Asst. CIT, Panvel Circle, Raigad V. M/s. Mhatre Poultry Farm, Raigad

ITA 909/PUN/2013

• Counselvise Citation: 90924514 RSA 2013
• Duration Of Justice: 1 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 25-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PRAVEENA
• Keywords: Depreciation; Rectification of order; Additional depreciation
• Section: 143(3); 32; 6; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO S. 907, 908 & 909 / P N/ 20 1 3 ASSESSMENT YEAR S : 2003 - 04, 2004 - 05 & 2005 - 06 ASS TT. COMMISSIONER OF INCOME TAX, PANVEL CIRCLE, PANVEL, DISTT. - RAIGAD VS. M/S. MHATRE POULTRY FARM, A/P. - DOLVI, TAL. - PEN, DISTT. - RAIGAD (APPELLANT) (RESPONDENT) PAN NO. AAJFM5230F APPELLANT BY: SMT. S. PRAVEENA RESPONDENT BY: SHRI C.H. NANIWAD EKAR DATE OF HEARING : 1 1 - 07 - 2014 DATE OF PRONOUNCEMENT : 21 - 0 7 - 2014 ORDER PER R.S . PADVEKAR , JM : - THIS BATCH OF THREE APPEALS ARE FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER S OF THE LD. CIT(A) - I , THANE DATED 1 9 - 12 - 2012 FOR THE A.YS. 2003 - 04, 2004 - 05 & 2005 - 06 AND TH ESE APPEALS ARE ARISING OUT OF THE RECTIFICATION ORDER PASSED BY THE ASSESSING OFFICER U/S. 154 OF THE INCOME - TAX ACT. THE REVENUE HAS TAKEN THE FOLLOWING GROUND WHICH IS COMMON IN ALL THE THREE APPEALS. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) - I, THANE HAS ERRED IN HOLDING POULTRY SHEDS AS PLANT WITHOUT CONSIDERING THE RATIO DECISION IN THE CASE OF SHIVALIK POULTRY 274 ITR 529, PADMAVATI HATCHERIES 241 CTR 171 AND BARAMATI AGRO IN ITA NO. 1251/PUNE/1991 AND THEREBY ALLOWING THE DEPRECIATION @ 25% INSTEAD OF 10% WHICH IS ALLOWABLE IN RESPECT OF BUILDINGS. 2. THE ISSUE WHICH ARISES FOR OUR CONSIDERATION IS WHETHER THE POULTRY SHED IS A PLANT AND ENTITLED FOR THE DEPRECIATION @ 25%. THE FACTS AS WELL AS ISSUES IN CONTROVERSY ARE IN NARROW COMPASS. THE 2 ITA NO S. 907, 908 & 909/PN/2013, M/S. MHATRE POULTRY FARM, RAIGAD ASSESSEE IS ENGAGED IN THE BUSINESS OF POULTRY FARM. THE ASSESSEE HAS CLAIMED DEPRECIATION ON POULTRY SHED S @ 25%. THE ASSESSING OFFICER ALLOWED THE SAID DEPRECIATION IN THE ASSESSM ENT ORDER PASSED U/S. 143(3) OF THE INCOME - TAX ACT. SUBSEQUENTLY, THE ASSESSING OFFICER INITIATED THE PROCEEDINGS U/S. 154 OF THE INCOME - TAX ACT AND PASSED THE ORDER RESTRICTING THE DEPRECIATION @ 10% ON POULTRY SHED AS AGAINST @ 25% WHICH WAS EARLIER CLA IMED BY THE ASSESSEE AND ALLOWED THE ASSESSING OFFICER. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A) AND LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE ON MERIT THAT THE POULTRY SHED CANNOT BE EQUATED WITH THE BUIL DINGS AS CONTEMPLATED U/S. 32 OF THE INCOME - TAX ACT. THE LD. CIT(A) HAS ALSO DISTINGUISHED THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. ANAND THEATRES, 244 ITR 192 WITH THAT OF THE ASSESSEES CASE BY OBSERVING THAT THE SAID JUDGMENT IS RENDERE D IN THE CONTEXT OF THE BUILDING OF THE THEATRE . 