Section 80-IC of the Income-tax Act, 1961 – ‘Milk’ is an article or thing mentioned in Part-A of Fourteenth Schedule of the Act and profit derived from production of milk is eligible for deduction u/s. 80-IC of the Act.
FACTS
The assessee, a proprietorship concern, was carrying on business of production of milk and milk based products, and had claimed deduction u/s. 80-IC in respect of profit & gains derived from the said business.
The Assessing Officer disallowed assessee’s claim holding that the article or thing, viz., milk, mawa, cream against which the assessee had sought deduction u/s. 80-IC were not specified in the Fourteenth Schedule referred to in section 80-IC(2)(b).
On appeal, the Commissioner (Appeals) held that ‘Milk’ was an article mentioned in Fourteenth Schedule of the Act, and that profit derived from milk was eligible for deduction u/s. 80-IC subject to other conditions laid down in section 80 IC of the Act.
On revenue’s appeal:
HELD
CIT-(A) had held that that Milk is an article mentioned in Fourteen Schedule of the Income-tax Act, 1961 and that profit derived from Milk is eligible for deduction u/s. 80IC of the Act by making following observation-
Sl. No.5 of Schedule 14 in respect of North Eastern States reads as under: Milk and milk based product industries manufacturing or producingi.
i. Milk Powder;
ii. Cheese;
iii. Butterghee;
iv. Infant food;
v. Weaning food;
vi. Malted milk food
The point is whether the first word (milk) in the items read independently or in conjunction with the word “based industries”. In order to find the answer, it may be useful to look at some of the other items in Schedule 14. Item 4 is Food & Beverages Industries. This may read as Food Industries and Beverages Industries. Similarly, meat and poultry Product Industries may be read as Meat Product Industries & Poultry Product industries.
The milk and milk based industries were definitely not used in a similar way because had it been so, one of the words “Milk” appearing therein would become superfluous. Therefore, the first “Milk” appearing in item No. 5 must be read separately. Therefore, the milk is an article or thing mentioned in Part A of Schedule XIV.
Also in the case of CIT vs. Tara Agencies [2007] 292 ITR 444, the Honorable Apex Court while explaining the meaning of the word “production” has observed as under:
‘The expression “produced” was given a wider meaning than the word “manufacture” pointing out that the word “produced” will include an activity of manufacturing the materials by applying human endeavour on some existing raw material, but the word ‘produce’ may include securing certain produce from natural elements, for example, by milching the cow the milkman, produce milk though he has not applied any process on any raw material for the purpose of bringing into existence the thing known as milk’
‘The word “production” or “produce” when used in juxtaposition with the word ‘manufacture’ takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods.’
In view of the above decision of the Honorable Apex Court, it is held that “Milk” is an article or thing which can be produced by the assessee and the view taken by the CIT- (A) that “Milk” is an article or thing mentioned in Part-A of Fourteenth Schedule of the Act, and that the profit derived from production of milk is eligible for deduction u/s. 80IC of the Act is upheld.
