Income Tax Appellate Tribunal - Chandigarh
Longowalia Poultry Farm vs Deputy Commissioner Of Income Tax on 30 June, 1998
Equivalent citations: [1998]67ITD45(CHD)
ORDER
R.K. Bali, A.M. 8th April, 1997.
1. These two appeals by the assessee relating to asst. yrs. 1993-94 and 1994-95 involve common points and are, therefore, disposed of by a common order for the sake of convenience.
2. ITA No. 115 of 1997 is directed against the order passed by the CIT under s. 263 of the IT Act, 1961. Briefly the facts are that the assessee derives income from running of poultry farming. While framing the assessment under s. 143(3) the AO allowed deductions under ss. 80HH and 80-I of Rs. 1,28,136 and Rs. 1,28,136 respectively. The CIT was of the view that the assessee was not entitled to deductions under ss. 80HH and 80-I because the poultry farm operated by the assessee was not an industrial undertaking which manufactured or produced articles. Accordingly the CIT issued a show-cause notice under s. 263 to the assessee intimating that the order passed by the AO under s. 143(3) allowing deductions to it under ss. 80HH and 80-I was erroneous and prejudicial to the interest of Revenue within the meaning of s. 263 and after considering the explanation of the assessee, the learned CIT directed that the deduction allowed amounting to Rs. 1,28,136 under each of the ss. 80HH and 80-I were wrongly allowed and were withdrawn and the income was increased by an amount of Rs. 2,56,272 for the reasons given in detail in his order dt. 20th January, 1997.
3. For asst. yr. 1994-95, the appeal is filed by the assessee against the order of the CIT(A) dt, 5th November, 1996 wherein also the main dispute is with regard to the action of the AO as well as the learned CIT(A) in denying the claim for deduction made by the assessee under ss. 80HH and 80-I. Besides the above issue, there is another ground relating to the claim of deduction under s. 80G(2)(a)(iiig) of the Act regarding donation made to the Chief Minister's Earthquake Relief Fund, Maharashtra which was denied by the lower authorities.
4. The learned counsel for the assessee while arguing ITA No. 115 of 1997 relating to the action of the learned CIT under s. 263, submitted that the learned CIT was not justified in invoking the jurisdiction under s. 263 because the AO had allowed relief permissible to the assessee under ss. 80HH and 80-I in accordance with the decision of the Tribunal in the case of Shivalik Poultries vs. Dy. CIT in ITA No. 989/90 and 205/94, dt. 16th January, 1996 in which reliance was placed on the decision of the Hon'ble Andhra Pradesh High Court in the case of CIT vs. Sri Venkateswara Hatcheries (P) Ltd. (1988) 174 ITR 231 (AP). It was submitted that since the action of the AO was in accordance with the decision of the Tribunal holding the supervisory jurisdiction of the AO, it could not be called erroneous although it may be prejudicial to the interests of the Revenue. It was submitted that for purposes of taking action under s. 263, the order must be shown to be erroneous as well as prejudicial to the interests of the Revenue.
5. On merits, it was submitted that no doubt the Hon'ble Bombay High Court in the case of CIT vs. Deejay Hatcheries (1995) 211 ITR 652 (Bom) has held that an assessee who is running mechanised poultry farm for the production of eggs and chickens is not bringing into existence any new product and is not entitled to deduction under ss. 80HH and 80-I, yet the Tribunal in the case of Shivalik Poultries referred to supra had duly considered both the decisions in the cases of Sri Venkateswara Hatcheries (supra) and Deejay Hatcheries (supra) and after reference to the decisions of the Hon'ble Supreme Court in the cases of CIT vs. Kulu Valley Transport Co. (P) Ltd. (1970) 77 ITR 518 (SC) and CIT vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) had held that where there were two reasonable views possible on the interpretation of a statute, the view favourable to the assessee may be taken. Accordingly, it was submitted that to be consistent, the assessee's claim had to be allowed in view of the decision of the Chandigarh Bench of the Tribunal in the case of Shivalik Poultries (supra).
6. The learned Departmental Representative supported the order of the CIT under s. 263 for asst. yr. 1993-94 as well as the order passed by the CIT(A) for asst. yr. 1994-95. While supporting the decision of the CIT for asst. yr. 1993-94, the learned Departmental Representative submitted that besides the factum of wrong allowance of deduction under ss. 8OHH and 80-I on the basis of the decision of the Bombay High Court, the assessee had not furnished the audit report along with the return as required for the purposes of allowing deduction under ss. 8OHH and 80-I and as such the CIT was justified in invoking the provisions of s. 263 for denying the claim under ss. 8OHH and 80-I to the assessee.
