of Income-Tax, Bangalore Vs. Venkateswara Hatcheries (P)
Ltd.  INSC 100 (24 March 1999)
V.N.Khare, A.P.Misra V.N. KHARE,J.
granted in the special leave petitions.
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.
is how both sets of appeals are before us.
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.
first contention on behalf of the Revenue is that 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
the arguments raised by the learned counsel for the Revenue are overlapping we,
therefore, propose to deal them together.
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
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.
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.
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.
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 and was in the following terms:
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.
year 1967, through the Finance Act No.2, the words beginning from word which to
1967 were omitted.
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.
is also evident from the Budget Speech of the then Finance Minister in the
Parliament which runs as under:
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.
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 :
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.
Finance Act 1976 inserted Section 32A with effect from 1st April, 1976 in replacement of development
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 :
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 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.
a small-scale industrial undertaking for the purposes of business of
manufacture or production of any other articles or things.
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
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.
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.
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:
income means the total amount of income referred to in section 5, computed in
the manner laid down in this Act.
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.
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.
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.
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.
The incubation period of the eggs is 21 days.
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.
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
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
is also stated that in modern hatchery operations there is a pooling of the
following factors :
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.
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.
perusal of the self-stated steps taken by the assessee for the alleged
production of chicks it is clear 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.
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.
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.
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.
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:
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.
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
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:
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.
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.
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.
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).
result of the aforesaid discussion is that the assessee is neither an
industrial undertaking nor is it engaged in the business of producing articles
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.
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.