JUDGMENT
A.N. Verma, J.
1. These three income-tax references are being disposed of by a common order as the question referred for the opinion of this court is identical. The question referred at the instance of the Revenue in each of the three references for our opinion is :
” Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the new machinery employed in the cold storage of the assessee was entitled to investment allowance in terms of Section 32A(2)(b)(iii) of the Income-tax Act, 1961?”
2. Each of the assessees is a registered firm and runs a cold storage. In the relevant previous year, the assessee purchased new machinery for its cold storage plant and claimed investment allowance in respect thereof in terms of Clause (iii) of Section 32A(2)(b) of the Income-tax Act, 1961, which provides for deduction of investment allowance for any new machinery or plant installed after March 31, 1976, in any industrial undertaking for the purpose of business of manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule. The Income-tax Officer rejected the assessee’s claim for investment allowance on the ground that there was no manufacture or production of any article or thing in the operation of the cold storage.
3. The assessee appealed without any success, the Appellate Assistant Commissioner affirming the view of the Income-tax Officer. On further appeal to the Income-tax Appellate Tribunal, the contention of the assessee was upheld on the strength of the decision of the Punjab and Haryana High Court in CIT v. Yamuna Cold Storage [1981] 129 ITR 728 and held that the operation of a cold storage plant tantamounts to ” manufacture of an article or thing ” within the meaning of Clause (iii) of Section 32A(2)(b) and, therefore, the assessee was entitled to claim investment allowance as a permissible deduction. Accordingly, the assessee’s appeal was allowed and a direction was issued for modification of the assessment.
4. The question referred for our opinion turns on a true and proper construction of Clause (iii) of Section 32A(2)(b) of the Income-tax Act. Sub-section (1) of Section 32A lays down, inter alia, that in respect of machinery or plant specified in Sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall be allowed a deduction, in respect of the previous year in which the machinery or plant was installed or the machinery or plant is first put to use, of a sum by way of investment allowance equal to 25 per cent. of the actual cost of the machinery or plant to the assessee. Section 32A(2) defines, inter alia, machinery or plant referred to in Sub-section (1) with respect to which investment allowance is claimable under this provision. Clause (b) which is material for our purpose, to the extent relevant, is quoted below.
“(b) any new machinery or plant installed after the 31st day of March, 1976,–
(i) for the purposes of business of generation or distribution of electricity or any other form of power ; or
(ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing ; or
(iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule.”
5. Three conditions must, therefore, be satisfied before a claim for investment allowance under Clause (iii) of Section 32A(2)(b) can be claimed.
(i) The machinery or plant should be owned by the assessee ;
(ii) the new machinery or plant should be wholly used for the purposes of the business carried on by the assessee ; and
(iii) it should be a new machinery or plant installed in an industrial undertaking for the purpose of the business of manufacture or production of an article or thing not being an article or thing specified in the list in the Eleventh Schedule.
6. Let us apply these conditions to the instant case. There is no dispute that the assessee was the owner of the cold storage and we may assume that the assessee is the owner of the cold storage and that it is wholly used for the purpose of the business carried on by him. The question is whether the machinery acquired for the cold storage is a machinery installed for the purpose of the business of manufacture or production of an.article or thing.
7. This brings us to the crux of the issue, namely, whether the plant and machinery installed by the assessee for its cold storage plant can be legitimately held to be one for the purpose of business of manufacture or production of any article or thing as contemplated by Clause (b)(iii) of Sub-section (2) of Section 32A of the Act. Put more simply, the question is whether the operation of a cold storage plant by the assessee amounts to carrying on the business of manufacture or production of any article or thing.
8. In order to resolve this controversy, we will have to examine the true meaning to be assigned to the words “manufacture” and “production”. These words have not been defined in the Act, It must, therefore, according to the settled view, receive its ordinary meaning, of course keeping in view the context in which they appear. The words “manufacture” and “production” in common parlance have been used synonymously to refer and relate to the turning out of a new article. In Words and Phrases, Vol. 26, Permanent Edn., the word “manufacture” has been defined as :
” Manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation, but something more is necessary and there must be transformation, a new and different article must emerge having a distinctive name, character or use.”
9. In Union of India v. Delhi Cloth and General Mills Ltd., AIR 1963 SC 791, their Lordships of the Supreme Court have approved the above passage.