7. In the rejoinder, the learned counsel for the assessee submitted that the audit report was duly filed along with the return, which was apparent from the written reply furnished by the assessee on 7th March, 1994 to the AO in response to the questionnaire issued by him on 11th February, 1994, along with the notices issued under ss. 143(2) and 142(1). In any case, it was submitted that if the audit report was not furnished, the assessee was required to be given an opportunity to submit the same in view of the decision of the Hon'ble Supreme Court in the case of CIT vs. Nanjibhai Dungerbhai (1989) 179 ITR (St.) 61. It was further submitted that the assessee was allowed deduction under ss. 8OHH and 80-I from asst. yr. 1989-90 onwards and it was only in the asst. yrs. 1993-94 and 1994-95 that a dispute had been raised denying the deduction permissible to the assessee under ss. 8OHH and 80-I. He accordingly submitted that in view of the decision of the Tribunal in the case of Shivalik Poultries (supra), the assessee was entitled to deduction under ss. 8OHH and 80-1.
8. We have considered the rival submissions. The issue in dispute is covered in favour of the assessee and against the Revenue as per the order of the Tribunal in the case of Shivalik Poultries referred to supra dt. 16th January, 1996, to which one of us was a party. The Tribunal in the aforesaid decision had referred to its earlier decision, dt. 8th June, 1994, in the case of Sandeep Poultry Farm (supra) and also to the decision of the Hon'ble Andhra Pradesh High Court in the case of Sri Venkateswara Hatcheries (P) Ltd. (supra). The Tribunal also took note of the decision of the Hon'ble Bombay High Court in the case of Deejay Hatcheries (supra) reliance on which was placed by the Revenue's representative. After taking note of the aforesaid decisions, the Tribunal took the view that where there were two reasonable views possible in the interpretation of a statute, the one favourable to the assessee may be adopted in view of the decisions of the Hon'ble Supreme Court in the cases of Kulu Valley Transport Co. (P) Ltd. and Vegetable Products Ltd. referred to supra. Respectfully following the decision of the Tribunal in the case of Shiv@ Poultries referred to supra and taking a consistent view we hold that the assessee is entitled to deduction under ss. 8OHH and 80-1 and the learned CIT was not justified in denying the benefit admissible to the assessee under these sections by invoking the provisions of s. 263. Similarly, the learned CIT(A) was not justified in denying the claim of the assessee under ss. 8OHH and 80-I for asst. yr. 1994-95 when the decision in the case of Shivalik Hatcheries (P) Ltd. (supra) was duly brought to his notice by the learned counsel for the assessee. Accordingly we direct that the deduction under ss. 8OHH and 80-I should be allowed to the assessee for asst. yrs. 1993-94 and 1994-95.
9. Coming to the ground relating to deduction claimed by the assessee for asst. yr. 1994-95 of donation made to the Chief Minister's Earthquake Relief Fund, the same is allowed at 100 per cent in view of the Board's Circular No. 678, dt. 10th February, 1994, copy of which has been furnished by the assessee at p. 65 of the paper-book which specifically grants 100 per cent tax relief on donations made to Chief Minister's Earthquake Relief Fund. The AO is directed to allow the claim of the assessee after verification of the amount of donation.
10. In the appeal for asst. yr. 1994-95, there is another ground relating to the charging of interest under ss. 234A, 234B and 234C. No specific arguments were advanced by the learned counsel for the assessee in respect of this ground at the time of hearing. This ground is accordingly rejected. The AO, however, is directed to recalculate the interest under these sections after giving appeal effect to this order.
11. In the result, ITA No. 115 of 1997 is allowed and ITA No. 126 of 1997 is partly allowed.
U.B.S. Bedi, J.M.
