THE C.I.T.-II ASR. vs. M/S EMBROCIA FARMS PVT. LTD.

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ITA/127/2002HC Punjab & HaryanaPHHC01042415200214 July 2010Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL5 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the substantial question of law arises from the Tribunal's decision to allow deductions under Sections 80J and 32A to the assessee engaged in poultry farming. The Court referred to the Supreme Court's decision in CIT v. Venkatshwara Hatcheries P Ltd (1999) 237 ITR 174, which held that poultry farming, fisheries, and dairy farming do not involve manufacturing or producing articles or things, and thus do not qualify as an industrial undertaking. Consequently, such activities are not entitled to investment allowance under Section 32A and special deduction under Section 80J. The High Court answered the substantial question of law in favour of the Revenue and against the assessee, stating that the assessee cannot be termed an industrial undertaking and is legally not entitled to the claimed deductions. The appeals were disposed of accordingly.

What were the facts?

The Revenue has filed two appeals against the orders of the Income Tax Appellate Tribunal for assessment years 1986-87 and 1987-88. The assessee, M/s Embrocia Farms Private Limited, engaged in poultry farming, claimed deductions under Sections 80J and 32A of the Income Tax Act, 1961. The Assessing Officer disallowed these claims, stating that poultry farming was not considered an industrial undertaking. The Commissioner of Income Tax (Appeals) allowed the deductions, holding the assessee to be an industrial unit. The Tribunal upheld the CIT(A)'s order. The Revenue's appeals are based on the substantial question of law regarding the eligibility of the assessee for these deductions.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee, which is running a poultry farm, is entitled to deductions under Sections 80J and 32A of the Income Tax Act, 1961? (Question of law) Assessee's Contentions: The judgment does not record any specific contentions made by the assessee before the High Court. However, the earlier orders indicate the assessee claimed deductions under Sections 80J and 32A, asserting its status as an industrial unit. Revenue's Contentions: The Revenue contended that the assessee, engaged in poultry farming, is not an industrial undertaking and therefore not entitled to deductions under Sections 80J and 32A. The Revenue relied on the principle that these activities do not involve manufacturing or producing articles or things.

Which sections of the Income-tax Act were involved?

Section 80J,Section 32A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
1 - . 127 2002 Income tax Appeal No of IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ----- - . 127 2002 Income tax Appeal No of : 14.7.2010 Date of decision - - , Commissioner of Income tax II Amritsar --- Appellant Versus / . M s Embrocia Farms Private Limited , Village Kotli District Gurdaspur --- Respondent --- : . CORAM HON’BLE MR JUSTICE ADARSH KUMAR GOEL . HON’BLE MR JUSTICE AJAY KUMAR MITTAL --- : PRESENT . . . , Ms Navender P K Singh Advocate . for the appellant --- , . AJAY KUMAR MITTAL J , - This order will dispose of two appeals Income tax . 127 153 2002 , Appeal Nos and of preferred by the Revenue 1987-88 1986-87, pertaining to the assessment years and , respectively as the facts and the question of law involved in 2 - . 127 2002 Income tax Appeal No of . , , both is common The facts have however been taken from . 127 2002. ITA No of The Revenue has claimed that the following substantial question of law arises in this appeal for : adjudication by this Court “ Whether on the facts and in the circumstances of the case the Tribunal was justified in law in holding that the assessee which is running poultry / . 80- 32- far is entitled to deductions u ss J and A - . of the Income tax Act ” The assessee filed return for the assessment year 1987-88 . 16,85,800/-. , declaring loss of Rs Accordingly the . 93,750/- assessee claimed deduction in the sum of Rs 80- .3,92,548/- under Section J and of Rs under Section 32- , 1961 ( “ ). A of the Income Tax Act for short the Act” - , , The Deputy Commissioner of Income tax Special Range , Amritsar disallowed the claim of the assessee referred to , above observing that since the business activities carried on by the assessee were not considered to be of an industrial 3 - . 127 2002 Income tax Appeal No of undertaking as held in the cases pertaining to assessment 1984-85 1985-86, years and it was not possible to entertain 1986-87 the claim of the assessee for the assessment years 1987-88 . 143(3) and also Assessment under Section of the , , . , Act was thus completed at income of Rs nil

vide order 17.3.1993. dated The assessee challenged the said order by . preferring appeal

- ( ), The Commissioner of Income tax Appeals , [(

“

( ) ],

Amritsar for short the CIT A ” following the order of the -

,

Income tax Appellate Tribunal for the assessment years 1984-85 1985-86,

9.11.

1994 and held vide order dated that -

, , the assessee company was an industrial unit and thus

.

entitled to claim deductions It accordingly issued a direction

- to the assessing officer to allow the claim of the assessee .

( ), respondent Aggrieved by the order of the CIT A the

-

Revenue carried appeal before the Income tax Appellate ,

, (

“

). Tribunal Amritsar Bench Amritsar for short the Tribunal”

The Tribunal dismissed the appeal vide order dated 18.12.2001. 4 -

. 127 2002 Income tax Appeal No of

We have heard learned counsel for the appellant

.

and have perused the case The question that arises for the

,

consideration of this Court in these appeals is whether the -

assessee respondent which was carrying on the business of

Poultry Farm can be said to have been manufacturing or

producing goods so as to be termed as an industrial

80- 32- undertaking under the provisions of Sections J and A

.

of the Act This matter is no longer

res integra.

The apex

Court in .

( ) . CIT v Venkatshwara Hatcheries P Ltd (1999) 237 174

ITR has held that such an assessee is not entitled

32-

to investment allowance under Section A and special

80

deduction under Section J are not allowable in respect of ,

poultry farming fisheries and dairy farming as they do not

, ,

manufacture or produce articles or things and thus are not ‘

. an industrial undertaking’

In view of the aforesaid comprehensible

,

- observations of the Supreme Court the assessee company

cannot be termed as an industrial undertaking and once that ,

is so it is legally not entitled to claim deductions referred to .

,

, above The substantial question of law noticed above is 5 -

. 127 2002 Income tax Appeal No of ,

therefore answered in favour of the Revenue and against the .

. assessee The appeals stand disposed of accordingly (

) AJAY KUMAR MITTAL JUDGE (

ADARSH KUMAR ) GOEL 14, 2010 July JUDGE * * rkmalik

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