10. It is hence unnecessary to dilate on the true meaning and concept of the term “manufacture” further. Applying the definition of the word “manufacture” as stated in the Permanent Edition of Words and Phrases quoted above, it must follow that, in order to attract Clause (iii) of Section 32A(2)(b), the industrial undertaking run by the assessee must be engaged in a business activity which results in the manufacture or production of a new and distinct article or thing. In our considered view, operation of a cold storage does not result in bringing into existence any new or distinct article or thing. Indeed, to say that a cold storage plant manufactures or . produces a new and distinct article or thing would be a contradiction in terms as its avowed object is to preserve the article or thing in the same form and condition in which it is entrusted to the cold storage. The basic purpose of a cold storage plant is to conserve and retain the freshness of vegetables (mostly potatoes) or fruits and the like and to save the same from perishing or decaying. This is secured by keeping the temperature of the chamber in which the articles are stored low through electrical and mechanical devices. Be that as it may, the process of preservation does not result in any new article. The article or thing stored in a cold storage retains its essential character and properties. That indeed is the basic purpose of a cold storage.
11. We are, therefore, clearly of the view that the machinery or plant of a cold storage used in an industrial undertaking does not fall within the ambit and scope of Clause (iii) of Section 32A(2)(b) of the Income-tax Act. We are fortified in this view by the decisions of several other High Courts. Indeed, except for the decision of the Punjab and Haryana High Court (CITv. Yamuna Cold Storage [1981] 129 ITR 728), there is complete unanimity among other High Courts. The preponderating view is that the operation of a cold storage plant does not result in the manufacture or production of any article or thing so as to attract Section 32A(2)(b) of the Income-tax Act. In Mittal Ice and Cold Storage v. CIT [1986] 159 ITR 18, the Madhya Pradesh High Court, considering an identical situation, held that an assessee who operates a cold storage is not entitled to claim investment allowance under Section 32A in respect of machinery of a cold storage plant. Chief Justice Sohani, speaking for the court, observed at pages 23 and 24 thus :
“It is, thus, clear that as the words “manufacture” and “production” used in Clause (b)(ii) of Sub-section (2) of Section 32A of the Act are not defined in the Act, these words have to be understood in the context as meaning bringing into existence a new and distinct commercial commodity. Accordingly, it must be held that the provisions of Section 32A of the Act could not be invoked by the assessee as the operation of a cold storage plant does not result in bringing into existence any new and distinct marketable commodity. The articles or goods preserved in a cold storage plant remain the same as they were prior to such preservation. There is no manufacture or production of ” ool air” as was urged on behalf of the assessee because no marketable product is brought into existence by the operation of a cold storage plant. In our opinion, therefore, the Tribunal was justified in holding that the assessee was not entitled to claim investment allowance in respect of machinery of a cold storage plant operated by the assessee. The Tribunal, in our opinion, was also right in holding that the definition of the words “manufacturing process” in the Factories Act, 1948, could not be imported into the provisions of Section 32A of the Act.”
12. The learned Chief Justice distinguished the decision of the Punjab and Haryana High Court in the case of Yamuna Cold Storage [1981] 129 ITR 728, on the ground that the same was concerned with an altogether different question, namely, whether the cold storage building was a factory building which qualified for depreciation allowance under the Act.
13. The same view was expressed by their Lordships of the Calcutta High Court in the case of S.B. Cold Storage Industries P. Ltd. v. CIT [1987] 166 ITR 646. Their Lordships relied on several decisions including those rendered by the Supreme Court in support of the view that the operation of a cold storage does not involve manufacture or production of any new article or thing. They said that, by its very nature, a cold storage is designed to preserve the articles or things entrusted to it for conserving the freshness of the same and to prevent it from decaying and perishing rather than manufacturing or producing any article. Reliance was placed by the Calcutta High Court on the decision of the Supreme Court in the case of Dy. Commissioner of Agricultural Income-tax and Sales Tax v. Palampadam Plantations Ltd. [1969] 24 STC 231, 233, in which their Lordships of the Supreme Court ruled as follows (at page 653) :
“The context in which the word ‘produced’ appearing in the definition can only mean ‘to bring forth, bring into being or existence–to bring (a thing) into existence from its raw materials or elements’ (see the meaning of the word “produce” in the Shorter Oxford English Dictionary). According to Webster’s International English Dictionary, the verb “produce” means to bring forward, beget, etc.”
14. On an exhaustive analysis of the relevant authorities on the subject, their Lordships of the Calcutta High Court concluded at page 655 as follows :
“We hold that the cold storage plant of the assessee is not new machinery or plant installed, for the manufacture or production of any article or thing and as such the assessee is not entitled to claim investment allowance under Section 32A of the Income-tax Act, 1961. We answer the question referred in the affirmative and in favour of the Revenue, There will be no order as to costs.”
15. With respect, we entirely agree with the opinion expressed by the Calcutta High Court and the Madhya Pradesh High Court in the cases cited above.
