Have Heard The Junior Standing Counsel For Income Taxdepartment v. The Referred Case Shall Stand Disposed Of Accordingly

THE HON’BLE SRI JUSTICE V.V.S.RAOAND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.61 OF 1995 Dated: 30.12.2001 Between: The Commissioner of Income Tax,Guntur .. Applicant And M/s.Hemsons Industries Oil Mill, Anantapur .. Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.61 OF 1995 ORDER:(Per Hon’ble Sri Justice V.V.S.Rao) The Income Tax Appellate Tribunal, Hyderabad Bench ‘B’referred the following question under Section 256(1) of the IncomeTax Act, 1961 (the Act, for brevity), at the instance of theRevenue. Whether on the facts and in the circumstances of thecase, the ITAT was justified in law in holding that assessee’sactivity of decortication of groundnuts was in industrial undertaking engaged in manufacture or production activity andtherefore entitled to deduction under Section 80HH of theI.T.Act, 1961? The brief background of the matter is as follows. Theassessee is in the business of purchase and sale of groundnuts aswell as decortication of groundnuts into kernel and selling thesame at its factory at Gooty. In their return of income for theassessment year 1985-1986, the assessee claimed deductionunder Section 80HH of the Act in respect of decortication ofgroundnuts. The assessing authority disallowed the assessee’sclaim on the ground that decortication of groundnuts did notinvolve any manufacturing activity. The Commissioner of IncomeTax (Appeals), however, followed a decision of the AppellateTribunal in the case of the assessee itself for the otherassessment years and allowed the appeals duly directing the assessing officer to allow deduction under Section 80HH to theextent admissible under law. The Tribunal upheld the same,whereupon the Revenue sought the reference. The respondent/assessee is served, but none appears. We have heard the Junior Standing Counsel for Income TaxDepartment. During the course of submissions, our attention has beeninvited to the decision of the Division Bench of this Court in thecase of assessee itself viz., Commissioner of Income Tax vHemsons Industries[[1]].Inter alia,this Court considered a similarquestion. After referring to the decision of the Supreme Court inGanesh Trading Company v. State of Harynana[[2]]and other HighCourt decisions, this Court held that decortication of groundnutsinto kernel involves manufacturing activity and therefore theassessee is entitled to the benefit under Section 80HH of the Act. Following the same, the question referred to is answered in theaffirmative in favour of the assessee and against the Revenue. The Referred Case shall stand disposed of accordingly. _______________ (V.V.S.RAO, J) _____________________ (B.N.RAO NALLA, J) 30.12.2011KH [2](1973) 32 STC 623 (SC)