Full Judgment Text
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PETITIONER:
COMMISSIONER OF INCOME-TAX, BANGALORE
Vs.
RESPONDENT:
VENKATESWARA HATCHERIES (P) LTD.
DATE OF JUDGMENT: 24/03/1999
BENCH:
S.P.Bharucha, V.N.Khare, A.P.Misra
JUDGMENT:
V.N. KHARE,J.
Leave granted in the special leave petitions.
In this group of civil appeals and special leave
petitions the main question that arises for consideration is
whether the business of hatchery run by the assessee comes
within the meaning of the expression manufacture or produce
articles or things occurring in Section 32A(2) and Section
88J of the Income Tax Act (hereinafter referred to as the
Act). The further question to be decided is whether the
assessee is an industrial undertaking. The appeals
excepting Civil Appeal No.2596 of 1997 are directed against
the judgments of Andhra Pradesh and Karnataka High Courts
whereby the two High Courts following the decision in the
case of Commissioner of Income-tax vs. Sri Venkateswara
Hatcheries (P) Ltd. (174 I.T.R. 231) rejected the
applications of the Revenue filed under Section 256(2) Act
holding that the business of hatchery comes within the
meaning of the expression an industrial undertaking
producing articles or things and in one case answered the
questions in favour of assessee. Whereas in Civil Appeal
No.2596/97, the Bombay High Court has rejected the
application of the assessee under Section 256(2) of the Act
following the decision in the case of Commissioner of
Income-Tax vs. Deejay Hatcheries (211 I.T.R. 652) wherein
it was held that the business of hatchery cannot be termed
as an industrial undertaking producing articles or things.
That is how both sets of appeals are before us.
Respondents in these civil appeals and the appellant
in civil appeal No.2596/97 (hereinafter referred to as the
assessee) have poultry farms and they run hatcheries where
eggs are hatched on large scale by adopting latest
scientific and technological methods. The aforesaid
questions arose when the assessees in connection with their
income tax assessments for the relevant years claimed that
since they are industrial undertakings engaged in the
business of producing articles or things, they are entitled
to development allowance under Section 43A and deductions
under Sections 80HH, 80HHA, 80I and 80J of the Act.
The first contention on behalf of the Revenue is that
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chicks, being animate creatures, cannot be termed as
articles or things within the meaning of Section 32A,
(2)(iii) or Section 80J(4)(iii) of the Act. The second
contention is that even if a chick could be construed as an
article or thing it cannot be said that the assessee is
producing chicks, that being a natural process of the
development of the eggs. The third contention is that if
the dictionary meaning of the word articles or things
conveys different meanings, in that event the said words
have to be interpreted in the context of the provisions of
the Act, and regard must also be had to the legislative
history of the provisions of the Act and the scheme of the
Act and the fourth submission is that the assessee is not an
industrial undertaking.
Since the arguments raised by the learned counsel for
the Revenue are overlapping we, therefore, propose to deal
them together.
The learned counsel appearing for the assessee on the
other hand maintained that hatching of eggs comes within the
meaning of the expression production of an article or thing.
He contended that the word produce is of wider import and
for that purpose he referred to various dictionary meanings
of the word produce. In Websters New International
Dictionary the word produce means something that is
brought forth either naturally or as a result of effort and
work; a result produced.
In Blacks Law Dictionary the meaning of the word
produce is to bring forward; to show or exhibit; to
bring into view or notice; to bring to surface.
A reading of aforesaid dictionary meanings of the word
produce does indicate that if a living creature is brought
forth it can be said that it is produced. However,
dictionary gives more than one meaning of the word
produce. Neither the word produce nor the word
article has been defined in the Act. When the word is not
so defined in the Act it may be permissible to refer to
dictionary to find out the meaning of that word as it is
understood in the common parlance. But where the dictionary
gives divergent or more than one meaning of a word, in that
case it is not safe to construe the said word according to
the suggested dictionary meaning of that word. In such a
situation the word has to be construed in the context of the
provisions of the Act and regard must also be had to the
legislative history of the provisions of the Act and the
scheme of the Act. It is settled principle of
interpretation that the meaning of the words, occurring in
the provisions of the Act must take their colour from the
context in which they are so used. In other words, for
arriving at the true meaning of a word, the said word should
not be detached from the context. Thus, when the word read
in the context conveys a meaning, that meaning would be the
appropriate meaning of that word and in that case we need
not rely upon the dictionary meaning of that word.
