C.I.T. vs. M/S GAURAV POULTRIES

ITR/550/1995HC Punjab & HaryanaPHHC01032543199530 November 2006Author: MR. JUSTICE RAJESH BINDAL,MR. JUSTICE ADARSH KUMAR GOEL4 pages
AI SummaryDismissed

What were the facts?

The assessee, Om Parkash, derived income from poultry business for assessment year 1990-91. The Assessing Officer (AO) rejected the assessee's claim for deduction under Section 80-I of the Income-tax Act, 1961, holding that poultry farming does not constitute an "industrial undertaking." The assessee relied on a CIT(A) decision for AY 1989-90 in a similar case, which the AO did not accept due to a pending departmental appeal. However, the CIT(A) subsequently allowed the assessee's claim, following a Tribunal decision in the case of Sandeep Poultry Farm. The revenue preferred an appeal, leading to the Income Tax Appellate Tribunal (ITAT) referring a question of law to the High Court.

What did the High Court hold?

The High Court answered the referred question in favour of the revenue and against the assessee. The Court relied on the Supreme Court's decision in Commissioner of Income Tax v. Venkateswara Hatcheries (P) Limited, which held that running a poultry farm does not involve any manufacture or production of 'articles or things.' The Court noted that chicks are animate creatures and their development from eggs is a natural process, not a manufacturing or production activity. The Supreme Court observed that while mechanical processes in a hatchery might reduce mortality and increase numbers, this does not equate to producing chicks as 'articles or things.' The Court also referred to its own decision in CIT v. Shivalik Poultries, which followed the Supreme Court's view. Consequently, the assessee's claim for deduction under Section 80-I was not sustainable as poultry farming was not considered an industrial undertaking. The issue regarding poultry sheds falling under 'plant' for Section 32A deduction was implicitly answered against the assessee by the overall finding that poultry farming itself does not qualify for such benefits.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that 'Poultry Farming' constituted an industrial undertaking producing articles or things, eligible for deduction under Section 80-I of the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, poultry sheds to house chicks fall within the definition of 'plant' eligible for deduction under Section 32A of the Income-tax Act, 1961? Assessee's contentions: The assessee argued that poultry farming constitutes an industrial undertaking and that poultry sheds are plant eligible for deduction. The assessee relied on the decision of the ITAT in the case of Sandeep Poultry Farm. Revenue's contentions: The revenue contended that poultry farming does not involve manufacture or production of articles or things, and therefore, is not an industrial undertaking. The revenue relied on Supreme Court judgments in Indian Hotels Co. Limited and Commissioner of Income Tax v. Venkateswara Hatcheries (P) Limited, and a Punjab & Haryana High Court judgment in CIT v. Shivalik Poultries.

Which sections of the Income-tax Act were involved?

Section 80-I,Section 32A,Section 80J,Section 33(1)(b)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

**** I.T.R. No.550 of 1995 Date of Decision:30.11.2006 The Commissioner of Income-tax, Patiala .....Petitioner Vs.

Om Parkash

.....Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present:- Dr. N.L.Sharda, Advocate for the revenue. **** ADARSH KUMAR GOEL, J. Following question has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh arising out of its order dated 3.6.1994 in I.T.A. No.88/Chandi/94 in respect of assessment year 1990-91:- “Whether on the facts and in the circumstance of the case, the ITAT was right in law in holding that `Poultry Farming' constituted and industrial undertaking producing articles or things and poultry sheds to house the chicks fall in the definition of `plant' eligible for deduction u/s 32A of the Income-tax Act?” 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 Section 80-I of the Income Tax

The order continues below.

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