Commissioner of Income Tax vs Universal Poultry Farm

Arijit Pasayat, C.J.—At the instance of revenue, the following question has been referred u/s 256(1) of the income tax Act, 1961 (''the Act'') by the Tribunal, Delhi Bench ''E'', for opinion of this Court : Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the assessee is an industrial undertaking within the meaning of section 54D of income tax Act, 1961 ?

The dispute relates to assessment year 1974-75. Factual position as set out in the statement of case is as follows : Assessee is a partnership firm hatching pure lines of poultry birds in its own poultry breeding farm. Main activity of the assessee was to produce chicks and sell one day old poultry chicks. As an ancillary activity, assessee also sell eggs, dressed chicken, old birds and yield from the land including fruit, kitchen garden products and grain. In carrying out aforesaid activity, assessee had in its possession 55 bighas and 5 biswas of land which is equivalent to 11.5 acres. 50 per cent of the land was owned by the assessee, while remaining 50 per cent had been taken on lease for a period of 42 years beginning from 1968 from Mohar Singh and Pratap Singh. The entire land including the land taken on lease was acquired by the Government for public purpose in 1978. The Collector made an award of Rs. 15,61,623 which included Rs. 1,82,761 for the 50 per cent of the land owned by the assessee and an equal amount for the other portion taken on lease. However, that issue has lost its significance as the question formulated in that regard has not been referred. The ITO rejected assessee''s claim that it was a new industrial undertaking as according to him eggs laid by a hen resulted in the end product of chicks through a biological or natural process without the help of any machine or labour and, therefore, the activities of the assessee could not be regarded as that of an industrial undertaking. Matter was carried in appeal before the Commissioner (Appeals) by the assessee. Accepting assessee''s stand, the Commissioner (Appeals) allowed the appeal. The revenue carried the matter in further appeal before the Tribunal. The revenue''s appeal was not accepted and the Commissioner (Appeals)''s view was upheld. It was held that the activities carried on by the assessee were encompassed by the expression "new industrial undertaking". On being moved for reference, question, as set out above, has been referred.

We have heard the learned counsel for the revenue. There is no appearance on behalf of assessee in spite of notice. The learned counsel for the revenue pointed out that the condition precedent for availing special deduction as a new industrial undertaking is manufacture or production of articles. In Commissioner of Income Tax, Bangalore Vs. Venkateswara Hatcheries (P) Ltd. etc. etc., it was held by the Apex Court that poultry farms and hatcheries do not manufacture or produce articles. That being the position, the Tribunal''s conclusions cannot be said to be in order. Our answer to the question, therefore, is in the negative, in favour of the revenue and against the assessee.

The reference stands disposed of.