3. SO FAR AS THE FACTS OF THE ASSESSEES CASE ARE CONCERNED , THE SAME CANNOT BE EQUATED WITH THE FACTS OF THE BUILDING OF THE THEATRE. THE LD. CIT(A) PLACED HIS RELIANCE ON THE DECISION OF THE HON'BLE HI GH COURT OF HIMACHAL PRADESH IN THE CASE OF CIT VS. SHIVALIK HATCHERIES (P) LTD., 329 ITR 432 AS WELL AS THE DECISION OF THE HON'BLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF V.N. DUBEY VS. CIT, (2008) 10 DTR (MP) 175. THE OPERATIVE PART OF THE FINDINGS OF THE LD. CIT(A) ARE AS UNDER: 4.2. THE ISSUE AT HAND IS REGARDING THE ALLOWABILITY OF THE DEPRECIATION ON THE POULTRY SHEDS AND THE ELECTRICAL FITTINGS INSTALLED THEREIN. IN THE CASE OF A PROFESSIONAL POULTRY FARM, THE BUILDINGS, WHERE THE BIRDS ARE KE PT, ARE ERECTED IN SPECIFIC DESIGNS ON SCIENTIFIC LINES AND FITTED WITH SPECIALISED ELECTRICAL FITTINGS TO MAINTAIN THE REQUIRED MOISTURE, LIGHT AND TEMPERATURE LEVELS FOR THE OPTIMUM GROWTH OF THE BIRDS. THE WALLS AND ROOFS ARE CONSTRUCTED WITH SPECIAL DE SIGNS WITH DIFFERENT SANITARY REQUIREMENTS. THE APPELLANT HAS CONSTRUCTED AND USED POULTRY SHEDS, WHEREIN THE BIRDS RECEIVED FROM HATCHERIES ARE KEPT IN GROWING PHASE BEFORE THOSE COULD BE SOLD IN THE MARKET. THESE BIRDS DEVELOPED ARE TO BE CARED, 3 ITA NO S. 907, 908 & 909/PN/2013, M/S. MHATRE POULTRY FARM, RAIGAD NOURISH ED BY OFFERING TO THEM NUTRITIONAL DIET AND LIVING CONDITIONS. THESE SHEDS CANNOT BE USED FOR ANY OTHER PURPOSE THAN FOR WHICH THEY ARE CONSTRUCTED. THEREFORE THESE ARE NOT NORMAL BUILDINGS BUT SPECIAL ENCLOSURES EQUIPPED WITH ELECTRICAL AND OTHER FITTINGS AND THEREFORE CAN BE CATEGORIZED AS PLANTS. 4.3. THE IDENTICAL ISSUE HAS BEEN DECIDED IN THE CASE OF CIT VS SHIVAIIK HATCHERIES (P) LTD, (2010) 329 ITR 432, WHEREIN THE HON'BLE HIGH COURT OF HIMACHAL PRADESH HAS HELD THAT 'THE TRIBUNAL, ON THE BASIS OF THE MATERIAL PLACED BEFORE IT CAME TO THE CONCLUSION THAT THE BUILDING OF THE POULTRY SHED HAS BEEN SPECIFICALLY DESIGNED WITH A VIEW TO PROTECT THE BIRDS FROM DISEASE. IT HAS BEEN DESIGNED TO ENSURE PROPER LIGHT AND CIRCULATION OF AIR; PROPER AND SCIENTIF IC FEEDING ARRANGEMENT; PROPER WATER SYSTEM; PROPER ARRANGEMENT FOR COLLECTION OF MANURE AND DROPPINGS; PROPER ARRANGEMENT FOR MEDICATION AND VACCINATION; AND A RIGHT ENVIRONMENT CONDUCIVE FOR LAYING OF EGGS BY THE BIRDS. THE BUILDING HAD BEEN DESIGNED IN A MANNER SO AS TO PROTECT THE BIRDS AND INCREASE THEIR PRODUCTIVITY. THE ARGUMENT MADE ON BEHALF OF THE REVENUE THAT THE BUILDING CAN BE USED WITH A CERTAIN MODIFICATION FOR CERTAIN OTHER PURPOSES CANNOT BE ACCEPTED. IT IS HOW THE BUILDING IS DESIGNED WHIC H IS THE MAIN FACTOR WHICH IS TO BE TAKEN INTO CONSIDERATION. THE LAW IS CLEAR THAT IF IT IS FOUND THAT THE BUILDING HAS BEEN DESIGNED SPECIFICALLY TO FURTHER THE CAUSE OF MANUFACTURE OR PRODUCTION THEN THE SAME IS A PLANT. APPLYING THE AFORESAID TEST, THE POULTRY SHEDS ARE PLANT WITHIN THE MEANING OF S. 43(3), AS IT THEN STOOD.' 