- (1.) FOLLOWING question has been referred for opinion of this Court by the Tribunal, Chandigarh Bench, Chandigarh, arising "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the poultry - farming was an industrial undertaking producing articles and things entitling the assessee to claim deduction under s. 80 -I -
(2.) 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 s. 80 -I of the IT Act, 1961 ('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 asst. yr. 1989 -90 in the case of 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 in this connection the decision of the Chandigarh Bench of
(3.) WE have heard learned counsel for the parties and perused the record. We proceed to answer the question referred as under : Sec. 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. Ltd. vs. ITO (2000) 162 CTR (SC) 310 : (2000) 245 ITR 538 (SC), with reference to identical provision in s. 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 vs. CIT (1997) 138 CTR (MP) 382 : (1998) 230 ITR 909 (MP) 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." xxxxxxxxxx "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. Therefore, even after rearing, they remain chicks only.";