Per Smt. P. K. Ammini, Judicial Member - This is an appeal by the revenue. We are concerned with the assessment year 1985-86. The previous year of the assessee ended on 31-3-1985. The assessee is a registered firm. It is an exporter in lemon grass oil and dried cocoa seeds. The assessee claimed deduction under section 80HHC on the entire export turnover. According to the Assessing Officer dried cocoa seeds is an agricultural produce and as such export sale proceeds of the dried cocoa seeds cannot be considered for the purpose of working out the deduction under section 80HHC. The assessee contended before the Assessing Officer that the seeds had undergone certain process for a few days and as such they could not be treated as primary agricultural produce. The Assessing Officer did not accept this contention on the ground that the fruits of cocoa as such are not used for any purpose.
Dried seeds cannot be straightway taken for manufacturing chocolate.
They are utilised for manufacturing chocolate after undergoing certain chemical process in the factory. For the purpose of taking sees out of cocoa fruits a few days fermentation like process is to be done. Only after doing this process the seeds are taken out of the fruits and dried for the purpose of export or utilisation in the factory. By so-called process the character of the seed has not undergone any change either in its quality or in its nature or form. The so-called process is only done for the purpose of making agricultural produce fit to be taken to the market for sale/export. Since the nature, form and character of the seeds are the same even after the so-called process, they will come under agricultural produce only and as such the claim will be restricted to export on lemon grass oil. Further, the cocoa seeds will not come under plantation too, and hence the Assessing Officer rejected the claim of the assessee under section 80HHC, in respect of dried cocoa seeds.
2. Being aggrieved by this rejection of the claim under section 80HHC in respect of dried seeds of cocoa, the assessee went in appeal to the CIT (A). The CIT (A) after considering the contention of the assessee came to the conclusion that the dried cocoa seeds are not "primary agricultural produce" and hence he allowed the claim of the assessee under section 80HHC on the dried seeds of cocoa. Therefore, the revenue is aggrieved and is in second appeal.
3. We have heard the parties on this point. On the facts and circumstances of the case we see no infirmity in the order of the CIT (A). The learned Chartered Accountant brought before us the cocoa fruits, wet seeds and dried seeds. According to him the cocoa fruits are fleshy and the seeds are taken by opening the fruits. The wet seeds are obtained and dried for a week, which cannot be treated as a primary agricultural produce. "Agricultural income" is defined under section 2(1) (b) (ii) as "income from land by the performance by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market." This definition is in relation to "agricultural income" and it cannot be extended to explain the meaning of "primary agricultural produce" used in section 80HHC of the Income-tax Act. The meaning of "primary" as per Chambers Twentieth Century Dictionary is "first, original; of the first order (e.g. in a system of successive branchings); first-formed; primitive; chief; elementary; fundamental; belonging to first stages of education, elementary of a feather, growing on the manus; relating to primaries".
In the light of the above meaning given by Chambers Twentieth Century Dictionary, we hold that the dried cocoa seeds are not primary produced. In order to obtain dried cocoa seeds some process needs to be done for a week. Hence we hold that dried cocoa seeds is not a primary agricultural produce in contradistinction to cocoa fruits themselves.
Thus the benefit of deduction under section 80HHC in respect of the dried cocoa seeds cannot be denied. Therefore, the appeal of the revenue fails.