TMI Blog2009 (9) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons recorded vide order-sheet entry dated 17-4-2002. The basic reason was that the assessee was not an industrial undertaking as it was not having any manufacturing unit and was, thus, not entitled to deductions under sections 80HHA and 80-I of the Act. 2. As per the Assessing Officer, the deduction under section 80HHA is allowed only to the newly established small scale industrial undertakings which are engaged in the manufacturing and production of articles in rural areas. The deduction under section 80-I on the other hand is allowed to newly established industrial undertakings. One of the necessary conditions to be fulfilled by the assessee in order to become eligible for deductions under sections 80HHA and 80-I is that it should produce or manufacture any article or thing. In the reasons recorded for initiating action under section 147 of the Act, recorded vide order sheet entry dated 17-4-2002, it was recorded that In the returns filed by the assessee for the assessment years 1996-97 to 2000-01, it has claimed deduction under sections 80HHA and 80-I, thus, claiming to be an industrial undertaking. However, in the case of Indian Poultry v. CIT[1998] 230 ITR 909, 911 (MP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products like boneless chickens, full legs, drumsticks, wings as well as Giblets like chicken liver and Gizzards also commonly known as Offal. According to the assessee, to increase the shelf life of these products, tenderness and moisture retention, chicken is treated with salt and polyphosphates during chilling. On this basis the assessee claimed that it does not simply cut dead chicken into several parts and sell the cut parts. This process involves hard labour and scientific measures. Dressing, rearing, de-feathering, de-veining and de-boning is a human art and labour which makes the product consumable after preserving and packing it with the aid of machines. The question is whether the aforesaid process would make it a manufacturing process. 6. In the case of hatcheries itself, the question has come up for consideration before the Supreme Court and other Courts on number of occasions. We would, therefore, like to take note of those cases which would throw light on the principles to be applied in the instant case. The basic judgment is that of Supreme Court in the case of CIT v. Venkateshwara Hatcheries (P.) Ltd.[1999] 237 ITR 174. In that case the question was as to whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act and the fourth submission is that the assessee is not an industrial undertaking. (p. 178) 7. On the other hand, argument of the assessee was that hatching of eggs comes within the meaning of expression production of an article or thing . It was emphasized that chickens were produced by mechanical process and therefore, the assessee was producing articles or things. Argument was also raised that better and larger numbers of chickens are not possible by conventional method and therefore, for the larger growth of eggs and chicks, which was necessary for incubation, had to be mechanical as the broody hens are now virtually unobtainable from the commercial world. The Supreme Court refused to accept the aforesaid contentions of the assessee holding that the process did not amount to production of any article or manufacturing process. The relevant portion of the judgment of the Supreme Court reads as under :- From a perusal of the self-stated steps taken by the assessee for the alleged production of chicks it is clear 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; implies a change, but every change is not manufacture and yet every change in an article is the result of treatment, labour and manipulation and does not necessarily mean that on account of certain treatment and manipulation, a new identity has come to be acquired. In the present case, the chicks are only reared for a few days and they are developed; thereafter they become broilers. Therefore, even after rearing, they remain chicks only. 9. This judgment was affirmed by the Supreme Court in Indian Poultry v. CIT[2001] 250 ITR 664 . By that time view had already been taken by the Supreme Court in Venkateshwara Hatcheries (P.) Ltd.'s case (supra) and the Court held that the matter was covered by the said judgment as is clear from the following :- It is not in dispute that the case is covered against the assessee by the judgment of this Court in CIT v. Venkateshwara Hatcheries (P.) Ltd.[1999] 237 ITR 174. The further point that was made by the assessee was that it not only reared the chicken but also dressed them for sale in the market and, therefore, a process of manufacture was carried out. But, it appears that there was no material laid before the Tribunal in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the biological process is smoothened, but that would not mean that some different articles or things have been produced. For this reason only, hatching of eggs by the application of mechanical methods is not treated as manufacturing activity. Likewise, development of chicks into broilers is also not treated as manufacturing activity as basically the chicks remain chicks only. It is for this reason even when the shrimps are processed or frozen to add commercial value thereto, it is not regarded as an activity of manufacturing or production. So much so even when this process includes cutting of heads and tails, peeling, deveining, cleaning and freezing, that would not make any difference as shrimps or prawns do not cease to be shrimps or prawns and become other distinct commodity . 12. Notwithstanding above principle laid down by the Supreme Court in the judgments noted above, learned counsel for the assessee tried to argue that the assessee is producing various meat products such as edible chicken meat and meat products like boneless chicks, full legs, drumsticks, wings as well as giblets like chicken liver and gizzards and therefore, it should not be treated as manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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