IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH **** I.T.R. No.550 of 1995 Date of Decision:30.11.2006 The Commissioner of Income-tax, Patiala .....Petitioner Vs. Om Parkash .....Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present:- Dr. N.L.Sharda, Advocate for the revenue. **** ADARSH KUMAR GOEL, J. Following question has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh arising out of its order dated 3.6.1994 in I.T.A. No.88/Chandi/94 in respect of assessment year 1990-91:- “Whether on the facts and in the circumstance of the case, the ITAT was right in law in holding that `Poultry Farming' constituted and industrial undertaking producing articles or things and poultry sheds to house the chicks fall in the definition of `plant' eligible for deduction u/s 32A of the Income-tax Act?” Facts noticed by the Tribunal are that the assessee derives income from poultry business. In the course of the assessment proceedings, it claimed deduction under Section 80-I of the Income Tax Act, 1961 (for short, `the Act'), which came to be rejected by the AO on the ground that poultry farming did not constitute an “industrial undertaking” which was a necessary prerequisite for claiming such a deduction. The decision of CIT (A) for assessment year 1989-90 in the case of M/s Shivalik Poultries, Mauli, was placed on record by the assessee to support its claim but this was not acceded to by the AO on the ground that the department had filed second appeal to the Tribunal against the impugned order of CIT(A). On further appeal, however, the CIT(A) accepted the assessee's claim following I.T.R. No.550 of 1995 -2- in this connection the decision of the Chandigarh Bench of the Tribunal in the case of Sandeep Poultry Farm in ITA No.511/Chandi/88 dated 4.3.1993. We have heard learned counsel for the revenue and perused the record. We proceed to answer the question referred as under: Section 80-I of the Act provides for deductions in respect of profits and gains, inter-alia, from “industrial undertakings”. Question is whether poultry farming was an “industrial undertaking”. The question was gone into by the Hon'ble Supreme Court in Indian Hotels Co. Limited and others v. Income Tax Officer and others, (2000) 245 ITR 538, with reference to identical provision in Section 80J of the Act and it was observed that industrial undertaking must be involved in manufacture or production. In the context, production of a new article or bringing into existence some new commodity must be involved. Industrial undertaking should not be “trading activity”. The matter was also considered by the MP High Court in Indian Poultry v. Commissioner of Income Tax, (1998) 230 ITR 909 and it was observed:- “Suffice it to say that the process which is involved in development of chicks into broilers is nothing but basically the chicks remain chicks only. There is no substantial change so as to acquire new commercial identity. Chicks are smaller ones and when they are reared for some time, they develop suitably for table purposes. Therefore, there is no change of the substance.” xx xx xx xx “It is true that even if the chicks which develop into broilers and they are dressed and sold in the market, they still continue to be chicks only. Therefore, there is no substantial change in the matter. “Manufacture” implies a change, but every change is not manufacture and yet every change in an article is the result of treatment, labour and manipulation and does not necessarily mean that on account of certain treatment and manipulation, a new identity has come to be acquired. In the present case, the chicks are only reared for a few days and they are developed; thereafter they become broilers. I.T.R. No.550 of 1995 -3- Therefore, even after rearing, they remain chicks only.” In Commissioner of Income Tax v. Venkateswara Hatcheries (P) Limited and others, (1999) 237 ITR 174, the Hon'ble Supreme Court considered the issue and held that running of poultry farm does not involve any manufacture or production of “article or things”, chicks being animate creature and development of eggs was a natural process. Relevant observations in the judgment are:- “From a perusal of the self-stated steps taken by the assessee for the alleged production of chicks it is clear that the assessee does not contribute to the formation of chicks. The formation of chicks is a natural and biological process over which the assessee has no hand or control. In fact, what the assessee is doing is to help the natural or biological process of giving birth to chicks. The chicks otherwise can also be produced by conventional or natural method and in that process also, the same time is taken when the chicks come out from the eggs. What the assessee by application of mechanical process does in the hatchery is to preserve and protect the eggs at a particular temperature. But the coming out of chicks from the eggs is an event of nature. The only difference seems to be that by application of mechanical methods,the mortality rate of chicks is less and the assessee may get chicks more in number. This, however, would not mean that the assessee produces chicks is and that chicks are “articles or things.” We are, therefore, of the opinion that the assessee is neither an industrial undertaking nor does the business of hatchery carried out by the assessee fall within the meaning of section 32A and section 80J of the Act. It was then urged by learned counsel for the assessee that the Act uses the words “articles or things” at several places and the meaning assigned to them in other places of the Act should also be assigned under section 32A and section 80J of the Act. The Fifth Schedule to the Act sets out a list of items which are treated as articles or things manufactured or produced for the purpose of Section 33(1)(b) I.T.R. No.550 of 1995 -4- of the Act. In this Schedule we find that processed seeds which are products of plants have been shown as “articles or things”. Similarly, item No.(30) of the said Schedule is “fish”, which is an animate object, it has been shown under the heading “articles or things. On the strength of the meaning assigned to articles and things in the Fifth Schedule to the Act, it was urged that hatching of chicks is also production of “articles or things”. It is, no doubt, true that processed seeds and fish have been described under the heading “articles or things” in the Fifth Schedule. Generally, the same words in a statute have the same meaning whenever used in that statute, but they may also have a different meaning in different provisions of the same statute.” The Hon'ble Supreme Court approved the view taken by the Bombay High Court in CIT v. Deejay Hatcheries (1995) 211 ITR 652 and disapproved the view taken by the Andhra Pradesh High Court in CIT v. Sri Venkateswara Hatcheries (P) Limited, (1988) 174 ITR 231. This Court has also gone into this issue in the case of CIT v. Shivalik Poultries, (2005) 274 ITR 529 and relying on judgment of Hon'ble the Supreme Court in Venkateswara Hatcheries case (supra), the question was answered in favour of the revenue and against the assessee. In view of the above, we answer the question in favour of the revenue and against the assessee. Reference is disposed of accordingly. ( ADARSH KUMAR GOEL ) JUDGE November 30, 2006 ( RAJESH BINDAL ) renu JUDGE