Viewed in this light what we find is that Section
10(27) of the Act was inserted in the Act through the
Finance Act, 1964. The purpose of enacting Section 10(27)
was to provide incentive to poultry farming, which includes
the business of hatchery, by way of giving exemption from
income tax on income from such business. Initially, the
said exemption was given for the years 1965, 1966 and 1967
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and was in the following terms:
any income derived from a business of livestock
breeding or poultry or dairy farming which is assessable for
the assessment years commencing on the 1st day of April
1965, 1966 and 1967.
In the year 1967, through the Finance Act No.2, the
words beginning from word which to 1967 were omitted.
Thus exemption from income-tax was allowed beyond the
year1967. In the year 1975, it was felt that the exemption
from income-tax on income from poultry business is capable
of being abused by unscrupulous people by showing income
which would otherwise be chargeable to tax, as exempt
income. It was in this background that the mischief was
sought to be remedied by omitting Section 10(27) of the Act
and re-enacting Section 80JJ providing restricted exemption
to thirty three and on one third percent of gross total
income from livestock breeding, poultry and dairy farming.
This is also evident from the Budget Speech of the then
Finance Minister in the Parliament which runs as under:
At present income from livestock breeding and poultry
and dairy farming is exempt from Income tax. This exemption
is prone to abuse by showing income which would otherwise be
chargeable to tax as exempt income. I accordingly propose
to restrict the exemption to Rs.10,000/- in a year.
Consequently, Section 10(27) of the Act was omitted by
the Finance Act 1975 with effect from 1st April, 1976 and
Section 88JJ was brought into the Act with effect from the
date of omission of Section 10(27) of the Act. Section 80JJ
as re-enacted read as thus :
80JJ. Where the gross total income of an assessee
includes any profits and gains derived from a business of
livestock breeding, or poultry or dairy farming, there shall
be allowed, in computing the total income of the assessee, a
deduction as specified hereunder, namely:-
(a) in a case where the amount of such profits and
gains does not exceed, in the aggregate, ten thousand
rupees, the whole of such amount; and
(b) in any other case, one-third of the aggregate
amount of such profits and gains or ten thousand rupees,
whichever is higher.
The Finance Act 1976 inserted Section 32A with effect
from 1st April, 1976 in replacement of development rebate.
Section 32A provided development allowance where an
industrial undertaking has installed new machinery or plant
after March 31, 1976 for the purpose of business of
manufacture or production of any article or thing. Relevant
portion of Section 32A runs thus :
32A.(1) In respect of a ship or an aircraft or
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, in accordance
with and subject to the provisions of this section, be
allowed a deduction, in respect of the previous year in
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which the ship or aircraft was acquired or the machinery or
plant was installed or, if the ship, aircraft, machinery or
plant is first put to use in the immediately succeeding
previous year, then, in respect of that previous year, of a
sum by way of investment allowance equal to twenty-five per
cent of the actual cost of the ship, aircraft, machinery or
plant to the assessee.
(iii) in a small-scale industrial undertaking for the
purposes of business of manufacture or production of any
other articles or things.
Rele vant portion of Section 80J runs as under: (1)
Where the gross total income of an assessee includes any
profits and gains derived from an industrial undertaking or
a ship or the business of a hotel, to which this section
applies, there shall, in accordance with and subject to the
provisions of this section, be allowed, in computing the
total income of the assessee, a deduction from such profits
and gains (reduced by the deduction, if any, admissible to
the assessee under section 80HH of so much of the amount
thereof as does not exceed the amount calculated at the rate
of six per cent. per annum on the capital employed in the
industrial undertaking or ship or business of the hotel, as
the case may be, computed in the prescribed manner in
respect of the previous year relevant to the assessment year
(the amount calculated as aforesaid being hereafter, in this
section, referred to as the relevant amount of capital
employed during the previous year).
4(iii) it manufactures or produces articles, or
operates one or more cold storage plant or plants, in any
part of India, and has begun or begins to manufacture or
produce articles or to operate such plant or plants, at any
time within the period of thirty-three years next following
the 1st day of April, 1948, or such further period as the
Central Government may, by notification in the Official
Gazette, specify with reference to any particular industrial
undertaking.
As noticed earlier, the omission of Section 2(27) and
re- enactment of Section 80JJ was done simultaneously. It
is a very well recognized rule of interpretation of statutes
that where a provision of an Act is omitted by an Act and
the said Act simultaneously re-enacts a new provision which
substantially covers the field occupied by the repealed
provision with certain modification, in that event such
re-enactment is regarded having force continuously and the
modification or changes are treated as amendment coming into
force with effect from the date of enforcement of re-enacted
provision. Viewed in this background, the effect of
re-enacted provision of Section 80JJ was that profit from
the business of livestock and poultry which enjoyed total
exemption under section 10(27) of the Act from assessment
years 1964-65 to 12975-76 became partially exempt by way of
deduction on fulfillment of certain conditions.