1. I have gone through the order proposed by my learned brother but find myself unable to agree with his conclusion. The facts are already narrated above and need not. be repeated. For asst. yr. 1993-94, facts are as per para 2 above and for next asst. yr. 1994-95 as per para 3, arguments of learned counsel are as per para 4 and learned Departmental Representative as per para 6 above. Learned counsel mainly relied upon cases in CIT vs. Sri Venkateswara Hatcheries (P) Ltd. (1988) 174 ITR 231 (AP), Tribunal's decision, dt. 16th January, 1996, in ITA Nos. 989/90 and 205/94 in 54 ITD 550, wherein on the point of hatchery as poultry farming being industrial activity and entitled to deduction under ss. 8OHH and 80-1 of the IT Act was decided, after discussing contrary case law in CIT vs. Deejay Hatcheries (1995) 211 ITR 652 (Bom), taking CIT vs. Kulu Valley Transport Co. (P) Ltd. (1970) 77 ITR 518 (SC) and CIT vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) for taking favourable decision if two views as regards reasonable interpretation of statute, are possible. As regards plea for non-production of audit report for asst. yr. 1993-94, learned counsel referred to letters, dt. 7th March, 1994, to the AO, in response to questionnaire, dt. 17th February, 1994, along with notice under s. 142(1), as it was apparent from said letter that the audit report was filed with the return and, in case it was not furnished, the assessee was required to get an opportunity to submit the same in view of CIT vs. Nanjibhai Dungerbhai (1989) 179 ITR (St.) 61. It was also submitted that the assessee was allowed deduction under ss. 8OHH and 80-I for asst. yr. 1989-90 onwards and it was only in asst. yrs. 1993-94 and 1994- 95 that the dispute has arisen and, in view of earlier decision of the Tribunal, it was pleaded that the assessee is entitled to deduction under s. 8OHH and 80-I. Learned Departmental Representative strongly opposed the claim of the assessee and, relying upon (1995) 211 ITR 652 (Bom) (supra), it was pleaded that the assessee is not entitled to deductions under s. 8OHH and 80-I. It was also pointed out that no audit report for asst. yr. 1993-94 was filed and arguments in this regard are misconceived, therefore, learned CIT(A) was justified in invoking the provisions of s. 263. It was pleaded that submission of audit report is prerequisite and mandatory condition for considering the claim, besides other legal issues. It was also submitted that, as per AO's and learned CIT(A)'s orders for asst. yr. 1994-95, there too audit report appears to have not been filed, therefore, action of authorities below being legally valid, deserves to be confirmed. It was vehemently argued that facts of the cases relied upon by learned counsel for the assessee are distinguishable and the assessee-firm is not producing any article or thing, in strict sense, thus, not entitled to deduction and case law, referred and applied by Tribunal, pertained to hatchery and not production of eggs, which is the admitted business of the present assessee.
2. After hearing the contentions of both the parties and perusing the record, I find that the case law cited CIT vs. Sri Venkateswara Hatcheries (P) Ltd. and Tribunal's decision (supra) have distinguishing features. In the case in hand, the assessee-firm is producing eggs but in the case of Venkateswara Hatcheries (P) Ltd. (supra), it was a case of eggs being hatched and producing of chicks, which is entirely different business and activity in commercial and ordinary sense. Therefore, with respect, ratio of said decision is inapplicable to the facts of the case in hand. Similarly, decisions in (1970) 77 ITR 518 (SC) and (1973) 88 1TR 192 (SC) (supra) are also not applicable, in view of the facts prevalent in the present case.
3. As regards non-filing of audit report with the return for asst. yr. 1993-94, contents of the assessee's letter dt. 7th March, 1994 in response to questionnaire of AO, dt. 11th February, 1994, are reproduced hereunder :
"Dt. 11th February, 1994 Sub : Assessment for 1993-94.
In connection with assessment proceedings for the above assessment year, you are required to furnish the following information :
1. File details of opening and closing stock both in amount as well as in quantity;
2. File copies of account of feed account, medicine account, egg trays account, electricity expenses account, brooding expenses account, wages layout account, salary account, telephone expenses account, car running and maintenance account, interest account;
3. File ban certificate regarding interest paid to bank;
4. As regards unsecured loans, file their complete address along with their copy of account and confirmations;
5. File list of employees along with details of work done by each emnloyee and salary paid to him;
6. Have you made any payment exceeding Rs. 10,000 otherwise than by account payee cheque/draft. If yes, give reasons for doing so.
7. Details of household expenses of the partners along with its justification.
8. GP rate shown by you is too low. Give justification for the same.
9. File copy of capital account of the partners with narration of each debit and credit entry;
10. File certificate from bank regarding term loan balance. What are details of securities furnished to the bank ?
11. In the return of income, you have claimed deductions under ss. 80HHA, 80-I and 80J. Deductions under ss. 8OHHA and 80-I are admissible only to industrial undertakings, which are not admissible to you. So, please show-cause why not the same be disallowed.
