COMM.OF INCOME TAX-III HYD V. M/S. BHAGYALAXMI HATCHERIES (P) LTD.

ITTA/45/2003

AI Insights

The case revolves around the classification of a hatchery unit in Hyderabad for tax purposes, specifically whether it should be considered a 'plant' or a 'building' under the Income Tax Act. The respondent, a hatchery, claimed depreciation at 20% treating the unit as a plant, but the Assessing Officer classified it as a building, allowing only 10% depreciation. The Commissioner (Appeals) and the Tribunal upheld the respondent's view, leading to the Revenue's appeal. The court, referencing a Supreme Court judgment, concluded that the hatchery unit is to be treated as a building, not a plant, thereby setting aside the lower authorities' decisions.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 718822 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 27-08-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Venkateswara Hatcheries Private Limited, Commissioner of Income Tax vs. Padmavathi Hatcheries Private Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: Y RATNAKAR
• Keywords: Assessment; Depreciation; Hatchery; Income Tax; Plant vs Building
• Section: 260-A

Judgement Text

"THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.No.45 of 2003 JUDGMENT: (Per LNR,J) The respondent is a Hatchery functioning at Hyderabad, and is assessed to tax. In the returns submitted by it, for the assessment year 1993-94, it claimed depreciation in respect of the hatchery unit at 20%, by treating it as plant. The Assessing Officer however treated the hatchery unit as a building and allowed the depreciation of only 10%. Feeling aggrieved by the order passed by the Assessing Officer, the respondent carried matter in appeal before the Commissioner (Appeals). The appeal was allowed through order, dated 14.11.1996. Aggrieved by that, the Revenue filed appeal before the Hyderabad Bench of the Income Tax Appellate Tribunal. The Tribunal dismissed the appeal through order, dated 30.01.2002. Hence, this appeal under Section 260-A of the Income Tax Act, 1961 by the Revenue. S ri S.R.Ashok, learned Standing Counsel for the Department submits that the Tribunal as well as the Commissioner did not take into account, the precedents on the subject, particularly the Judgment of the Supreme Court in Commissioner of Income Tax vs. Venkateswara Hatcheries Private limited[1]. Learned counsel submits that the judgment of the Supreme Court was followed by this Court recently in Commissioner of Income Tax vs. Padmavathi Hatcheries Private Limited[2] and that the order under appeal is liable to be set aside. Sri Y.Ratnakar, learned counsel for the respondent, on the other hand, submits that the Commissioner as well as the Tribunal assigned cogent reasons in support of their conclusions. He submits that highly sophisticated machinery is required for running a hatchery and it is not the mere process of the chicks being produced from eggs, in the natural course. He submits that through a highly sophisticated mechanism, the gestation period, which is 21 days, is reduced to 21 hours and a mere building is not sufficient to undertake such a complicated activity. We have carefully gone through the order passed by the Assessing Officer, the Commissioner as well as the Tribunal. In the assessment order, the detailed contentions urged by the respondent are taken note of. The Tribunal has elaborated them further. Detailed process involved in the breeding of different varieties of chicks is taken note of. We in fact compliment the Tribunal for undertaking such an extensive discussion, on scientific lines. Even to our mind, it is not difficult to discern the distinction between a ‘building’ and a ‘plant’. If it is a case, where the chicks of very tender age are just put in a shed and they are grown simply by supplying the food and water, without any mechanical process, the shed, though used for poultry, deserves to be treated as building. Where however sophisticated mechanism or process is involved, the same cannot be ignored. For example, in the modern poultries, there are devices through which the feed and water are supplied in such a way that the quantities consumed by chicks are replenished automatically and thereby wastage is avoided. Arrangements are also made to ensure that the eggs accumulate at a place without any damage to them. Such machinery cannot be ignored nor it can be operated, independent of the shed. Compared to the arrangements that are made in a poultry, those in hatcheries are more sophisticated and complicated. The gestation period for an egg, to transform into a chick, is 21 days, that too, if natural hatching through the hen is arranged. In the hatcheries, the temperature and radiations are arranged in such a way that within 21 hours, a chick comes out of the egg. This is followed by highly sophisticated gradation. When so many mechanical devices are arranged in a shed, not only to produce chicks of hybrid varieties, but also to reduce the gestation period, almost to 5% of the natural one, it is difficult to treat the place, where such a process takes place, as a mere building. However, notwithstanding the convincing and otherwise practical arguments of the learned counsel for the respondent, we are handicapped on account of the recent judgment of this Court in Padmavathi Hatcheries Private Limited ’s case (2 supra), which in turn took note of the judgment of the Supreme Court in Venkateswara Hatcheries Private limited ’s case (1 supra). It was held that the hatchery unit can be treated only as a building and not as plant. We therefore allow the appeal and set aside the orders passed by the Commissioner and the Tribunal. The miscellaneous petition filed in this appeal shall also stand disposed of. There shall be no order as to costs. ____________________ L.NARASIMHA REDDY, J ________________________ CHALLA KODANDA RAM, J Date: 27.08.2014 JSU THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.No.45 of 2003 Date: 27.08.2014 JSU [1] (1999) 237 ITR 174 (SC) [2] (2011) 335 ITR 325 (AP) "