4.4. SIMILARLY, IN THE CASE OF V.N. DUBEY VS. CIT, (2008) 10 DTR (MP) 175, THE HON'BLE HIGH COURT OF MADHYA PRADESH, WHILE DECIDING AN IDENTICAL ISSUE HAS HELD THAT POULTRY SHEDS C ONSTITUTES PLANT ELIGIBLE FOR DEPRECIATION @ 25 PER CENT. WHILE DECIDING THE ISSUE ME HON'BLE HIGH COURT HAS RELIED ON THE CASE OF CIT VS JABALPUR HATCHERIES (P) LTD (MAIT NO. 32 OF 2005, 7 TH MAY 2007). 4.5. THE RELIANCE PLACED BY THE AO ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS ANAND THEATRES, 244 ITR 192, IS MISPLACED AS THE JUDGEMENT WAS DELIVER IN THE CONTEXT OF THE BUILDING OF THEATRE. THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE RELIED UPON BY THE AO . 4 ITA NO S. 907, 908 & 909/PN/2013, M/S. MHATRE POULTRY FARM, RAIGAD 4.6. IN VIEW OF THE FACTS AND CIRCUMSTANCES EXPLAINED ABOVE, IN MY CONSIDERED OPINION, THE RECTIFICATION ORDER PASSED U/S. 154 DISALLOWING THE DEPRECIATION CLAIMED BY THE APPELLANT @ 25% AND REDUCING THE SAME @ 10% ON THE POULTRY SHEDS, IS NOT IN ORDER. IN VIEW OF THE JUDICIAL PRONOUNCEMENTS ON THE ISSUE (SUPRA), THE AO IS DIRECTED TO ALLOW THE DEPRECIATION ON THE POULTRY SHED OF THE APPELLANT @ 25%. NOW, THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PE RUSED THE RECORD. THE FACTS ARE NOT IN DISPUTE , THE ONLY CONTROVERSY IS IN RESPECT OF THE INTERPRETATION OF THE TERM BUILDING VIS - - VIS PLANT IN THE CONTEXT OF THE POULTRY SHEDS USED BY THE ASSESSEE IN HIS POULTRY BUSINESS. 5. IN THE CASE OF SHIVAL IK HATCHERIES (P) LTD. (SUPRA) THE ASSESSEE WAS ENGAGED IN THE HATCHERIES BUSINESS. THE ASSESSEE CLAIMED THE DEPRECIATION AS WELL AS INVESTMENT ALLOWANCE ON THE POULTRY SHEDS BY TREATING THE SAME AS PLANT. THE ASSESSING OFFICER ALLOWED THE DEPRECIATION AT THE RATE WHICH IS APPLICABLE TO THE BUILDING AND NOT AS PLANT. INVESTMENT ALLOWANCE WAS NOT ALLOWED. THE HON'BLE HIGH COURT AFTER CONSIDERING THE DECISION OF THE HON'BLE SUPREME COURT AS WELL AS THE DIFFERENT HIGH COURTS HELD AS UNDER: 4. WE NOW TA KE UP THE FIRST QUESTION FOR CONSIDERATION. THE RELEVANT SECTION TO BE TAKEN INTO CONSIDERATION IS SECTION 43 OF THE ACT, WHICH PROVIDES FOR DEPRECIATION. 'PLANT' HAS BEEN DEFINED IN SECTION 43(3). THE DEFINITION OF PLANT AT THE RELEVANT TIME READS AS FOLL OWS: 'PLANT INCLUDES SHIPS, VEHICLES, BOOKS, SCIENTIFIC APPARATUS AND SURGICAL EQUIPMENT USED FOR THE PURPOSES OF THE BUSINESS OF PROFESSION BUT DOES NOT INCLUDE TEA BUSHES OR LIVESTOCK.' LATER ON, VIDE THE FINANCE ACT OF 2003, WITH EFFECT FROM APRIL 1, 2004, THE FOLLOWING WORDS WERE ADDED AT THE END OF THE DEFINITION: 'OR BUILDING OR FURNITURE AND FITTINGS.' 