1. This appeal relating to the assessment year 1978-79 is by the revenue. The only point urged in this appeal is that the AAC, Calicut, has erred in holding that investment allowance is admissible under Section 32A of the Income-tax Act, 1961 ('the Act'), on the 'plate freezer'.
2. The assessee purchases sea food, mainly shrimps and exports them after subjecting them to processes of de-heading, peeling, de-veining and freezing. For the purpose of freezing, the assessee had installed a plate freezer. It is not in dispute that it is a new machinery installed by the assessee. The assessee claimed investment allowance of Rs. 39,500 being 25 per cent of the cost of Rs. 1,58,000. The ITO did not allow this on the ground that the new machinery installed is not for the purpose of construction, manufacture or production of any one or more of the articles or things specified in the Ninth Schedule to the Act. In so disallowing he has reproduced the words contained in Section 32A(2)(6) as it stood before its amendment by the Finance (No.2) Act, 1977 with effect from 1-4-1978. By this amendment the reference to manufacture or production of the articles specified in the Ninth Schedule was removed. Sub-clause (iii) as introduced provided for the deduction of the investment allowance in respect of construction, manufacture or production of any article or thing not being an article or thing specified in the Eleventh Schedule. It is this modified provision that is relevant for the assessment year 1978-79. This was brought to the notice of the AAC by the assessee in its appeal and the AAC took due notice of this. He directed to allow the assessee's claim taking into account only this aspect, namely, the amendment with effect from 1-4-1978 in Section 32A.3. The revenue in its appeal contends that the assessee is not entitled to the investment allowance under Section 32A. The departmental representative submitted that both the ITO and the AAC had confined themselves only to a limited aspect of Section 32A(2)(b)(iii), viz., whether it is, in any way, excluded from being considered under this provision by reason of a reference or non-reference in the relevant Schedules to the Act. It is submitted that the more important question, viz., whether the assessee is manufacturing or producing any article or thing was not considered by them. It is pointed out that under both Sub-clauses (ii) and (iii) of Clause (b) of Section 32A(2), it is necessary that there should be either manufacture or production of an article or thing. The assessee is a small scale industrial undertaking and, therefore, it is only Sub-clause (ii) of Section 32A(2)(6) that would apply. The assessee merely purchases shrimps and other sea food and subjected them to such processes as are necessary for export. It is submitted that it cannot be said that in doing these processes, the assessee can be considered to be either manufacturing or producing any article or thing. Reliance is placed in this connection on the consolidated order of the Tribunal dated 21-2-1978 in IT Appeal Nos.
331 and 332 (Coch.) of 1976-77 where the business was also in purchase and export of sea food after subjecting them to these processes. The claim there was made under Section 80J of the Act. It is pointed out that the Tribunal held that the assessee in that case was not entitled to the relief under Section 80J as it would not be considered to manufacture anything. It is pointed out that the Tribunal in that order has held that even after the freezing process employed by the assessee the product remained the same and no different commodity came into existence. On the basis of this order of the Tribunal, it is submitted, that in this case also there is no change in the article even after the verious processes are employed and, therefore, the assessee cannot be said to produce an article much less manufacture. The departmental representative in fairness brought to our notice another order of the Tribunal dated 22-10-1980 in IT Appeal Nos. 265 and 329 (Coch.) of 1978-79 wherein, considering the relief under Section 80HH in respect of a business of freezing and export of shrimps (similar to the one carried on by the assessee here), it was held that because the raw fish and the end product are not same since the end product by no amount of processing can be restored to its original condition, the exportable item is an article produced by the assessee by a method of processing.
It was held in that order that the assessee was entitled to the relief under Section 80HH.4. The departmental representative brought to our notice a decision of the Kerala High Court dated 20-8-1981 in the case of Boroth Oil Mills Co. Ltd. in [TRC No. 59 of 1981]. This was a case arising under the Kerala Sales Tax Act. It is pointed out by the departmental representative that it has been held in this decision that in a commercial sense prawns which are purchased by the assessee there and prawns exported after processing for the purpose of such export are one and the same commodity. In view of this decision, it is contended that there is no manufacture or production. It is argued that manufacture or production definitely involves change in the commodity ; since such a change is absent here it cannot be said that the assessee is manufacturing or producing an article or thing ; and, therefore, the assessee is not entitled in the investment allowance.
5. On behalf of the assessee, it is submitted that the question here is squarely covered by the decision of the Kerala High Court in CIT v.Castlerock Fisheries  126 ITR 382. It is pointed out that though this decision was in respect of the claim of that assessee for a higher development rebate of 35 per cent on a cold storage plant for freezing sea food under Section 33(1)(b)(B)(i)(a), the development rebate under this provision was available only in respect of machinery installed for the purpose of business of construction, manufacture or production of any one or more of the articles or things specified in the Fifth Schedule. The same requirement is there for the investment allowance.