This matter may be examined from another angle. As
noticed earlier, Section 10(27) specifically excluded
poultry income from being included in total income. The
meaning of total income in Section 2(45) of the Income Tax
Act is as follows:
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total income means the total amount of income
referred to in section 5, computed in the manner laid down
in this Act.
Section 14(D) of the Income Tax Act deals with one
part of the total income, namely, profit and gains of
business. Section 29 of the Income Tax deals with
deductions from the profit and gains. Section 32A is one of
the sections dealing with such deductions. Therefore, the
income from poultry being outside the scope of total income
by virtue of omitted Section 10(27) of the Act, there was no
question for application of Sections 32A and 80J to them at
least when we find that Section 80JJ was consciously
simultaneously re-enacted on the omission of Section 10(27)
of the Act specially for those who were engaged in the
business of poultry. If omitted Section 10(27) and Sections
32A, 80J and 80JJ are read together along with the
legislative history it is evident that the provision giving
benefit to those who were engaged in running poultry farming
was separate and distinct from the provisions which provided
incentive to industrial undertakings engaged in the business
of manufacturing or producing articles. Thus, if the
expression industrial undertaking for purpose of business of
manufacture or production of an article or thing is read in
the context of the provisions of the Act and with regard to
legislative history of the provisions of the Act, it is
abundantly clear that those who are engaged in the business
of hatcheries are neither industrial undertakings nor
engaged in the business of producing articles or things.
It was then urged that the assessee has been running a
business where eggs are hatched on large scale by adopting
the latest scientific technological methods. Learned
counsel for the assessee referred to the various steps taken
by the assessee in producing chicks, as noticed in the
judgment of the Tribunal on the basis of written note
submitted by the assessee, which runs as under:-
(1) The farm and hatchery are kept strictly under
quarantine.
(2) The eggs are collected from the breeding farm
frequently and hygienically. Then they are transported to
the hatchery. Before admitting the eggs into the hatchery
they pass through the fumigation chamber. Once the eggs are
fumigated they become free from most of the micro organisms
which are pathogenic and present on the surface of the egg
shell.
(3) Storage of eggs is a must because we cannot
incubate and get a hatch every day due to economical
reasons. The technique of storing eggs without affecting
the hatchability has been evolved after many experiments. A
cold room having 60-65 degrees fahrenheit temperature and 75
per cent humidity is considered ideal for optimum results,
if your storage does not exceed a couple of weeks. Once we
store the eggs in the above temperature, 60-65 degree
fahrenheit, we just cannot take out and load them in the
incubation immediately. We take out the eggs 12 to 18 hours
before the loading time.
(4) The incubation period of the eggs is 21 days.
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Even by the natural process it takes the same time, but
there are certain research works which show that the
incubation period of broilers, particularly, can be reduced
to 18 days. Not only in India, but even in other parts of
the world, the complicated technology for reducing the
incubation period is not economical and viable. Hence, we
follow the same 21 days incubation period. The incubation
period can be divided into two stages : (a) First 18 days,
and (b) last 3 days.
For the first 18 days, the eggs are incubated in a
large scale in automatic machines where the temperature,
humidity and changing of position of the egg every hour is
done automatically. After completion of 18 days the same
eggs are transferred to another machine in which, except
turning, the rest are the same like the above machine. On
completion of 21 days, the chicks will be out from the eggs.
(5) Once the chicks are out the male and female are
separated. This process is called sexing. Two methods are
in existence. One is the Japanese event method and the
second is by a machine. In both the methods accuracy
remains almost the same. In case of machine sexing, the
chick mortality will be about 2 per cent whereas in the
Japanese method this mortality does not occur. Once the
sexed females(in case of layers) have been vaccinated
against various diseases they are sent to the farmers.
(6) It is also stated that in modern hatchery
operations there is a pooling of the following factors :
(1) Capital, (2) Labour, (3) Power, (4) Plant and machinery,
(5) Artificial hatching, (6) Research, (7) Technology, (8)
Large-scale production, (9) Prevention of diseases, (10)
Quality of chicks : (a) Protection against diseases - less
mortality, (b) Chicks - better yield, larger number of eggs,
size of eggs, (c) Less feed consumption.