5 ITA NO S. 907, 908 & 909/PN/2013, M/S. MHATRE POULTRY FARM, RAIGAD 5. IN CIT V. TAJ MAHAL HOTEL [1971] 82 ITR 44 ( SC), THE APEX COURT CONSIDERED THE QUESTION WHETHER SANITARY AND PIPELINE FITTINGS INSTALLED IN A HO TEL FALL WITHIN THE DEFINITION OF A PLANT. THE APEX COURT HELD AS FOLLOWS: 'IT CANNOT BE DENIED THAT THE BUSINESS OF A HOTELIER IS CARRIED ON BY ADAPTING A BUILDING OR PREMISES IN A SUITABLE WAY TO BE USED AS A RESIDENTIAL HOTEL WHERE VISITORS COME AND ST AY AND WHERE THERE IS ARRANGEMENT FOR MEALS AND OTHER AMENITIES ARE PROVIDED FOR THEIR COMFORT AND CONVENIENCE. TO HAVE SANITARY FITTINGS, ETC., IN A BATH ROOM IS ONE OF THE ESSENTIAL AMENITIES OR CONVENIENCES WHICH ARE NORMALLY PROVIDED IN ANY GOOD HOTEL, IN THE PRESENT TIMES. IF THE PARTITIONS IN JARROLD'S CASE [1963] 1 WLR 214 (CA) COULD BE TREATED AS HAVING BEEN USED FOR THE PURPOSE OF THE BUSINESS OF THE TRADER, IT IS INCOMPREHENSIBLE HOW SANITARY FITTINGS CAN BE SAID TO HAVE NO CONNECTION WITH THE BUS INESS OF THE HOTELIER. HE CAN REASONABLY EXPECT TO GET MORE CUSTOM AND EARN LARGER PROFIT BY CHARGING HIGHER RATES FOR THE USE OF ROOMS IF THE BATH ROOMS HAVE SANITARY FITTINGS AND SIMILAR AMENITIES. WE ARE UNABLE TO SEE HOW THE SANITARY FITTINGS IN THE BA TH ROOMS IN A HOTEL WILL NOT BE `PLANT' WITHIN SECTION 10(2)(VIB) READ WITH SECTION 10(2)( V ) WHEN IT IS QUITE CLEAR THAT THE INTENTION OF THE LEGISLATURE WAS TO GIVE IT A WIDE MEANING AND THAT IS WHY ARTICLES LIKE BOOKS AND SURGICAL INSTRUMENTS WERE EXP RESSLY INCLUDED IN THE DEFINITION OF `PLANT'. IN DECIDED CASES, THE HIGH COURTS HAVE RIGHTLY UNDERSTOOD THE MEANING OF THE TERM `PLANT' IN A WIDE SENSE. (SEE CIT V. INDIAN TURPENTINE AND ROSIN CO. LTD. 6. IN CIT V. MC . GAW RAVINDRA LABORATORIES (INDIA) LTD. [1981] 132 ITR 401 (GUJ), THE QUESTION RAISED BEFORE THE GUJARAT HIGH COURT WAS WHETHER THE EXPENDITURE INCURRED FOR COST OF PREPARING AND PROVIDING ADDITIONAL SPECIFICATIONS FOR ANALYSIS AND TESTING OF RAW MATERIALS AND FOR PROVIDING PRODUCTION M ETHODS WAS A 'PLANT' AND ALSO WHETHER ROADS WERE A 'PLANT'. FOLLOWING THE TEST LAID DOWN BY THE APEX COURT, THE GUJARAT HIGH COURT HELD THAT WHEREAS THE EXPENDITURE INCURRED ON PREPARING AND PROVIDING ADDITIONAL SPECIFICATION FOR ANALYSIS WOULD BE 'PLANT' , THE AMOUNT SPENT ON CONSTRUCTION OF THE ROAD WOULD NOT BE PLANT BECAUSE IT WAS NOT SHOWN BY THE ASSESSEE THAT THE ROAD WAS OF PARTICULAR TYPE SO AS TO BECOME PART OF THE PLANT'. 7. RELIANCE HAS BEEN PLACED BY THE REVENUE ON A JUDGMENT OF A DIVISION BE NCH IN R. C. CHEMICAL INDUSTRIES V. CIT [1982] 134 ITR 6 ITA NO S. 907, 908 & 909/PN/2013, M/S. MHATRE POULTRY FARM, RAIGAD 330, OF THE DELHI HIGH COURT, WHEREIN THE DELHI HIGH COURT LAID DOWN CERTAIN PRINCIPLES TO DECIDE WHETHER A BUILDING IS PLANT OR NOT. THESE PRINCIPLES ARE AS FOLLOWS : '1. THE DEFINITION OF `PLANT' IN SECTION 43(3) SHOULD BE GIVEN A WIDE MEANING AS IT IS AN INCLUSIVE DEFINITION. 