The only difference is that it is not confined to any items specified in the Fifth Schedule. It is submitted that on the decision of the Kerala High Court in Castlerock Fisheries' case (supra), the assessee is entitled to the investment allowance on the plate freezer. Reliance is also placed on the decision of the Calcutta High Court in CIT v.Radha Nagar Cold Storage (P.) Ltd.  126 ITR 66 where the cold storage plant was used for preserving potatoes. The claim in that case was under Section 2(6)(c) of the Finance Act, 1969, namely, whether the assessee there was an industrial company. Reliance is also placed on the decision of the Allahabad High Court in Addl. CIT v. Farrukhabad Cold Storage (P.) Ltd.  107 ITR 816, which was also the case of a company doing cold storage business. It is submitted that the decision of the Kerala High Court, in Boroth Oil Mills (supra) was on the question whether there was a change in the commodity and not on the question whether there was a production or not. It is also submitted that this point which has been raised by the departmental representative has not been raised by the ITO either in the assessment order or before the AAC.6. It is seen from the assessment order and the order of the AAC that the question of this allowance was considered by them only in a narrow compass, viz., whether the investment allowance is to be curtailed because of the reference to articles or things in the Ninth Schedule.
The question whether the assessee was engaged in the manufacture or production was not considered by the ITO nor did the ITO place this aspect before the AAC. The assessee's representative is right when he points out that these contentions made by the departmental representative were not before either of the lower authorities.
Nevertheless, this is only a question concerning the applicability of the provision. The more important aspect of Section 32A, namely, whether the assessee is engaged in the manufacture or production of any article or thing which should have been considered, has not been considered by them. We are of the opinion that the submissions of the departmental representative raising this aspect of Section 32A have to be taken into account and considered in this appeal by the revenue. The assessee's activities consist in buying sea food especially shrimps and processing them for the purpose of export. Whether the processes employed by the assessee here for rendering shrimps purchased fit for exporting amount to either manufacture or production as required under Section 32A is the question before us. The departmental representative has relied upon the order of the Tribunal in the case of United Industries (Cochin) Ltd. [IT Appeal Nos. 331 and 332 (Coch.) of 1976-77]. That order concerns itself with the claim of an assessee, carrying on a business similar to the business of the assessee here, under Section 80J. The actual claim made by the assessee in that case was that it was engaged in manufacture. The claim was negatived by the Tribunal on the ground that the end product was not different from the raw material that was used. The question whether that assessee could be considered to have produced an article was not considered by the Tribunal. This order of the Tribunal could only be of a limited application, viz., that the assessee in this case cannot be considered to be engaged in the manufacture or production of an article or thing as required under Section 32A. In the order of the Tribunal in the case of Marwell Sea Foods [IT Appeal Nos. 265 and 329 (Coch.) of 1978-79], the question was whether the assessee was eligible to the relief under Section 80BH. Section 80HH requires either manufacture or production of articles in the backward area. It was held that the assessee in that case must be considered to have been engaged in the production of the article concerned and therefore entitled to the relief under Section 80HH. This order of the Tribunal would be more relevant than the order of the Tribunal in the earlier case, viz., United Industries (supra).
In that order, the Tribunal did not consider the question whether that assessee was engaged in the production of an article.
7. The decision of the Kerala High Court in the case of Boroth Oil Mills (supra) was under the Sales Tax Act. This, in our opinion, is not concerned with the question here, viz., whether there is a production.
It that case the question was whether there was a change in the article that was dealt in by the processes employed by the assessee therein. In that context, the Kerala High Court has held that there was no change in the article in the commercial sense. The prawns, which were purchased by the assessee and the prawns exported after processing, were held to be one and the same commodity. We do not think that decision would have a bearing on the question here whether the assessee is engaged in the production of an article.
8. We are of the opinion that the assessee must be considered to be eligible for the deduction under Section 32A. We would agree with the department that the assessee may not be considered to be engaged in the manufacture of an article or thing, but we consider that the assessee is engaged in the production of an article, viz., the exportable sea food. It may be that in the light of the decision of the Kerala High Court in the sales tax case in Boroth Oil Mills (supra) that in a commercial sense the shrimps purchased by the assessee and the shrimps exported after subjecting to the various processes are one and the same thing. Nevertheless, the commodity purchased by the assessee, namely, shrimps and other sea foods cannot be exported as such. They have to be not merely frozen but before freezing they have to be de-headed and de-veined, removing part of the body of the sea food that is purchased by the assessee. We consider that taking into account these aspects, the assessee must be considered to have been engaged in the production of an article. We find support for this conclusion in the decision of the Kerala High Court in the case of Castlerock Fisheries (supra) though that was a decision under Section 33(1)(b)(B)(i)(a). It is true that the point involved in that case was whether the assessee was entitled to a higher development rebate on the ground that the particular commodity was an article enumerated in entry 30 of the Fifth Schedule. Nevertheless, the development rebate has been allowed on the basic premise that the assessee was engaged in the production of an article. The article in that case was also frozen fish and fish product. The same ratio would apply to the interpretation of the position obtaining under Section 32A.9. The decision of the Calcutta High Court in the case of Radha Nagar (supra) and of the Allahabad High Court in Farrukhabad Cold Storage (supra) may not, however, have any bearing on the question here because those decisions were given on the question whether the company-assessee there was an industrial company in respect of the relevant provisions of the Finance Acts.
10. We, therefore, confirm the order of the AAC. The appeal is dismissed.