12. For this purpose, your case stands fixed for 21st February, 1994. Notices under s. 143(2) and 142(1) enclosed."
"Reply dt. 7th March, 1994 Respected Sir, In reference to matter cited above, 1 hereby submit as under :
1. Copy of account of feed, medicines, egg trays, electricity expenses, brooding expenses, wages labour, salary, telephone expenses, car maintenance, interest accounts.
2. Bank certificate regarding interest paid to bank and balance confirmations certificates with bank reconciliation statements.
3. All copies of account of unsecured loans duly confirmed from the concerned person.
4. Statement of salary and employees.
5. No payment exceeded Rs. 10,000 has been made.
6. As per household expenses of parties, Sat Pal Gupta and Chand Garg both make their expenses out of their individual status and are assessed to income- tax in individual status with Asstt. CIT, Central Circle, Patiala.
7. Reasons for fall in GP rate is enclosed.
8. Copy of partners account are enclosed herewith.
9. The land of poultry farm has been used for giving security to bank.
10. Explanation regarding s. 8OHH and 80-I deduction, is enclosed.
Thanking you,"
From the above, it is not apparent, as contended by learned counsel if any audit report, as required, has ever been enclosed with the return. For asst. yr. 1994-95 also, AO's order as well as CIT(A)'s order are silent because deduction was disallowed at both the levels and copy of audit report was also not made available to the Bench even. It is thus presumed that the same too has not been filed with the return. Under these circumstances, authority referred to by learned counsel for the assessee being under different provision relating to registration of trust whose audit report was not filed with the return but later on filed and High Court declined the reference and SLP of the Department was discussed (sic - dismissed) but that case has no application here in this case, as facts are distinguishable. From the above and in view of the facts and circumstances of the case, I am of the considered view that the assessee is not entitled to deduction under ss. 8OHH and 80-I for either of the two years under appeal. Therefore, orders of CIT under s. 263, dt. 20th January, 1997, for asst. yr. 1993-94 and CIT(A), dt. 21st January, 1997, for asst. yr. 1994-95 are upheld on the point and the issue is decided against the assessee. Grounds get rejected.
4. Coming to the ground relating to donation made to the Chief Minister's Earthquake Relief Fund, Maharashtra, at 100 per cent, in view of Board's Circular No. 678 (supra), the facts are that in asst. yr. 1994-95, the assessee claimed deduction at 100 per cent of the donations made but the AO allowed it at 50 per cent and CIT(A) confirmed his action. Details given at p. 56 of the paper-book, read as under :
"26th October, 1993 Ch. No. 468453 to the Secretary Distt. Red Cross Society for earthquake effected people -
Rs. 11,000"
Learned counsel for the assessee pleaded for 100 per cent relief and learned Departmental Representative relied on orders of the authorities below. The circular, referred to above, grants 100 per cent tax relief for donations made to Chief Minister's Earthquake Relief Fund, Maharashtra, and from the receipt/detail, reproduced above, it cannot be said that the donation was made to Chief Minister's Earthquake Relief Fund, Maharashtra. Therefore, in view of facts and circumstances of the case, I am unable to accept the contention of the assessee and, confirm the order of CIT(A) in the issue. Ground gets rejected.
5. Regarding ground relating to charging of interest under ss. 234A, 234B and 234C for asst. yr. 1993-94, no specific argument was advanced by learned counsel. The ground stands rejected as such.
6. Both the appeals stand dismissed.
REFERENCE UNDER S. 255(4) OF THE IT ACT, 1961 27th May, 1997 On a difference of opinion between the Members who heard these appeals, the following points of difference are referred to the Hon'ble President for the opinion of the third member :
(1) Whether, on the facts and in the circumstances of the case, the assessee who is engage(f in the business of poultry farming is an industrial undertaking and as such entitled to deduction under ss. 80HH and 80-I as held by the Accountant Member particularly in view of the decision of the Chandigarh Bench of the Tribunal itself in the case of Shivalik Poultries vs. Dy. CIT and as such the order of the CIT under s. 263 and the order of the CIT(A) are required to be reversed or the assessee is not entitled to deduction under ss. 80HH and 80-I as held by the Judicial Member and consequently his action in upholding the order of the CIT under s. 263 in ITA No. 115 of 1997 and the order of the CIT(A) in ITA No. 126 of 1997 is correct ?