2. ALL BUILDINGS ARE NOT `PLANT' DESPITE THE DICTIONARY MEANING WHICH INCLUDES BUILDING; BUT A BUILDING OR STRUCTURE IS NOT PER SE TO BE EXCLUDED FROM THE AMBIT OF THE EXPR ESSION `PLANT'. 3. IF THE CONCRETE CONSTRUCTION OR BUILDING IS USED AS THE PREMISES OR SETTING IN WHICH THE BUSINESS IS CARRIED ON IN CONTRADISTINCTION TO THE FULFILLING OF THE FUNCTION OF A PLANT, THE BUILDING OR CONSTRUCTION OR PART THEREOF IS NOT CONSI DERED A PLANT. THE TRUE TEST IS WHETHER IT IS THE MEANS OF `CARRYING ON THE BUSINESS' OR THE LOCATION FOR SO DOING. 4. IN ORDER, FOR A BUILDING OR CONCRETE STRUCTURE, TO QUALIFY FOR INCLUSION IN THE TERM `PLANT', IT MUST BE ESTABLISHED THAT IT IS IMPOSSIB LE FOR THE EQUIPMENT TO FUNCTION WITHOUT THE PARTICULAR TYPE OF STRUCTURE. 5. THE PARTICULAR APPARATUS OR ITEM MUST BE USED FOR CARRYING ON THE ASSESSEE'S BUSINESS AND MUST NOT BE HIS STOCK - IN - TRADE. THE MATTER HAS TO BE CONSIDERED IN THE CONTEXT OF THE P ARTICULAR BUSINESS OF THE ASSESSEE, E.G., BOOKS ARE A LAWYER'S PLANT BUT A BOOKSELLERS STOCK - IN - TRADE.' 8. IT IS CONTENDED ON BEHALF OF THE REVENUE THAT APPLYING THE AFORESAID TESTS THE BUILDING OF POULTRY SHEDS CANNOT BE CONSIDERED TO BE A PLANT SINCE T HE BUILDING WITH SOME MODIFICATIONS CAN EASILY BE USED AS A SHED FOR ANY OTHER COMMERCIAL PURPOSES. ONE OF THE EXAMPLES GIVEN IS THAT IT CAN BE USED AS A SHED TO STORE GRAIN. 9. A DIVISION BENCH OF THE KARNATAKA HIGH COURT CONSIDERED THE MEANING OF THE W ORD 'PLANT' IN PATHANGE POULTRY FARM V. CIT [1994] 210 ITR 668. THE DIVISION BENCH OF THE KARNATAKA HIGH COURT WAS CONSIDERING THE QUESTION AS TO WHETHER EACH OF THE SMALL CAGES ERECTED IN A POULTRY SHED SHOULD BE TREATED AS SEPARATE PLANT OR PART OF A LA RGER UNIT. THE COURT HELD THAT EACH OF THE CAGES WAS PLANT BUT CAME TO THE CONCLUSION THAT ONCE EACH OF THE SMALLER CAGES IS COMBINED TO FORM THE LARGER UNIT IT LOSES ITS INDIVIDUALITY AND BECOMES A PART OF THE BIGGER PLANT. THE COURT FURTHER HELD THAT AF TER EACH SMALL CAGE MERGES IN THE LARGER UNIT IT CEASE TO PERFORM AND 7 ITA NO S. 907, 908 & 909/PN/2013, M/S. MHATRE POULTRY FARM, RAIGAD BECOMES INCAPABLE OF PERFORMING ANY FUNCTION INDEPENDENT OF THE ENTIRE UNIT AS A PLANT OR MACHINE. EACH OF THE SMALLER CAGES WAS, THEREFORE, TREATED TO BE NO BETTER THAN THE INDIVIDUAL COMPONENTS OF AN ENGINE. 10. THE APEX COURT AGAIN CONSIDERED THE QUESTION AS TO WHAT MEANING SHOULD BE GIVEN TO THE WORD 'PLANT' IN SCIENTIFIC ENGINEERING HOUSE P. LTD. V. CIT [1986] 157 ITR 86 ( SC). IT WAS HELD THAT EVEN DRAWINGS, DESIGNS , CHARTS , PLAN S, PROCESSING DATA AND OTHER LITERATURE COMPRISED IN THE DOCUMENTATION SERVICE CONSTITUTED A BOOK AND, THEREFORE, FELL WITHIN THE DEFINITION OF A PLANT. THE COURT HELD THAT PURPOSE OF RENDERING SUCH DOCUMENTATION SERVICE BY SUPPLY OF THE DOCUMENTS TO THE A SSESSEE WAS TO ENABLE IT TO UNDERTAKE ITS TRADING ACTIVITY. IT WAS HELD THAT THESE DOCUMENTS HAD A VITAL FUNCTION TO PERFORM IN THE MANUFACTURE OF THE INSTRUMENTS AND , THEREFORE , EVEN THOUGH THE DOCUMENTS DID NOT PERFORM ANY MECHANICAL OPERATIONS OR PROCES S THEY STILL FALL WITHIN THE DEFINITION OF 'PLANT'. 