Commissioner of Income Tax Vs Balakrishna Hatcheries

@JUDGMENTTAG-ORDER

In the Karnataka High Court Ashok Bhan & Chidananda Ullal, JJ.

ASHOK BHAN, J.

Commissioner of Income Tax Karnataka (hereinafter referred to as ''the Revenue'') has filed this petition u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act) seeking a direction to the Appellate Tribunal, Bangalore Bench (hereinafter referred to as the Tribunal) directing it to refer the following question of law along with the statement of case to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the order of the Commissioner (Appeals) wherein he has directed the assessing officer to allow investment allowance u/s 32A on the plant and machineries used in the poultry business of the assessee?"

2. Briefly stated the facts are :

This petition arises from the order passed by the Tribunal in ITA No. 258(Bang)/1990 relating to the assessment year 1985-86. Assessee is engaged in the poultry business and while concluding the assessment for the year 1985-86, the assessee''s claim towards investment allowance was not allowed by the assessing authority on the ground that assessee being engaged in hatchery business was not involved in any manufacturing activity so as to be eligible for investment allowance.

Assessee being aggrieved by the disallowance of the claim for investment allowance, preferred an appeal before the Commissioner (Appeals). The Commissioner (Appeals) relying upon an unreported judgment of this court in ITRC No. 47 of 1992 dated 13-11-1992 [in the case of Southern Hatcheries (P) Ltd.], accepted the appeal. In the said case, this court had taken the view that a person engaged in hatchery business is involved in a manufacturing activity and, therefore, entitled to the investment allowance u/s 32A. Accordingly, the Commissioner (Appeals) directed the assessing authority to allow investment allowance u/s 32A in respect of the plant and machinery used in hatchery business of the assessee on the ground that the poultry farm could be considered as involving production of chicks from eggs and certain other things.

Revenue being aggrieved, filed an appeal before the Tribunal. Tribunal dismissed the appeal filed by the revenue relying upon the judgment of the jurisdictional High Court. Revenue thereafter filed a petition u/s 256(1) requesting the Tribunal to refer the question of law (reproduced above) to this court for its opinion. Petition was declined on the ground that as the matter already stood concluded by a judgment of the jurisdictional High Court, a referable question of law did not arise from the order of the Tribunal. Revenue thereafter filed the present petition u/s 256(2) seeking a mandamus to the Tribunal to refer the question of law (reproduced above) along with the statement of case, to this court for its opinion.

3. Counsel appearing for the revenue relying upon the judgment of the Supreme Court in Commissioner of Income Tax, Bangalore Vs. Venkateswara Hatcheries (P) Ltd. etc. etc., contended that the assessee was neither an industrial undertaking nor does the business of hatchery carried out by the assessee fall within the meaning of sections 32A and 80J of the Act. That the law laid down by this court in ITRC 47/1992 was no longer good law as the Supreme Court in the judgment relied upon by the revenue has taken a contrary view and held that the business of hatchery carried on by the assessee was not an industrial undertaking within the meaning of sections 32A and 80J of the Act. Counsel appearing for the respondent fairly conceded that the view taken by this court was no longer good law in view of the judgment of the Supreme Court upon which reliance has been placed by the revenue .

4. Counsel for the parties are agreed that instead of issuing a mandamus directing the Tribunal to refer the question of law claimed by the revenue, the court may answer the question at this stage itself as the point involved already stands concluded by a judgment of the Supreme Court of India. Otherwise also, the legislature has repealed the provisions of section 256(1) and 256(2). Requirement of filing a petition before the Tribunal, requiring it to refer the question of law to the High Court and in the event of dismissal of the petition, filing of the petition in the High Court u/s 256(2) for issuance of a mandamus requiring the Tribunal to refer the question of law arising from the order of the Tribunal along with the statement of the case to the High Court, has been dispensed with. Instead, the legislature has introduced section 260A providing a direct appeal to the High Court on the question of law. The High Court, on framing the question of law in the appeal, can proceed to answer the same.

5. Keeping in view the concession made by the counsel for the parties and the repeal of sections 256(1) and 256(2), we proceed to frame the following question of law and proceed to answer the same :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the order of the Commissioner (Appeals) wherein he has directed the assessing officer to allow investment allowance u/s 32A on the plant and machineries used in the poultry business of the assessee?"

6. We have perused the judgment of the Supreme Court. It has been held thus :

"Held, allowing the revenue ''s appeals and dismissing the assessee''s appeals that from a perusal of the steps taken by the assessee for the production of chicks, it was clear that the assessee did not contribute to the formation of chicks. The formation of chicks is a natural and biological process over which assessee had no hand or control. In fact, what the assessee was doing was to held the natural or biological process of giving birth to chicks. The chicks otherwise could also be produced by contentional or natural method and in that process also, the same time is taken when the chicks come out from the eggs. What the assessee by application of mechanical process did in the hatchery was to preserve and protect the eggs at a particular temperature. But 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". The assessee is neither an industrial undertaking nor does the business of hatchery carried out by the assessee fall within the meaning of sections 32A and 80J of the Act. Consequently, the assessee is not entitled to investment allowance u/s 32A of the Act and special deductions under sections 80HH, 80HHA, 80-I and 80J of the Income Tax Act."

Relying upon the judgment of this court in ITRC No. 47/1992 the Tribunal as well as the Commissioner (Appeals) had taken the view that the assessees engaged in hatchery business were entitled to the investment allowance u/s 32A as they were carrying out manufacturing activities. The view taken by this court stands overruled by the Supreme Court in CIT v. Venkateshwara Hatcheries (P) Ltd., case (supra). Respectfully following the view taken by the Supreme Court, it has to be held that the assessee is neither an industrial undertaking nor does the business of hatchery carried on by the assessee fall within the meaning of section 32A of the Act. The assessee would not be entitled to the investment allowance u/s 32A of the Act.

7. Petition stands allowed and the question is answered in the negative i.e., in favour of the revenue and against the assessee. No costs.