transformed into a different matter. The mixture may become a chemical compound in which the drugs used may have been transformed into a totally different thing in their character and properties, or it may result in what is called a mechanical or physical mixture, in which each drug retains its original properties. But in either case, the resulting mixture is a distinct product brought into being in a particular form suitable for the particular use for which it is intended and capable of being sold or supplied for a price.”

(b) CIT v. Tata Locomotive & Engineering Co. Ltd., [1968] 68 ITR 325 (Bom). In this case, a Division Bench of the Bombay High Court held that assembly of a motor bus or truck chassis from imported parts would bring into existence an article totally different from the parts and would amount to manufacture or production of an article within the meaning of section 15 of the Indian Income-tax Act, 1922. The High Court observed specifically that the words “manufacture” and “produce” applied to the bringing into existence of something different from its components.

(c) Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Palampadam Plantations Ltd., [1969] 24 STC 231: In this decision, the Supreme Court considered and construed the meaning of the word “produced” with reference to the standard dictionaries and observed as follows (at p. 233):

“The context in which the word ‘produced’ appeared in the definition can only mean ‘to bring forth, bring into being or existence— to bring (a thing) into existence from its raw materials or elements’: (See the meaning of the word ‘produce’ in the Shorter Oxford English Dictionary). According to Webster's International English Dictionary, the verb ‘produce’ means to bring forward, beget, etc.”

(d) Farrukhabad Cold Storage (P.) Ltd. v. Commissioner Of Income-Tax, [1979] 119 ITR 895 (All): In this case, the assessee, which was engaged in running a cold storage plant, claimed to be a priority industry within the meaning of section 80-1 of the Income-tax Act, 1961, on the ground that it was engaged in the activity of production of processed seed and as such was a priority industry within the meaning of the said section as also section 80B(7) read with item 28 of Schedule VI to the said Act. It was held by a Division Bench of the Allahabad High Court that the assessee primarily was only storing potatoes in the cold storage. But the same did not amount to processing of seeds as the potatoes stored could be used for many purposes. The contentions of the assessee were rejected.

(e) CIT v. Hindustan Metal Refining Works (P) Ltd., [1981] 128 ITR 472 (Cal). In this case, it was held by a Division Bench of this court that galvanization of metals was an act or process of galvanizing or coating iron or steel with zinc to protect it from rust. It was held further that this process did not result in the manufacture or production of any new goods. The assessee in that case was held not to be entitled to relief under section 84(2)(ii) of the Income-tax Act, 1961, as an industrial undertaking engaged in the manufacture or production of articles, as its business consisted only of galvanizing of metals on behalf of its customers.

(f) Stale of Orissa v. Titaghur Paper Mills Co. Ltd., [1985] 60 STC 213 (SC): This decision was cited for the following observation of the Supreme Court (at p. 261):

“Even where the question is whether a certain process has resulted in a manufacture, the resultant product must be a different commercial commodity and merely because certain articles are known by different names, it does not mean that they are different commercial commodities, if, in fact, they are merely different forms of the same commodity.”

10. We note the material portion of section 32A of the Income-tax Act, 1961, which is set out hereinbelow:

“Section 32A. (1) In respect of… machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which… the machinery or plant was installed… machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent, of the actual cost of the… machinery or plant to the assessee.

(2)… machinery or plant referred to in sub-section (1) shall be the following, namely: —…

(ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing.”

11. On a consideration of the facts on record, the respective submissions made on behalf of the parties and the decisions cited, it appears to us that it remains undisputed that the assessee, which stores potatoes in its cold storage plant, carries out an operation of processing within the meaning of the said expression as understood in legal parlance. The question which is to be decided is, whether the assessee in the course of such processing is manufacturing or producing any article or goods.

12. The material on which the processing is carried out is potato. After the processing, the materials remain potatoes. In fact, the entire object of such processing is to ensure that the potatoes remain in the condition they were in when stored to the fullest extent possible. The object of putting the goods in cold storage is mainly to preserve their original condition and not to produce anything new. By such preservation, no new article is brought into existence. It also cannot be said that by reason of such processing, something which was not marketable to start with becomes marketable. It is nobody's case that the potatoes before they were put in the cold storage were not marketable. Further, it cannot be said that as a result of such processing, the potatoes become fit for consumption. To start with, potatoes are fit for consumption and after the period of storage, they remain fit for consumption.

13. For the above reasons, the ratio in the decisions cited on behalf of the assessee cannot be applied to the facts of this case. If we accept the contentions of the assessee, we have to equate the expression “processing” with the expression “production”.

14. In our view, the two expressions are not identical. The Legislature in different statutes has used the said expressions in different contexts and made a distinction between the two. The decision in Union Carbide India Ltd. v. CIT, [1987] 165 ITR 550 is distinguishable. Potatoes kept in cold storage have not been treated as a distinct article of production or manufacture as in the case of processed (including frozen) fish and fish products in Schedule V to the Income-tax Act, 1961. The Tribunal also found that the said article was a new article and different from the fish as originally caught. Therefore, the assessee also cannot take advantage of the said decision. The contention of the assessee that as a result of storage, some chemical changes result in the potatoes stored is also of no consequence. Chemical changes would also occur even if the potatoes were not kept in the cold storage but stored in the ordinary way. By putting potatoes in cold storage, the rate of chemical change is reduced. There is no evidence on record that potatoes kept in cold storage is a new commercial product or a commercial product different from potatoes which have not been kept in cold storage.

15. We hold that the cold storage plant of the assessee is not new machinery or plant installed for the manufacture or production of any article or thing and as such the assessee is not entitled to claim the investment allowance under section 32A the Income-tax Act, 1961. We answer the question referred in the affirmative and in favour of the Revenue. There will be no order as to costs.

Monjula Bose, J.:— I agree.