11. IN CIT V. DR. B. VENKATA RAO [2000] 243 ITR 81, THE APEX COURT CONSIDERED THE QUESTION WHETHER A BUILDING SPECIFICALLY DESIGNED AND EQUIPPED TO FUNCTION AS A NURSING HOME SHOULD BE TREATED AS A PLAN T. THE APEX COURT HELD THAT IN VIEW OF THE FACT THAT THE ASSESSEE'S NURSING HOME IS EQUIPPED TO ENABLE THE STERILIZATION OF SURGICAL INSTRUMENTS AND THAT THE BUILDING ALSO HOUSED AN OPERATION THEATRE, THE SAME SHOULD BE TREATED AS A 'PLANT'. 12. IN CIT V. ANAND THEATRES [2000] 244 ITR 192 (SC) ; [2000] 5 SCC 393, THE QUESTION UNDER CONSIDERATION BEFORE THE APEX COURT WAS WHETHER A BUILDING HOUSING A HOTEL OR A THEATRE IS A PLANT OR NOT. THE APEX COURT DECIDED THE QUESTION IN FAVOUR OF THE REVENUE BY HOLDI NG AS FOLLOWS : 'IN THE RESULT, IT IS HELD THAT THE BUILDING USED FOR RUNNING OF A HOTEL OR CARRYING ON CINEMA BUSINESS CANNOT BE HELD TO BE A PLANT BECAUSE: (1) THE SCHEME OF SECTION 32, AS DISCUSSED ABOVE, CLEARLY ENVISAGES SEPARATE DEPRECIATION FOR A BUILDING, MACHINERY AND PLANT, FURNITURE AND FITTINGS, ETC. THE WORD `PLANT' IS GIVEN INCLUSIVE MEANING UNDER SECTION 43(3) WHICH NOWHERE INCLUDE BUILDINGS. THE RULES PRESCRIBING THE RATES OF DEPRECIATION SPECIFICALLY PROVIDE GRANT OF DEPRECIATION ON BUILD INGS , FURNITURE AND FITTINGS, MACHINERY AND PLANT AND SHIPS. MACHINERY AND PLANT INCLUDES CINEMATOGRAPH FILMS AND OTHER ITEMS 8 ITA NO S. 907, 908 & 909/PN/2013, M/S. MHATRE POULTRY FARM, RAIGAD AND THE BUILDING IS FURTHER GIVEN MEANING TO INCLUDE ROADS, BRIDGES , CULVERTS , WELLS AND TUBE WELLS. (2) IN THE CASE OF CIT V. T AJ MAHAL HOTEL [1971] 82 ITR 44 ( SC) ; AIR 1972 SC 168 ; [1972] TAX LR 54 THIS COURT HAS OBSERVED THAT BUSINESS OF A HOTELIER IS CARRIED ON BY ADAPTING BUILDING OR PREMISES IN SUITABLE WAY. MEANING THEREBY BUILDING FOR A HOTEL IS NOT APPARATUS OR ADJUNCT FOR RUNNING OF A HOTEL. THE COURT DID NOT PROCEED TO HOLD THAT A BUILDING IN WHICH THE HOTEL WAS RUN WAS ITSELF A PLANT, OTHERWISE THE COURT WOULD NOT HAVE GONE INTO THE QUESTION WHETHER THE SANITARY FITTINGS USED IN BATH ROOM WAS PLANT. (3) FOR A BUILDI NG USED FOR A HOTEL, SPECIFIC PROVISION IS MADE GRANTING ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(V) OF THE ACT. (4) BARCLAY, CURLE AND CO.'S CASE [1969] 1 WLR 675 ; [1970] 76 ITR 62, DECIDED BY THE HOUSE OF LORDS PERTAINS TO A DRY DOCK YARD WHICH IT SELF WAS FUNCTIONING AS A PLANT, THAT IS TO SAY, STRUCTURE FOR THE PLANT WAS CONSTRUCTED TO THAT DRY DOCK CAN OPERATE. IT OPERATED AS AN ESSENTIAL PART IN