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PETITIONER:

COMMISSIONER OF INCOME-TAX, BANGALORE

Vs.

RESPONDENT:

VENKATESWARA HATCHERIES (P) LTD.

DATE OF JUDGMENT: 24/03/1999

BENCH:

S.P.Bharucha, V.N.Khare, A.P.Misra

JUDGMENT:

V.N. KHARE,J.

Leave granted in the special leave petitions.

In 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.

That is how both sets of appeals are before us.

Respondents 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.

The first contention on behalf of the Revenue is that

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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

industrial undertaking.

Since the arguments raised by the learned counsel for

the Revenue are overlapping we, therefore, propose to deal

them together.

The 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 or thing.

He 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.

In 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.

A 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.

Viewed 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

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and was in the following terms:

any 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.

In the year 1967, through the Finance Act No.2, the

words beginning from word which to 1967 were omitted.

Thus 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.

This is also evident from the Budget Speech of the then

Finance Minister in the Parliament which runs as under:

At 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.

Consequently, 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 :

80JJ. 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.

The Finance Act 1976 inserted Section 32A with effect

from 1st April, 1976 in replacement of development rebate.

Section 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 :

32A.(1) 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

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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.

(iii) in a small-scale industrial undertaking for the

purposes of business of manufacture or production of any

other articles or things.

Rele vant 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 previous year).

4(iii) 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.

As 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.

This 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:

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total income means the total amount of income

referred to in section 5, computed in the manner laid down

in this Act.

Section 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.

It was 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.

(2) 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.

(3) Storage 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.

(4) The incubation period of the eggs is 21 days.

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Even 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.

For 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 the eggs.

(5) 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 the farmers.

(6) It is also stated that in modern hatchery

operations there is a pooling of the following factors :

(1) 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.

Learned 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.

From a perusal of the self-stated steps taken by the

assessee for the alleged production of chicks it is clear

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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.

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.

We 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.

It was 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.

Generally, 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:

It is, 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.

The 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

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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:

But 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.

The 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.

Learned 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.

We, 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).

The result of the aforesaid discussion is that the

assessee is neither an industrial undertaking nor is it

engaged in the business of producing articles or things.

Consequently, 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.

For 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.