TMI Blog2005 (3) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases chicks for running a poultry farm. The assessee maintains the chicks till they attain maturity or till they attain the stage to lay eggs. The assessee has incurred an expenditure of Rs. 94,15,342 as feed on the chicks as well as the layer birds. However, the assessing authority found that the expenditure incurred by the assessee on rearing the chicks is a capital expenditure therefore, the expenditure relating to feed and medicine relatable to chicks was disallowed while computing the total income. Accordingly, the Assessing Officer disallowed a sum of Rs. 14,58,560. The first Appellate authority confirmed the addition made by the Assessing Officer. Therefore, the assessee has filed the present appeal before this Tribunal. 3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mal or livestock and the amount realized in respect of carcasses. Therefore, the learned representative submitted that the Legislature intended to treat the livestock differently from that of agricultural product and the plant. The learned representative further invited our attention to section 43(3) of the Income-tax Act and submitted that the word 'plant' includes ship, vehicle, books, scientific apparatus and surgical apparatus used for the purpose of business or profession. But it does not include tea bushes and livestock. Therefore, the learned representative submitted that the intention of the Legislature is to treat the livestock separately and differently when compared to the machineries and the agricultural product. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side, and also perused the material available on record. Admittedly, the assessee purchased chicks for running the poultry farm. Therefore, the cost of acquisition of chicks has to be classified as capital expenditure. There is no dispute on this classification. The only issue arises for consideration is with respect to expenditure incurred by the assessee for feeding and providing medicine till the chicks attain the layer stage. The lower authorities disallowed the claim of the assessee on the ground that the expenditure incurred by tea growers for plantation and the maintenance till it reaches the plucking stage has of be classified as capital in nature. We have also carefully gone through the provisions of rule 8 of Income-tax Rules, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to be a capital expenditure. Capital expenditure involves an investment increasing the capital for higher profit. The expansion means extension of plantation to an additional area. An area already abandoned, if replanted would be an expansion of the area under cultivation for the previous year concerned. The maintenance of area already under cultivation cannot be treated to be an expansion of the plantation nor can it be treated to be an investment or expansion adding to the capital already invested. On the other hand, it would be a maintenance of the plantation itself and, therefore, is a revenue expenditure." 7. In view of the observation made by the Calcutta High Court, the maintenance of an area already under cultivation cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... superintendence, weeding, etc., incurred by the company in respect of the whole estate including the non-bearing rubber estate was allowed on the ground that in arriving at the assessable profits the assessee was entitled to deduct the expenditure for superintendence, weeding, etc., on the whole estate and not only 1/7th of such expenditure." 9. The Supreme Court, after referring to their early judgment in the case of Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34, observed that the expenditure incurred by the assessee in acquisition of an income earning asset is a capital expenditure and the expenditure incurred in the process of earning of income was a revenue expenditure. In this case, the income earning apparatus is the chick i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s we have already observed, the chicks are laying eggs due to biological and physical changes in its body. The assessee is providing feed and medicine and protects them by giving a better living condition. The facility provided by the assessee may lead to a better living condition but that alone is not sufficient to lay egg for a chick. Therefore, we have to consider the whole expenditure and activity of the assessee in the business of poultry farming. Some chicks may lay egg and some chicks may not lay egg at all. What we have to see is whether the expenditure claimed by the assessee was for the purpose of deriving income from the business of poultry farm. Admittedly, the assessee incurred the expenditure for the purpose of earning income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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