Tax Court: Cold storage plant qualifies as industrial company for tax purposes

The High Court held that the assessee-company, operating a cold storage plant to prevent goods from perishing, was engaged in processing goods and qualified as an industrial company under the Finance Acts. The court relied on interpretations of "processing" and precedent, including Addl. CIT v. Farrukhabad Cold Storage (P.) Ltd., to support its decision. The Tribunal's findings were upheld, and the assessee was directed to be treated as an industrial company for tax purposes, with income-tax levied at 55%. Sudhindra Mohan Guha J. concurred with the judgment.

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Issues Involved:
1. Whether the assessee-company was engaged in the processing of goods.
2. Whether the assessee-company qualifies as an industrial company u/s 2(6)(d) of the Finance Act, 1968, or u/s 2(6)(c) of the Finance Act, 1969.

Summary:

Issue 1: Engagement in Processing of Goods
The assessee-company operates a cold storage plant, earning income from charges collected for storing potatoes to prevent them from perishing and to keep them marketable. The Income Tax Officer (ITO) levied tax at 65% for the assessment years 1968-69 and 1969-70, asserting that the assessee was not an industrial company. The Appellate Assistant Commissioner (AAC) held that the activity of operating a cold storage plant fell within the meaning of processing of goods, directing the ITO to treat the assessee as an industrial company and charge income-tax at 55%. The Tribunal, while dismissing the revenue's appeal, concluded that the act of cold storage, which prevents the natural decay of goods, constitutes processing. The Tribunal referred to various definitions and judicial interpretations of "processing" to support this conclusion.

Issue 2: Qualification as an Industrial Company
The relevant Finance Act defines an "industrial company" as one mainly engaged in the business of generation or distribution of electricity, construction of ships, manufacture or processing of goods, or mining. The Tribunal held that the assessee-company, by preventing changes in goods through cold storage, was engaged in processing and thus qualified as an industrial company. The High Court agreed with this interpretation, noting that the act of cold storage preserves goods in their original state and prevents decay, which constitutes processing. The court referenced multiple judicial decisions and dictionary definitions to support this view, including the Allahabad High Court's decision in Addl. CIT v. Farrukhabad Cold Storage (P.) Ltd. and other relevant cases.

Conclusion:
The High Court answered the question in the affirmative, holding that the assessee-company was engaged in the processing of goods and qualified as an industrial company under the relevant Finance Acts. There was no order as to costs. Sudhindra Mohan Guha J. concurred with the judgment.

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