(2) If answer to question No. 1 above concurs with the conclusions of the Accountant Member, whether, in view of the facts and circumstances of the case, could the relief under ss. 80HH and 80-I be granted to the assessee without filing the audit report with the return of income ?
(3) Whether, on the facts and in the circumstances of the case, the assessee is entitled to 100 per cent deduction on donation of Rs. 11,000 to Red Cross Society for victims of earthquake as held by the Accountant Member or the view that the assessee is not entitled to 100 per cent deduction as claimed because donation is not directly paid to the Chief Minister's Earthquake Relief Fund, Maharashtra as per Board's Circular No. 678, is correct ?
R. M. Mehta, Vice President (As A Third Member)
1. There being a difference of opinion between the Members constituting the Division Bench, the Hon'ble President has referred the following points of difference to me for disposal under s. 255(4) of the IT Act, 1961 :
"1. Whether, on the facts and in the circumstances of the case, the assessee who is engaged in the business of poultry farming is an industrial undertaking and as such entitled to deduction under ss. 80HH and 80-I as held by the Accountant Member particularly in view of the decision of the Chandigarh Bench of the Tribunal itself in the case of Shivalik Poultries vs. Dy. CIT (1995) 54 ITD 550 (Chd) and as such the order of the CIT under s. 263 and the order of the CIT(A) are required to be reversed or the assessee is not entitled to deduction under ss. 80HH and 80-I as held by the Judicial Member and consequently his action in upholding the order of the CIT under s. 263 in ITA No. 115 of 1997 and the order of the CIT(A) in ITA No. 126 of 1997 is correct ?
2. If answer to question No. 1 above concurs with the conclusions of the Accountant Member, whether, in view of the facts and circumstances of the case, could the relief under ss. 80HH and 80-I be granted to the assessee without filing the audit report with the return of income ?
3. Whether, on the facts and in the circumstances of the case, the assessee is entitled to 100 per cent deduction on donation of Rs. 11,000 to Red Cross Society for victims of earthquake as held by the Accountant Member or the view that the assessee is not entitled to 100 per cent deduction as claimed because donation is not directly paid to the Chief Minister's Earthquake Relief Fund Maharashtra as per Board's Circular No. 678, is correct ?"
2. The main issue arising from the two appeals filed by the assessee for asst. yrs. 1993-94 and 1994-95 pertains to allowability of deductions under ss. 80HH and 80-I of the IT Act, 1961, in respect of poultry farming. For asset. yr. 1993-94, the relevant facts are that the assessee deriving income from poultry farming claimed deduction under ss. 80HH and 80-I which were duly allowed by the AO vide order, dt. 31st January, 1995. The CIT vide order, dt. 20th January, 1997, passed under s. 263 directed the AO to modify the assessment order withdrawing the deductions allowed under ss. 80HH and 80-I. Aggrieved by this order, the assessee preferred appeal before the Tribunal.
3. For asst. yr. 1994-95, the AO while making the assessment vide order, dt. 24th January, 1996 rejected the claim of deductions under ss. 80HH and 80-I. The assessee carried the matter in appeal before the CIT(A) who upheld the assessment. Aggrieved by the said order, the assessee preferred appeal before the Tribunal.
4. The learned Accountant Member referred to the earlier order of the Tribunal in the case of Shivalik Poultries vs. Dy. CIT (supra) in ITA Nos. 989/90 and 205/94 relating to asst. yrs. 1988-89 and 1987-88, dt. 16th January, 1996, and held that the assessee is entitled to deductions under ss. 80HH and 80-I for both the assessment years involved. The learned Accountant Member took note of the fact that in the Tribunal's decision in Shivalik Poultries vs. Dy. CIT (supra), there is a difference of opinion between the Andhra Pradesh High Court and Bombay High Court. The Hon'ble Andhra Pradesh High Court in the case of CIT vs. Sri Venkateswara Hatcheries (P) Ltd. (1988) 174 ITR 231 (AP), has held that a poultry farm constitutes industrial undertaking and entitled to special deductions under s. 80J for the asst. yrs. 1977-78 and 1979-80. A contrary view has been taken by the Hon'ble Bombay High Court in CIT vs. Deejay Hatcheries (1995) 211 ITR 652 (Bom) wherein it has been held that the business of poultry farming could not be characterised as an industrial undertaking engaged in the manufacture or production of articles and the assessee was, therefore, not entitled to deduction under s. 80J as an industrial undertaking. The learned Accountant Member, while referring to Shivalik Poultiies vs. Dy. CIT's case (supra), observed that the Tribunal has taken a consistent view that deductions under ss. 80HH and 80-I are allowable in respect of poultry farming. He accordingly allowed both the appeals for asst. yrs. 1993-94 and 1994-95.
