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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.