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The question requried to be considered by us in this reference is as to whether the processing of shrimps amounts to production or manufacture, entitling the assessee to deduction under section 80HH of the Income Tax Act, 1961 ('the Act,'). The question arises out of the assessment of the income of the respondent, George Maijo (Cuddalore), Madras for the assessment years 1979-80 and 1980-81. The reference is made at the instance of the revenue.

2. The assessee is engaged in the business of processing and exporting shrimps. Its claim for deduction under section 80HH was rejected by the Income Tax Officer on the ground that such processing does not amount to production or manufacture, The Commissioner, however, was of the view that it does amount to manufacture and allowed the assessee's appeal. The revenue carried the matter further in appeal to the Tribunal which agreed with the view of the Commissioner. The Tribunal relied upon the decision of the Karnataka High Court in the case of Sterling Foods v. CIT (1994) 150 ITR 293 (Karn), when the question did not arise for consideration and the decision of the Delhi High Court in the case of Delhi Cold Storage (P)Ltd v. CIT (1985) 156 ITR 97 (Del) to hold that processing of shrimps amounts to manufacture. The Delhi High Court also in that case was not. concerned with the question which arises for consideration here. The Court held in that case that keeping of goods in a cold storage plant does not bring about any change and that to characterise an operation as 'processing' that commodity must, as a result of the operation, experience some change.

4. The commodity which was considered by the Apex Court in the case of Sterling Foods (supra) was the same as the one processed by the assessee herein. The Court field that on the application of the test formulated in the case of' Pio Food Packers (supra), followed in the case of Sterling Foods (supra), it was clear that processed or frozen shrimps, prawns and lobsters are commercially regarded the same commodity as raw shrimps, prawns and lobsters. The Court observed "When raw shrimps, prawns and lobsters are subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing, they do not cease to be shrimps, prawns and lobsters and become another distinct commodity. They, are in common parlance known as shrimps, prawns and lobsters. There is no essential difference between the raw shrimps, prawns, and lobsters. The dealer and consumer regard both as shrimps, prawns and lobsters. The only difference is that the processed shrimps, prawns and lobsters are ready for the table, while raw shrimps, prawns and lobsters are not, but still both are in commercial parlance shrimps, prawns and lobsters. It is undoubtedly true that processed shrimps, prawns and lobsters are the result of subjecting raw shrimps, prawns and lobsters to a certain degree of processing but even so they continue to possess their original character and identity as shrimps, prawns and lobsters, notwithstanding the removal of head and tails, peeling, deveining and cleaning which are necessary f or making them fit for the table. Equally it makes no difference in character when shrimps, prawns and lobsters are frozen for the purpose of preservation and transfer to other places including far off countries in the world. There can, therefore, be no doubt that processed or frozen shrimps, prawns and lobsters are not a new and distinct commodity but they retain the same character and identity as the original shrimps, prawns and lobsters."

5. The Apex Court in the case of Sterling Foods (supra) referred with approval to the decision of the Supreme Court of United States in the case of East Texas Motor Lines v. Frozen Food Express 351 US 49, wherein the Supreme Court of U.S. held that dressed and frozen chicken was not a commercially distinct commodity but was commercially and in common parlance the same article as chicken.

6. The enunciation made by the Supreme Court regarding the result of the processing of shrimps in such a lucid manner, one would have expected, would make any litigant realise the futility of any further argument on the question in issue here. However, the counsel for the assessee made a valiant attempt to sustain the order of the Tribunal and referred to a number of decisions rendered by this Court and other High Courts on the question as to whether the processing of sea foods results in the manufacture of a new article, and relying on those decisions, sought to contend that processing of shrimps by the assessee would result in the manufacture and production of a new article which was commercially a distinct and different article.

The passage so relied on by the counsel is only a part of the judgment of the Apex Court in the case of Pio Food Packers (supra) which was considered by the Apex Court in the case of Sterling Foods (supra). It was only after considering the decision of the Court in the case of Pio Food Packers (supra) and after applying the tests laid down therein, the Apex Court came to the definite conclusion that the processing of shrimps for the purpose of export by removing the head and tails, peeling, deveining, cleaning and freezing, does not bring into existence a commercially new and different commodity and that the-commodity remains the same before and after processing of the shrimps. As 'new' goods are not brought into existence by the processing of shrimps at any stage of the processing, frozen shrimps are neither produced nor manufactured by reason of such processing.