5. The learned Judicial Member, in his dissenting opinion, observed that the facts of the instant case are entirely distinguishable than those in Shivalik Poultries (supra) and Sri Venkateswara Hatcheries (P) Ltd. (supra), inasmuch as in the instant case the assessee firm is producing eggs whereas in the said two cases the business of hatching of eggs and production of chicks was carried out. The learned Judicial Member further observed that for both the assessment years involved i.e., 1993-94 and 1994-95, audit reports have not been filed along with the returns and that the same have not been made available to the Bench. The learned Judicial Member ultimately held that the assessee was not entitled to deductions under ss. 80HH and 80-I for either of the two years under appeal.
6. Before me, the learned counsel for the assessee supporting the order of the learned Accountant Member argued that the assessee has been allowed deductions under ss. 80HH and 80-I in the earlier assessment years by the AO and there was no justification to take a contrary view for the asst. yrs. 1993-94 and 1994-95 under appeal. The learned counsel strongly urged that even though the doctrine of res judicata does not apply to income-tax proceedings yet it is equally true that unless there is a change of circumstances, the tax authorities will not depart from previous decisions at their sweetwill in the absence of material circumstances or reasons for such departure. Reliance is placed on the decision of Gujarat High Court in Taraben Ramanbhai Pate] vs. ITO (1995) 215 ITR 323 (Guj). Further, reliance is placed on the decision of Punjab & Haryana High Court in CIT vs. Dalmia Dadri Cement Ltd. (1970) 77 ITR 410 (P&H). The learned counsel submitted that the Chandigarh Bench of the Tribunal has consistently taken the view that poultry farming constitutes industrial undertaking entitled to special deductions under ss. 80HH and 80-I in the following cases :
(i) Sandeep Poultry Farm (ITA No. 611/Chandi/88, dt. 4th March, 1993);
(ii) Sudarshan Lal (ITA No. 1431/Chandi/93, dt. 31st March, 1994); and
(iii) Shivalik Poultries (supra).
The learned counsel urged that the decisions of the Tribunal are binding on the lower tax authorities. Relying upon the decision of Madras High Court in CIT vs. L. G. Ramamurthi (1977) 110 ITR 453 (Mad), learned counsel contended that no Tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another Bench of the same Tribunal on the same facts. Reliance is further placed on the following decisions of the Tribunal :
(i) Arun Kumar Mohota vs. WTO (1990) 32 ITD 509 (Nag);
(i) CIT vs. Brg. B. D. Khurana; and
(iii) Tube Investments of India Ltd. vs. ITO (1984) 9 ITD 690 (Mad)(TM).
The learned counsel further referred to the decision of the Hon'ble Supreme Court in the case of Union of India vs. Kamlaxmi Finance Co. (P) Ltd. (1991) 55 ELT 433, wherein Hon'ble Supreme Court has observed that utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher authorities which are binding on them. With regard to the filing of the audit reports, the learned counsel pointed out that audit reports have been duly filed along with the returns for the two assessment years under consideration. In this connection learned counsel invited our attention to pp. 96 to 108 of the paper-book indicating the audit report, dt. 8th May, 1993, relating to asst. yr. 1993-94. Concluding his arguments the learned counsel supported the order of the learned Accountant Member. The learned Departmental Representative, on the other hand, supported the order of the learned Judicial Member.
