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32. It may be pertinent to mention that reference of Chowgules case acquires greater significance because, in that case, this Court dealt with a Division Bench judgment of the Bombay High Court in the case of Nilgiri Ceylon Tea Supplying Co. v. State of Bombay (1959) 10 STC 500. This Court observed that the judgment of the Bombay High Court did not lay down the correct law because it held that the activity of the assessee did not amount to processing.

33. Details of relevant Statute are as under:

57. In Chowgules case the court specifically examined a case decided by a Division Bench of the Bombay High Court in Nilgiris case. In this case, the Division Bench of Bombay High Court held that blending of different kinds of tea does not amount to processing. The Revenue, in support of its arguments, placed reliance on the said Nilgiris judgment. This court in Chowgules case comprehensively examined Nilgiris judgment and observed as under:

Now undoubtedly there is a close analogy between the facts of Nilgiri Tea Company case and the facts of the present case, but we do not think we can accept the decision of the Bombay High Court in the Nilgiri Tea Company case as laying down the correct law. When different brands of tea were mixed by the assesses in Nilgiri Tea Company case for the purpose of producing a tea mixture of a different kind and quality according to a formula evolved by them, there was plainly and indubitably processing of the different brands of tea, because these brands of tea experienced, as a result of mixing, qualitative change, in that the tea mixture which came into existence was of different quality and flavour than the different brands of tea which went into the mixture.

58. In view of the specific language of the Statutes in Nilgiris case (supra) and Chowgules case (supra), the term processing has been specifically incorporated in the statute, therefore, the assessees were justifiably held to be entitled to the benefit.

59. Undoubtedly, the facts of Nilgiris case are identical to the facts of the present case and the ratio of Nilgiris case is fully applicable to this case. But we have to bear in mind a significant difference in the language employed in section 8 of the Bombay Sales Tax Act, 1953 in Nilgiris case and the language of section 35(1)(B) of the Income Tax in the present case. The difference is that the term processing which has been specifically incorporated in Nilgiris case has been specifically omitted in the present case. Similarly, in Chowgules case, the term processing has been incorporated in the statute and the activities of the assessees both in Chowgules and Nilgiris cases were held to be processing and, in these respective cases, the assessees were held to be entitled to the benefit under the respective statutes. In the present case, same benefit cannot be extended to the respondent assessee because the word processing has been specifically omitted in the statute. The activities of the assessees both in Nilgiris and Chowgules cases amount to processing. The activity of the respondent assessee in the present case also amounts to processing. Section 35(1)(b) governing the instant case incorporated the terms manufacture and production and omitted the term processing. Therefore, the respondent assessee cannot be extended the benefit of section 35(1)(B) of the Income Tax Act.

60. The processing is only an intermediate stage of production and/or manufacture. The processing of tea of the respondent assessee falls short of either manufacturing or production, therefore, because of the language of section 35(1)(B) of the Income Tax Act, the respondent assessee cannot be extended the benefit which has been extended to the assessees in Nilgiris and Chowgules cases.

61. Since the legislature in its wisdom has not used the term processing in section 35(1)(B) of the Act, it would be erroneous to incorporate the word in the section and then interpret the Statute. In this view of the matter Chowgules case and Nilgiris case dealt with by this court in Chowgules case are clearly distinguishable because of the language of the statutes.