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TMI Blog1982 (3) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 percent 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 F, 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. Even by the natural process it takes the same time, but there are certain research works which show that the incubation period of broilers, particularl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng associated in common parlance with the words "manufacture or produce", the Commissioner (Appeals) felt that it cannot be said that the company is engaged in any manufacture or production of articles and, thus, will not be entitled to relief under section 80J. 5. The company is on further appeal before us. Sri Ganesh, learned counsel for the assessee, submitted that in the large scale production of eggs, as is done in modern hatcheries, there is always an element of production as required under section 80J. He pointed out that this section requires production of articles or things. The word "production" is of very wide ambit, as has been laid down by the Allahabad High Court in Singh Engg. Words (P.) Ltd. v. CIT [1979] 119 ITR 891. The relevant passage appears at page 895. This authority was cited only to show how wide are the term of the words to be interpreted. In fact even mining of mica has been held to be production, although it only involves taking out of the earth mica, which had formed naturally. This is on an authority in 12 STC 150 at page 153. This approach of the Supreme Court, in the sales tax case, is the proper approach to be adopted in understanding the expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l not say that the company is producing eggs like other companies producing various materials. Chicks are produced by natural processes only. The reference to the Central Excise Act, also, does not help the assessee, according to him, because if the assessee's contentions are correct, the production of chicks should be subject to Central excise. The assessee himself accepted that it is not subject to Central excise. He further submitted that each statute has to be construed within the four walls of the expressions used therein and in the context and it would not be correct to import the meanings attributed to the term in other statutes. It is submitted that the findings of the Commissioner (Appeals) on this point are correct. 7. To a query from the Bench as to whether, in view of the fact that the assessee has been allowed deduction under section 80JJ on the profits of poultry farming, the assessee is also entitled to deduction under section 80J, the counsel replied that unless there is any specific provision in either section 80J or section 80JJ, the assessee would be entitled to the double deductions. The concept of production of eggs according to him, would be covered both by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds" appearing in the Fifth Schedule. Therein, they held that "processed seeds" fall either in the category of manufacture or of production. They had also pointed out, that section 80B and the Sixth Schedule of the Act also treat processed seeds as an article obtained by manufacture or production. Again, they had pointed out that section 80-I, which grants relief to specified industries, covers processed seeds also. 10. Now, the decision also gives how the processed goods are obtained. In that case, the company distributes foundation seeds to farmers, who are shareholders in the company. After the seeds are sown by the shareholders, the seed production assistants of the company inspect the field and advise the farmers regarding pesticides, etc. After the produce is harvested, seed-samples are collected and tested for purity, viability and moisture content. On the samples meeting the required standard, the farmers are asked to supply their produce. The seeds supplied are again tested and, if found suitable, approved for processing. The seeds are then graded and cleaned by mechanical processes and sorted out in three categories. The approved category is treated with mixtures of vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... International English Dictionary, the word "produce" means "to bring forward, to get together". It would be seen that the word "production" means, amongst other things, that which is produced, a thing that results from any action, process or effort. It is, however, to be noted that the word "produce" is not necessarily confined to what is grown from the ground. It also refers to finished articles or semi-finished articles made from the raw materials. This being the meaning of the word "produce", it would be, at once, clear that where human agency is associated with a natural process the human agency is also credited with the production of the article or thing. Thus, a farmer is said to produce the crops, although it is natural for a plant to grow and give fruit. What the farmer had done was to tend the plant, water it and protect it from pests. It gives fruits of its own accord. Yet, we consider that the farmer has produced the fruits or the crop. It is true that an egg, left to itself, would hatch and the chick would conic out in the normal course. It is not necessary that the mother bird should help in the hatching of the eggs. There is an abundance of instances in nature where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of CIT v. Shahzada Nand Sons [1966] 60 ITR 392 has considered this maxim. They had pointed out that this rule of construction is not of universal application. It is subject to the general condition that there is nothing in the general provision, express or implied, indicating an intention to the contrary. This would require us to consider the provisions of section 80JJ and section 80J in order to find