Andhra HC (Pre-Telangana)
Commissioner Of Income-Tax vs Sudesh Kumari Soni on 22 March, 1995
Equivalent citations: [1997]227ITR113(AP)
Author: S.S. Mohammed Quadri
Bench: S.S. Mohammed Quadri
JUDGMENT
1. At the instance of the Revenue, the following three questions have been referred by the Tribunal under section 256(1) of the Income-tax Act, 1961 :
"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the assessee is an industrial undertaking entitled to relief under section 80J of the Income-tax Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the assessee is entitled to relief under both the sections 80J and 80JJ ?
3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in directing the Appellate Assistant Commissioner to consider that the assessee is an industrial company within the meaning of the Finance Act of the relevant assessment year for allowing enhanced depreciation at 10 per cent. on all the five items of buildings ?"
2. The admitted facts are that the assessee is engaged in the business of hatchery employing modern methods. For the previous year ended March 31, 1978, corresponding to the assessment year 1978-79, the assessee claimed deduction under section 80J as having established a new industrial undertaking in respect of the business of hatchery. The Income-tax Officer was of the view that this business cannot be considered to be an industrial undertaking and the assessee was not entitled to such a deduction. However, he considered that the assessee was entitled to the specific relief under section 80JJ which is a deduction in respect of the business of poultry farming. The assessee appealed and pointed out that in similar cases the Appellate Tribunal had granted deduction under section 80J. However, the Appellate Commissioner confirmed the order. On further appeal, the Appellate Tribunal followed the decision in the case of Sri Venkateswara Hatcheries decided by the Tribunal and granted deduction under section 80J. On these facts the questions mentioned above have been referred.
3. Learned counsel for the Revenue fairly pointed out that the decision of the Tribunal in the case of Sri Venkateswara Hatcheries came up to this court on reference and it was affirmed by the decision in CIT v. Sri Venkateswara Hatcheries P. Ltd. . He also stated that the said decision has become final as no appeal was taken to the Supreme Court. However, he pointed out that in a subsequent decision, the Bombay High Court held in CIT v. Deejay Hatcheries , that the expression "production of article" cannot encompass a poultry farm where chicks are grown and further that there being a special provision under section 80JJ for granting the relief in respect of poultry farming the deduction under section 80J was inadmissible. Learned counsel for the Revenue also referred to a decision of the Supreme Court in CIT v. N. C. Budharaja and Co. and contended that the words "production of article" in section 80J would refer only to manufacture or creation of inanimate objects of matter but not to the growing of animate objects. He, therefore, pleaded for reconsideration of the decision.
4. We have carefully read through the judgment of this court in CIT v. Sri Venkateswara Hatcheries P. Ltd. along with the decisions cited by learned counsel. It may be recalled that the profits and gains of a business of livestock breeding or poultry or dairy farming was completely exempted under section 10(27) until 1976 and the provision of section 80JJ was introduced in the Finance Act, 1975. In the Budget Speech (see [1975] 98 ITR (St.) 113, 115), the Finance Minister stated that this exemption is prone to abuse by showing the income which would otherwise be chargeable to tax as exempt income and, therefore, it was proposed to restrict the exemption to Rs. 10,000 in a year. This was the reason why section 80JJ was introduced with respect to the business of poultry farming. At that point of time obviously the reference was to poultry farming as the business of rearing poultry. But of late the present business has become more sophisticated and by use of incubators and machines and scientific techniques the hatcheries have transformed themselves into industrial undertakings which employ labour with machinery and power for production of chicks. The contention of learned counsel for the Revenue that a reference to article cannot refer to animate objects may not any longer be acceptable in view of the fact that the Tribunal itself refers to other animate objects such as fish in some of the provisions. The objection that the assessee is availing himself of a double deduction as an industrial undertaking under section 80J as well as a poultry farm under section 80JJ has also been rejected by the Tribunal on the ground that there is no specific prohibition in these provisions as has been found in similar provisions. All these aspects have been taken into account when this court rendered the decision in Sri Venkateswara Hatcheries' case . That decision has become final. We are not persuaded to differ from it. We, therefore, answer the first two questions in the affirmative, i.e., in favour of the assessee and against the Revenue.
5. The third question is consequential as the assessee is entitled to enhanced depreciation on the footing that machinery has been utilised in an industrial company. The definition of "industrial company" being the same as that given for an industrial undertaking under section 80J this question also is answered in the affirmative, i.e., in favour of the assessee and against the Revenue.
6. The referred case is accordingly disposed of.