THE OPERATIONS WHICH TOOK PLACE IN GETTING A SHIP INTO THE DOCK , HOLDING IT SECURELY AND THEN RETURN ING IT TO THE RIVER. THE DOCK AS A COMPLETE UNIT CONTAINED A LARGE AMOUNT OF EQUIPMENT WITHOUT WHICH THE DRY DOCK COULD NOT PERFORM ITS FUNCTION. (5) EVEN IN ENGLAND, COURTS HAVE REPEATEDLY HELD THAT THE MEANING TO THE WORD `PLANT' GIVEN IN VARIOUS DECIS IONS IS ARTIFICIAL AND IMPRECISE IN APPLICATION, THAT IS TO USE THE WORDS OF LORD BUCKLEY, `IT IS NOW BEYOND DOUBT THAT THE WORD `PLANT' IS USED IN THE RELEVANT SECTION IN AN ARTIFICIAL AND LARGELY JUDGE - MADE SENSE.' LORD WILBERFORCE COMMENTED BY STATING THAT `NO ORDINARY MAN, LITERATE OR SEMI - LITERATE , WOULD THINK THAT A HORSE, A SWIMMING POOL, MOVABLE PARTITIONS, OR EVEN A DRY - DOCK WAS PLANT.' (6) FOR THE HOTEL BUILDING AND HOSPITAL IN THE CASE OF CARR (H. M. INSPECTOR OF TAXES) V. SAYER 65 TC 15 (CH D) IT HAS BEEN OBSERVED THAT A HOTEL BUILDING REMAINS A BUILDING EVEN WHEN CONSTRUCTED TO A LUXURY SPECIFICATION AND SIMILARLY, A HOSPITAL BUILDING FOR INFECTIOUS DISEASES WHICH MIGHT REQUIRE A SPECIAL LAYOUT AND OTHER FEATURES ALSO REMAINS A PREMISES AND IS NOT PLANT. IT IS TO BE ADDED THAT ALL THESE DECISIONS ARE BASED UPON THE INTERPRETATION OF THE PHRASE `MACHINERY OR PLANT' UNDER SECTION 41 OF THE FINANCE ACT, 1971, WHICH WAS APPLICABLE AND THERE APPEARS NO SUCH DISTINCTION FOR 9 ITA NO S. 907, 908 & 909/PN/2013, M/S. MHATRE POULTRY FARM, RAIGAD GRANT OF ALLOWANC E ON DIFFERENT HEADS AS PROVIDED UNDER SECTION 32 OF THE INCOME - TAX ACT. (7) TO DIFFERENTIATE A BUILDING FOR GRANT OF ADDITIONAL DEPRECIATION BY HOLDING IT TO BE A `PLANT' IN ONE CASE WHERE THE BUILDING IS SPECIALLY DESIGNED AND CONSTRUCTED WITH SOME S PECIAL FEATURES TO ATTRACT THE CUSTOMERS AND A BUILDING NOT SO CONSTRUCTED BUT USED FOR THE SAME PURPOSE. NAMELY, AS A HOTEL OR THEATRE WOULD BE UNREASONABLE. ' IT WOULD BE PERTINENT TO MENTION THAT THIS DECISION WAS RENDERED BY A BENCH OF TWO JUDGES, WHICH DISTINGUISHED THE EARLIER JUDGMENT GIVEN IN DR.B. VENKATA RAO'S CASE [2000] 243 ITR 81 ( SC), WHICH WAS ALSO RENDERED BY A BENCH OF TWO JUDGES. 13. HOWEVER, A THREE - JUDGE BENCH OF THE APEX COURT IN CIT V. KARNATAKA POWER CORPORATION [2001] 247 ITR 268 (SC), AGAIN CONSIDERED THE QUESTION WHETHER A BUILDING CAN BE TREATED AS A PLANT OR NOT. THE COURT HELD AS FOLLOWS : 'IT IS DIFFICULT TO READ THE JUDGMENT IN THE CASE OF ANAND THEATRES [2000] 244 ITR 192 (SC) SO BROADLY. THE QUESTION BEFORE THE COURT WAS WHETHER A BUILDING THAT WAS USED AS A HOTEL OR A CINEMA THEATRE COULD BE GIVEN DEPRECIATION ON THE BASIS THAT IT WAS A `PLANT' AND IT WAS IN RELATION TO THAT QUESTION THAT THE COURT CONSIDERED A HOST OF AUTHORITIES OF THIS COUNTRY AND ENGLAND AND CAME TO THE CONCLUSION THAT A BUILDING WHICH WAS USED AS A HOTEL OR A CINEMA THEATRE COULD NOT BE GIVEN