Tribunal Ruling: CIT's Order Upheld, Deductions Allowed, Interest Addition Deleted

DEPUTY COMMISSIONER OF INCOME TAX. Versus CENTRAL HATECHERIES (P) LTD.

DEPUTY COMMISSIONER OF INCOME TAX. Versus CENTRAL HATECHERIES (P) LTD. - TTJ 059, 587, Issues Involved:
1. Deletion of addition on account of closing stock of parental flock (birds).
2. Deduction under Section 80HHA.
3. Deletion of addition on account of non-charging of interest.
4. Claim of deduction under Section 32AB.
5. Treatment of matador hire charges as industrial income.
6. Validity of the assessment order under Section 153.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Closing Stock of Parental Flock (Birds):
The first ground of the Revenue's appeal was the deletion of Rs. 29,57,698 added by the AO on account of the closing stock of parental flock (birds). Both parties conceded that this issue was covered in favor of the assessee by a prior Tribunal decision in the case of V.N. Dubey vs. Dy. CIT. Since the facts were identical, the Tribunal upheld the CIT's order on this issue, rejecting the Revenue's ground.

2. Deduction under Section 80HHA:
The second ground involved the deduction under Section 80HHA amounting to Rs. 2,38,648, which was disallowed by the AO on the grounds that the assessee was not a small-scale industrial undertaking. The AO found that the total cost of the plant and machinery exceeded Rs. 35 lakhs, thus disqualifying the assessee from the deduction. On appeal, the CIT(A) directed the AO to allow the deduction, which led to the Revenue's appeal.

- Generator: The generator, used as a standby due to power failures, was argued to be excluded from the plant and machinery valuation. The Tribunal agreed, citing the Industrial Manual and the decision of the Hon'ble Supreme Court in Bajaj Tempo Ltd. vs. CIT, which supports a liberal interpretation of provisions granting incentives for economic growth.

- Tubewell and Well: These were considered part of the building as per the IT Rules and would be evaluated in detail under the building category.

- Motor Pump: The Tribunal disagreed with the assessee's contention that the motor pump, used for lifting water, should be excluded. It was deemed essential for the hatchering activity and thus included in the plant and machinery valuation.

- Broiler House Building: The Tribunal directed the AO to determine if the broiler house building was a plant using the functional test. If found to be a plant, appropriate actions regarding depreciation would follow.

- Mini Truck: The mini truck, not used for hatchering, was excluded from the plant and machinery valuation.

The Tribunal directed the AO to reassess the plant and machinery value to determine if it exceeded Rs. 35 lakhs. If it did, the disallowance under Section 80HHA would stand; otherwise, the deduction would be allowed.

3. Deletion of Addition on Account of Non-Charging of Interest:
The third ground involved the deletion of Rs. 1,50,000 added by the AO for non-charging of interest on a Rs. 10 lakh deposit made with Shri V.N. Dubey. The AO viewed the non-charging of interest as unjustified and calculated a presumptive interest. The CIT(A) deleted this addition, and the Revenue appealed.

- The assessee argued that the deposit was made under a genuine lease agreement for hiring a shed, and the total rent, even considering interest, was below market rates. Additionally, tax avoidance was not a factor as Shri Dubey was taxed at the maximum marginal rate.

The Tribunal upheld the CIT(A)'s order, rejecting the Revenue's ground.

4. Claim of Deduction under Section 32AB:
The assessee's claim under Section 32AB was not pressed during the hearing and was thus rejected.

5. Treatment of Matador Hire Charges as Industrial Income:
The assessee's claim to treat Rs. 44,000 from matador hire charges as industrial income was rejected. The assessee failed to establish a direct relation to the manufacturing or production of articles or things.

6. Validity of the Assessment Order under Section 153:
The assessee contended that the assessment order dated 22nd March 1993 was not within the limitation period prescribed under Section 153. This issue was covered by a prior Tribunal decision in the case of Shri V.N. Dubey, which set aside the matter for fresh consideration. The Tribunal directed the CIT(A) to reexamine the issue after giving the assessee an opportunity to be heard.

Conclusion:
- The Revenue's appeal (ITA No. 17/Jab/1994) and the assessee's cross-objection (C.O. No. 15/Jab/1994) were partly allowed for statistical purposes.
- The assessee's appeal (ITA No. 362/Jab/1991) was dismissed.