16. Reliance was, however, placed by learned counsel for the assessee on the decision of the Punjab and Haryana High Court in the case of CIT v. S. Warriam Singh Cold Stores [1989] 178 ITR 585 in support of his contention that the operation of a cold storage does involve manufacture or production of a thing or article, the article manufactured or produced being cool air which helps in the preservation of potatoes and other articles and in preventing them from decaying or perishing. With great respect to the learned judges of the Punjab and Haryana High Court, we find it difficult to share the opinion expressed by them. The decision is founded on an earlier judgment of that court in the case of CIT v. Yamuna Cold Storage [1981] 129 ITR 728 (P & H). As already noted, Yamuna Cold Storage was concerned with an altogether different question, namely, whether a cold storage is a factory building within the meaning of Clause (k)(i) of Section 2 of the Factories Act, 1948. The question raised there was whether the process undertaken in a cold storage fell within the definition of “manufacturing process” in Clause (k)(i) of Section 2 of the Factories Act. It is hardly necessary to stress that there is a vital distinction between manufacturing process and “manufacture” or “production of a thing or article”. Manufacturing process is a term of wider import than manufacture or production of an article or thing. As noted above, the terms “manufacture” or “production” imply bringing into existence a new article or thing. Manufacturing process may or may not result in bringing into existence a new article or thing.
17. Apart from the fact that in the case of S. Warriam Singh Cold Stores [1989] 178 ITR 585 (P & H), the Bench was influenced by an earlier decision of that court in Yamuna Cold Storage [1981] 129 ITR 728 (P & H), which was clearly distinguishable on the facts, the Punjab and Haryana High Court found in favour of the assessee also on the ground that, in a cold storage, cool air is produced and, therefore, it must be held to fall within the definition of machinery or plant under Section 32A(2)(b). With profound respect to the learned judges, we find it hard to share their view. The decision overlooks the crucial words occurring in Clause (iii) of Section 32A(2)(b), namely, ” for the purposes of business of construction, manufacture or production of any article or thing”. In our considered view, reference to the words “article or thing” in Clause (iii) is to the article or thing which it is the business of the industrial undertaking to manufacture or produce. It is unarguable that the business of running a cold storage is not to produce cool air but to preserve the articles or things entrusted to it for that purpose. We have to look at the true and basic nature of the business activity involved and employed in the running of a cold storage.
18. On a careful consideration of the rival opinions, therefore, we find ourselves in respectful agreement with the view expressed by the Calcutta and Madhya Pradesh High Courts in the decisions cited above and regret our inability to share the opinion expressed by the Punjab and Haryana High Court in S. Warriam Singh’s case [1989] 178 ITR 585.
19. Before concluding, we may refer to a recent pronouncement of their Lordships of the Supreme Court in the case of Delhi Cold Storage P. Ltd. v. CIT [1991] 191 ITR 656 ; [1991] 3 JT 449 SC, which has a decisive bearing on the question referred to us. In this case, their Lordships of the Supreme Court were considering the scope of Section 2(7)(c) of the Finance Act, 1973, which runs thus (at page 658) :
“Industrial company means a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining.”
20. Paragraphs 12 and 13 of the judgment are relevant for our purpose and the same read thus (at page 660) :
” In common parlance, processing is understood as an action which brings forth some change or alteration of the goods or material which is subjected to the act of processing. The dictionary meaning of the term is not very different from this meaning in one sense, while various other meanings of wider amplitude are also available. The view taken by the Allahabad and Calcutta High Courts did not find favour with the three-judge Bench of this court and, in clear terms, the judgment indicates that processing involves bringing into existence a different substance from what the material was at the commencement of the process.
In a cold storage, vegetables, fruits and several other articles which require preservation by refrigeration are stored. While as a result of long storage, scientific examination might indicate loss of moisture content, that is not sufficient for holding that the stored articles have undergone a process within the meaning of Section 2(7)(c) of the Finance Act, 1973. The three-judge Bench decision must be taken to have overruled the view of the Allahabad High Court in Addl. CIT v. Farrukhabad Cold Storage P. Ltd. [1977] 107 ITR 816 and that of the Calcutta High Court in CIT v. Radha Nagar Cold Storage P. Ltd. [1980] 126 ITR 66. ”
21. If, therefore, even “processing” means an action which brings forth some change or alteration of the goods or material as ruled by the Supreme Court, it must follow with greater validity that the operation of a cold storage cannot, by any stretch, be said to be the business of “manufacture” or “production ” of any article or thing within the meaning of Section 32A(2)(b). Indisputably, the terms “manufacture” or “production” have a narrower import than “processing”.
22. We, therefore, answer the question referred for our opinion in the negative, in favour of the Revenue and against the assessee. The Revenue shall be entitled to its costs which we assess at a consolidated figure of Rs. 500.