7. I have carefully considered the rival submissions and also perused the orders of the tax authorities. The basic issue giving rise to the difference of opinion between the learned Members of the Division Bench centers round the allowability of special deductions under ss. 80HH and 80-I. The assessee-firm runs a poultry farm which admittedly involves hatching of eggs and producing chicks. The assessee also carried on sale of eggs on a substantial scale. Following the decision of Andhra Pradesh High Court in the case of Sri Venkateswara Hatcheries (supra), the Chandigarh Bench of the Tribunal has consistently held in a number of cases that poultry farm constitutes an industrial undertaking entitled to special deductions under ss. 80HH and 80-I. In Shivalik Poultries' case (supra), the Tribunal has taken note of the contrary decision of the Bombay High Court in D.G. Hatcheries (supra), and observed that where two equally reasonable views are possible, the Court should adopt a view which is favourable to the assessee. In support of this proposition, the Tribunal has placed reliance on the decisions of the Hon'ble Supreme Court in the case of CIT vs. Kulu Valley Transport Co. (1970) 77 ITR 518 (SC) and CIT vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC). The Tribunal has dwelt upon at length on the various facets of the controversy and adjudicated upon the issue in the light of well-accepted cardinal principles of jurisprudence enunciated by various judicial authorities referred to by the Tribunal. I, therefore, see no justification to take a view contrary to the one taken in Shivalik Poultries' case (supra). I see ample merit in the contention of the learned counsel that the earlier decision of the Tribunal rendered on identical facts is binding on the tax authorities and further that the Tribunal would not be justified in coming to an entirely different conclusion on the same set of facts. It is imperative for matured and developed jurisprudence that there should be finality and certainty in all litigation arising out of the IT Act and in earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse and if no fresh facts have been brought on record to justify a departure from the earlier decision. Certainty, continuity, and stability are unquestionably the most important attributes of a sound judicial system, Consideration of judicial expediency and public policy dictates strict observance of these attributes in judicial adjudications, viewed in the aforesaid legal perspective, I have no hesitation in holding that the assessee is entitled to special deductions under ss. 80HH and 80-I for both the assessment years involved.
7.1 The learned Departmental Representative has rested his case for denying the relief to the assessee under ss. 80HH and 80-I mainly on the ground that the assessee is not an industrial undertaking and is not engaged in the manufacture or production of articles or things. The expression "industrial undertaking" has not been defined under the statute and should, therefore, be understood in the sense in which it is used in the world of trade and commerce. An assessee engaged in the production of eggs and hatching of chicks on a large scale by adopting modern scientific and technological methods would necessarily constitute an industrial undertaking. It is seen from the balance sheet of the assessee as on 31st March, 1993 appearing at pages 101 to 104 of the paper-book that the assessee has got fixed assets of the value of Rs. 83,22,122 which comprised, inter alia, building Rs. 47,32,059 and machinery Rs. 27,77,910. It is further to be noted that the assessee has been registered as a small-scale industrial unit with the Director of Industries, Haryana and a certificate for registration, dt. 16th October, 1987, is placed at p. 32 of the paper-book. The Govt. of Haryana has sanctioned subsidy to the assessee by way of incentive for setting up the industrial unit in a backward rural area in Haryana. I see no earthly reason for denying relief to the assessee as an industrial undertaking under ss. 80HH and 80-I which are intended for promoting the growth and development of industry. The further requirement of ss. 80HH and 80-I is that it manufactures or produces articles or things. The word "produce" is of wider import than the word "manufacture". The word should be understood in its common parlance-as understood by any layman according to the dictates of commonsense. There is no justification to give a narrow and restricted meaning to the word "produce" and exclude the process of hatching of chicks and producing of eggs by using sophisticated scientific methods from the purview of "production". I, therefore, hold that the assessee is an industrial undertaking entitled to deductions under ss. 80HH and 80-I.
8. The learned Judicial Member in his dissenting opinion observed that the facts of the instant case are entirely distinguishable than those in Shivalik Poultries, (supra), and Shri Venkateswara Hatcheries (P) Ltd. (supra), inasmuch as in the instant case the assessee-firm is producing eggs whereas in the said two cases the business of hatching of eggs and production of chicks was carried out. The distinction sought to be drawn by the learned Judicial Member is not borne out from the facts on record. No such case for distinguishing assessee's case has been made out by the Department at any stage. The Department has heavily rested its case on the decision of the Bombay High Court in Deejay Hatcheries (supra), in contradistinction to the decision of the Andhra Pradesh High Court in Sri Venkateswara Hatcheries (P) Ltd. (supra). In the assessment order, dt. 24th January, 1996, for asst. yr. 1994-95, the AO has observed that ',eggs and chicks are produced by natural process. By using modern and mechanical process the assessee is only aiding the natural process and hence it cannot be said that the assessee is an industrial undertaking engaged in the manufacture or production of articles". The distinction sought to be drawn by the learned Judicial Member is, therefore, not supported by undisputed facts on record. The decision of the Andhra Pradesh High Court in Sri Venkateswara Hatcheries (P) Ltd. (supra), is squarely applicable to the assessee's case. Hence deductions under ss. 80HH and 80-I deserve to be allowed for both the assessment years under appeal. In the ultimate analysis, I concur with the view of the learned Accountant Member that the assessee is entitled to deductions under ss. 80HH and 80-I for both the assessment years under appeal. Question No. 1 is answered accordingly.