Learned counsel for the assessee also referred to
various passages from several books, i.e., The Incubation
Book by Dr. A.F. Anderson Brown, Poultry Hatcheries
business by Dr. A.L. Bhagwat, Poultry Science and
Production by Robert E. Moreng and Poultry Keeping in India
by P.M.N. Naidu and on the strength of those passages it
was emphasized that chickens are produced by mechanical
process and, therefore, the assessee is producing articles
or things. It was also urged that better and larger number
of eggs and chickens are not possible by conventional
method, namely, through broody hens. It was stated that
under natural conditions the broody hen produces about 6 to
8 eggs, then stops laying, sits on the eggs, incubates them
for 3 weeks and hatches the chicks by natural methods. She
then takes care of the young chicks for 2 to 3 weeks, till
they are able to pick up independently. This conventional
method produces only 68 to 80 eggs in a year, whereas by
employing modern scientific methods assessee produces about
280 eggs in a year and is capable of producing 220 to 230
chicks in a year through artificial incubation. For the
larger growth of eggs and chicks, it is necessary that
incubation has to be mechanical as the broody hens are now
virtually unobtainable from the commercial world.
From a perusal of the self-stated steps taken by the
assessee for the alleged production of chicks it is clear
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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, 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 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 88J of the Act.
It was then urged by the 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 88J of the Act. Fifth Schedule of 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)
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
heading articles or things. On the strength of the
meaning assigned to articles and things in the Fifth
Schedule of 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. In Shamrao Vishnu Parulekar and another vs. The
District Magistrate, Thana and others, (1956 SCR 644, it was
held, thus:-
But it is contended by Mr. Chatterjee that the
expression grounds on which the order has been made
occurring in S.3(3) is, word for word, the same as in S.7,
that the same expression occurring in the same statute must
receive the same construction, that what S.3 requires is
that on the making of an order for detention, the authority
is to formulate the grounds for that order, and send the
same to the State Government under S.3(3) and to the detenu
under S.7, and that therefore it was not sufficient merely
to send to the State Government a report of the materials on
which the order was made. Reliance was placed on the
following passage in Maxwells Interpretation of Statutes:
It is, at all events, reasonable to presume that the
same meaning is implied by the use of the same expression in
every part of an Act.
The rule of construction contended for by the
petitioners is well-settled, but that is only one element in
deciding what the true import of the enactment is, to
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ascertain which it is necessary to have regard to the
purpose behind the particular provision and its setting in
the scheme of the statute. The presumption, says Craies,
that the same words are used in the same meaning is however
very slight, and it is proper if sufficient reason can be
assigned, to construe a word in one part of an Act in a
different sense from that which it bears in another part of
an Act. And Maxwell, on whose statement of the law the
petitioners rely observes further on:
But the presumption is not of much weight. The same
word may be used in different senses in the same statute,
and even in the same section.
The same word, if read in the context of one provision
of the Act, may mean or convey one meaning and another in a
different context. The Legislature in its wisdom had chosen
to place processed seeds and fish under the heading articles
or things in the Fifth Schedule as Legislature is competent
to give artificial meaning to any word. We are, therefore,
of the opinion that the meaning assigned to words articles
or things in the Fifth Schedule cannot be assigned to the
words articles or things used in Sections 32A and 80J of
the Act.
Learned counsel for the assessee relied upon several
decisions under the Sales Tax Acts, Central Excise Act and
the provisions of other statutes for the contention that
article includes goods and goods could be an animate
object and, viewed in this light, the hatching of eggs would
come within the meaning of the word produce which is of
wider import than the word manufacture. No doubt, several
Sales Tax Acts have included animate things for the purpose
of levying tax on sales. But the meaning assigned to a
particular word in a particular statute cannot be imported
to a word used in a different statute.
We, therefore, reject the submissions of the learned
counsel for the assessee. For the aforesaid reasons, we
hold that the decision by the Andhra Pradesh High Court in
the case of Commissioner of Income Tax vs. Sri Venkateswara
Hatcheries (P) Ltd.(supra) does not lay down the correct
view of law, whereas we approve the decision of the Bombay
High Court in the case of Commissioner of Income Tax vs.
Deejay Hatcheries (supra).
The result of the aforesaid discussion is that the
assessee is neither an industrial undertaking nor is it
engaged in the business of producing articles or things.
Consequently, the assessee is not entitled to developmental
allowance under Section 32A of the Act and deductions under
Sections 80HH, 80HHA, 80I and 80J of the Act.
For the reasons stated above the judgments under
appeal, except Appeai No. 2596 of 1997, are set aside. All
the civil appeals, except Civil Appeal No. 2596 of 1997 are
allowed. Appeal No. 2596 of 1997, are allowed. Appeal No.
2596 of 1997 is dismissed. There shall, however, be no order
as to costs.