out whether the general provision, section 80J, completely comprehends the special provision, section 80JJ, and whether there is anything implied therein which is contrary. In our opinion, the provisions of these two sections do not operate in the same field. We may highlight some of the differences. Section 80J operates only for a period of five years from the date of production of the article or thing. The provisions of section 80JJ, on the other hand, have no limitation in time. Secondly, it is not necessary that there should be any production of an article or thing in order to be eligible for deduction, under section 80JJ. It would be seen that this applies to livestock breeding and dairy farming. These businesses could be undertaken without satisfying the prime condition lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, such expenditure may or may not result in depreciable capital assets. On the other hand, depreciation is allowable only on such capital assets as are depreciable and are used for the purpose of business. The purport and scope of two sections is quite different. The mere fact that originally capital expenditure on scientific research was to be allowed in five equal yearly instalments does not, in our opinion, at all mean that the deduction can be equated with depreciation. In any event, after the insertion of clause (ia) in section 35(2) with effect from 1-4-1968, the position has undergone a material change. It may not be out of place to observe that all capital expenditure does not necessarily result in depreciable capital assets and in any event under section 35 expenditure incurred before the commencement of the business is also allowable while, for allowance of depreciation under section 32, the capital assets has got to be used for the purposes of the business. Moreover, double allowance, as we understand, means allowances of same nature on the same assets in the same year and not different types of deductions allowed in different years. 7.1. Sections 35 and 32 thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made from or which uses as raw material any product of agriculture, animal husbandry, or dairy farming. There is no dispute that the company has used as raw material a product of poultry farming, i.e., eggs. But the department's objection is that the company should be engaged in the manufacture or processing of any article or thing and chicks are not article or thing. Our finding, in respect of section 80J, would be applicable in deciding the assessee's claim under section 35C. Consequent to our finding, we hold that the assessee-company would be entitled to section 35C deduction also. 19. The next ground is, the claim of the company that they would be entitled to relief under section 35B in respect of the salaries of staff not engaged in export work. The assessee has a department which looks after the export sales. Apart from that, the assessee has other staff which are looking after the rest of the activities. The salary paid in respect of the member of the staff in the non-export departments amounted to Rs. 10,52,717. Now, the poultry business of the assessee amounted to 69 per cent of the turnover. On that basis, the assessee had calculated that the balance, i.e., 31 per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requirements of section 2(8) of the Finance Act. We have already held that the assessee could be considered as producing articles or things. The expression "processing" is, certainly, wider in terms than the expression "producing". If the assessee could be considered as producing articles or things, the assessee can certainly be considered as engaged in a business of processing of goods. So, they are entitled to be treated as an industrial company. 22. We will now take up the appeals for the assessment year 1979-80. Both the assessee and the department are in appeal. The first ground of appeal in the assessee's appeal, is their claim that they are entitled to the deduction under section 80J. For the reasons given in the earlier paragraphs, we accept the assessee's claim. 23. The second ground was not pressed at the time of hearing. 24. The third ground is that they should be treated as an industrial company. This is also acceptable to us for reasons stated by us in the above paragraphs. 25. In the departmental appeal, the only point is the computation of income for the purpose of deduction under section 80JJ. The ITO computed the income, as per statute, and arrived at a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Legislature had made it clear in the statute itself. For instance, section 80-I or section 80E which was considered by the Supreme Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84. It will not be open for us to read in the statute what has not been provided therein by the Legislature. We will, therefore, hold that the deduction has to be computed with reference to the commercial profits. Shri Satyanarayana, the learned departmental counsel, submitted that the commercial profits being a vague term, the deduction available will vary according to the manner in which each assessee draws up his accounts. There would be no uniformity in such cases. Although there is some force in the submission made by the department, we are of the opinion that it would not apply to cases of limited companies. The Companies Act, 1956, has laid down a certain amount of uniformity in drawing up the profit and loss account and it is mandatory that the accounts should be drawn up accordingly. There may not be, therefore, much of a variance in the computation of the deductions available. 29. In the result, the appeals by the assessee for the years 1977-78 and 1979-80 are part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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