9. Question No. 2 brings out the controversy whether the relief under ss. 80HH and 80-I can be granted to the assessee without filing the audit report with the return of income. In CIT vs. Jaideep Industries (1989) 180 ITR 81 (P&H), it has been held by the Hon'ble Punjab & Haryana High Court that filing of the audit report along with the return of income was a mandatory requirement for claiming deductions under s. 80J(6A). A contrary view, however, has been taken by the Hon'ble Gujarat High Court in CIT vs. Gujarat Oil & Allied Industries (1993) 201 ITR 235 (Guj), wherein it has been held that audit report filed after the submission of return but before framing of the assessment constitutes sufficient compliance with the requirement of s. 80J(6A). The view taken in Jaideep Industries (supra), would obviously be binding. However, the entire issue of allowability of deductions under ss. 80HH and 80-I would have to be considered in the backdrop of attendant facts and circumstances of the case as well as the legal position regarding the filing of the audit report referred to above. Insofar as asst. yr. 1993-94 is concerned, the learned counsel for the assessee invited my attention to pp. 100 to 108 of the paper-book which contains copy of the audit report dt. 8th May, 1993, in prescribed form No. 10C and argued that the audit report was duly furnished along with the return of income. It is further submitted that the alleged non-filing of the audit report has been cited in support of withdrawal of relief under ss. 80HH and 80-I by the CIT in the impugned order under s. 263 without allowing an opportunity to the assessee in this behalf. The learned counsel referred to the notice under s. 263, dt. 14th October, 1996, placed at p. 1 of the paper book which does not make any reference regarding the non-filing of the audit report. A further notice issued by the CIT under s. 263, dt. 4th December, 1996 placed at p. 2 of paper-book again contains no reference regarding the non-filing of the audit report. The written submissions made by the assessee before the CIT, placed at p. 3 of the paper-book, contains no reference regarding filing of the audit report. So, the facts on record, in my opinion, clearly indicate that the audit report has been duly filed along with the return for asst. yr. 1993-94 and the CIT in the impugned order under s. 263 has proceeded to withdraw the deductions under ss. 80HH and 80-I without allowing any opportunity to the assessee whether audit report has been filed with the return or not. In the circumstances, the order of the CIT based on the alleged non-filing of the audit report for asst. yr. 1993-94 cannot be sustained.
10. Insofar as asst. yr. 1994-95 is concerned, no such controversy regarding filing of the audit report along with the return has been raised at any stage by the AO. There is no mention not even a whisper-regarding the non-filing of the audit report along with the return by the assessee for asst. yr. 1994-95 in the assessment order, dt. 24th January, 1996, or the order of the CIT(A), dt. 21st January, 1997. On behalf of the assessee, photocopy of the return of income filed on 15th February, 1995, has been furnished which indicates that audit report has been duly enclosed with the return of income. In the circumstances of the case. I see no justification for denying relief under ss. 80HH and 80-I to the assessee for either of the assessment years involved on the ground of. non-filing of the audit reports. Question No. 2 is, therefore, answered as under :
Since audit reports have been filed along with the returns for both the assessment years in question, the assessee is entitled to deductions under ss. 80HH and 80-I.
11. Question No. 3 is regarding deduction under s. 80G on donation of Rs. 11,000 to Red Cross Society. Page 56 of the paper-book contains the detail of charity and donation for the period relevant to asst. yr. 1993-94 which indicates that cheque No. 468453, dt. 26th October, 1993 for Rs. 11,000 has been given to the Secretary, District Red Cross Society for earthquake affected people. Page 57 of the paper-book contains receipt No. 16596, dt. 29th October, 1993, acknowledging receipt of the cheque by the Indian Red Cross Society, Ambala. The donation given to Indian Red Cross Society would not be covered under sub-cl. (iiig) of cl. (a) of sub-s. (2) of s. 80G. I concur with the conclusion arrived at by the learned Judicial Member that donation of Rs. 11,000 is entitled to deduction @ 50 per cent as allowed by the AO and not @ 100 per cent as claimed by the assessee.
12. The matters shall now go back before the Division Bench for passing an order in accordance with the majority opinion.