COMMISSIONER OF INCOME TAX, BANGALORE vs. VENKATESWARA HATCHERIES (P) LTD. ETC. ETC.

CIVIL APPEAL No. 5066/1996Supreme Court[1999] 2 S.C.R. 17724 March 1999Bench: 3 JudgesAuthor: S.P. BHARUCHA, V.N. KHARE, AJAY PRAKASH MISRA13 pages
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What were the facts?

The assessees operated hatcheries, hatching eggs on a large scale using scientific methods. They claimed eligibility for investment allowance under Section 32A and deductions under Sections 80 HH, 80 HHA, 80 I, and 80 J of the Income Tax Act, 1961, asserting they were industrial undertakings engaged in producing "articles or things." The Bombay High Court, in one case, ruled against the assessees, while the Andhra Pradesh and Karnataka High Courts, in other cases, ruled in their favour. The Revenue appealed these conflicting decisions to the Supreme Court. The Revenue contended that chicks, as animate creatures, could not be "articles or things" and that their production was a natural process, not manufacturing or production by the assessees. The assessees argued that "produce" had a wider import and that hatching fell within this definition.

What did the Supreme Court hold?

The Supreme Court held that the business of a hatchery does not fall within the meaning of "manufacture or produce articles or things" as contemplated in Sections 32A and 80J of the Income Tax Act, 1961. The Court reasoned that the hatching of chicks from eggs is primarily a natural or biological process, where the assessees' role is to preserve and protect the eggs through mechanical methods, leading to a reduced mortality rate and potentially a higher number of chicks. However, this intervention does not amount to the production of 'articles or things'. The Court also held that the assessees were not 'industrial undertakings' for the purposes of these provisions. The Court rejected the argument that the meaning of 'articles or things' in the Fifth Schedule, which includes processed seeds and fish, should apply to Sections 32A and 80J, stating that the same words can have different meanings in different contexts within a statute. The Court overruled the Andhra Pradesh and Karnataka High Courts' decisions and approved the Bombay High Court's decision. Consequently, the assessees were not entitled to investment allowance under Section 32A or deductions under Sections 80 HH, 80 HHA, 80 I, and 80 J.

What were the issues?

1. Whether the business of a hatchery, involving hatching eggs on a large scale using scientific methods, constitutes the "manufacture or produce articles or things" as contemplated in Sections 32A(2) and 80J of the Income Tax Act, 1961, thereby entitling the assessees to investment allowance and deductions? (Mixed law and fact, concerning Sections 32A and 80J). 2. Whether the assessees are "industrial undertakings" for the purposes of claiming the aforementioned benefits? (Mixed law and fact, concerning Sections 32A and 80J). Assessee's Contentions: - The word 'produce' has a wider import and hatching of eggs falls within its meaning, citing dictionary definitions. - The meaning of 'articles or things' in Sections 32A and 80J should be interpreted in line with its inclusion of processed seeds and fish in the Fifth Schedule of the Act. - Relied on various Sales Tax and Central Excise Act decisions where animate objects were considered 'goods' or 'articles'. Revenue's Contentions: - Chicks, being animate creatures, cannot be considered 'articles or things' under Sections 32A(2)(b)(ii) or 80J(4)(iii). - Even if chicks were 'articles or things', their emergence from eggs is a natural process, not production by the assessees. - The meaning of 'articles or things' must be interpreted in the context of the Income Tax Act and its legislative history, not by analogy to other statutes or schedules. - The assessees are not 'industrial undertakings'.

Which sections of the Income-tax Act were involved?

Section 32A,Section 80J,Section 80 HH,Section 80 HHA,Section 80 I

AI-generated summary — verify with the full judgment below

• -- COMMISSIONER OF INCOME TAX, BANGALORE A v. VENKATESWARA HATCHERIES (P) LTD. ETC. ETC. MARCH 24, 1999 (S.P. BHARUCHA, V.N. KHARE AND A.P. MISRA, JJ.] B Income Tax Act 1961, Ss. 32 A and 80 J-Whether the business of hatchery comes within the meaning of the expression ''manufacture or produce articles or things '' in Ss. 32 A (2) and 80 J and consequently are the assessees entitled to investment allowance and deductions-Held, no C Interpretation of Statutes-Whether words articles or things should receive same interpretation as when occurring in Fifth Schedule of Act-Held, no; 'Same words, if read in context of one provision may convey one meaning and another in a different context.

The assessees run hatcheries where eggs are hatched on large scale by adopting latest scientific methods. In connection with their income tax assessments, they claimed that they were industrial undertakings engaged in the business of producing articles or things and therefore entitled to investment allowance under S. 32A and deductions under Ss. 80 HH, 80 HHA, 80 I and 80 J of the Income Tax Act, 1961 ('Act').

The Bombay High Court following the decision in Commissioner of Income

The order continues below.

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