DEPRECIATION ON THE BASIS THAT IT WAS A PLANT. WE MUST ADD THAT THE COURT SAID (PAGE 225 ): `TO DIFFERENTIATE A BUILDING FOR GRANT OF ADDITIONAL DEPRECIATION BY HOLDING IT TO BE A 'PLANT' IN ONE CASE WHERE A BUILDING IS SPECIALLY DESIGNED AND CONSTRUCTED WITH SOME SPECIAL FEATURES TO ATTRACT THE CUSTOMERS AND THE BUILDING NOT SO CONSTRUCTED BUT USED FOR THE SAME PURPOSE, NAMELY, AS A HOTEL OR THEATRE WOULD BE UNREASONABLE.' THIS OBSERVATION IS, IN OUR VIEW, LIMITED TO BUILDINGS THAT ARE USED FOR THE PURPOSES OF HOTELS OR CINEMA THEATRES AND WILL NOT ALWAYS APPLY OTHERWISE. THE QUESTION, BASICALLY, IS A QUESTION OF FACT, AND WHERE IT IS FOUND AS A FACT THAT A BU ILDING HAS BEEN SO PLANNED AND CONSTRUCTED AS TO SERVE AN ASSESSEE'S SPECIAL TECHNICAL REQUIREMENTS, IT WILL QUALIFY TO BE TREATED AS A PLANT FOR THE PURPOSES OF INVESTMENT ALLOWANCE.' 14. THE LINE OF DEMARCATION BETWEEN WHAT IS A 'PLANT' OR NOT IS A VERY THIN ONE . EACH CASE WILL HAVE TO BE DECIDED WITH REFERENCE TO 10 ITA NO S. 907, 908 & 909/PN/2013, M/S. MHATRE POULTRY FARM, RAIGAD THE PARTICULAR FACTS OF THE CASE. IT, HOWEVER, NEEDS TO BE NOTED THAT THE DEFINITION OF 'PLANT' IN SECTION 43(3) IS NOT AN EXHAUSTIVE DEFINITION. IT IS ONLY INCLUSIVE IN NATURE. THEREFORE, THE RE IS A WIDE SCOPE FOR INCLUDING IN THE DEFINITION MANY ITEMS. IT IS CLEAR THAT THE LEGISLATURE BY INCLUDING, SHIPS, VEHICLES, AND BOOKS IN THE DEFINITION OF PLANT, HAD WIDENED THE SCOPE OF THE WORD 'PLANT'. AS NOTED ABOVE , NOW THE LEGISLATURE HAS STEPPED IN AND SPECIFICALLY EXCLUDED BUILDINGS FROM THE DEFINITION OF THE WORD 'PLANT'. THIS ITSELF INDICATES THAT PRIOR TO THE EXCLUSION WITH EFFECT FROM APRIL 1, 2004, BUILDINGS IF SPECIFICALLY CONSTRUCTED AND FALLING WITHIN THE GUIDELINES OF THE VARIOUS AUTHOR ITIES REFERRED TO HEREINABOVE COULD BE TREATED AS 'PLANT'. THE VARIOUS AUTHORITIES REFERRED TO ABOVE ALSO INDICATE THAT A VERY WIDE AMPLITUDE HAS BEEN GIVEN TO THE TERM 'PLANT'. THE DEFINITION OF 'PLANT' ENGULFS WITHIN ITS AMBIT MANY DIVERSE SUBJECTS, SUCH AS, SHIPS SAILING ON THE HIGH SEAS, BOOKS USED BY LAWYERS OR ENGINEERS AND SCALPELS USED BY DOCTORS. 15. IN NOWRANGROY METALS P. LTD. V. JOINT CIT [2003] 262 ITR 231 THE DIVISION BENCH OF THE GAUHATI HIGH COURT HELD THAT A MILL BUILDING SPECIALLY CONSTR UCTED FOR THE PURPOSE OF HOUSING A MILL IS A 'PLANT' WITHIN THE MEANING OF SECTIONS 32, 43(3). 16. IN CIT V. VICTORY AQUA FARM LTD. [2004] 271 ITR 530, A BENCH OF THE KERALA HIGH COURT CAME TO THE CONCLUSION THAT SPECIALLY DESIGNED PONDS IN WHICH PRAWNS WERE GROWN ARE PLANT. A DIVISION BENCH OF THE GUJARAT HIGH COURT IN CIT V. AMOL DICALITE LTD. [2006] 286 ITR 648 (GUJ), CAME TO THE CONCLUSION THAT AN ORE SHED PERFORMS THE FUNCTION OF PLANT AND IS AN INTEGRAL PART OF THE PLANT. 17. IN THE PRESENT CASE , THE INCOME - TAX APPELLATE TRIBUNAL, ON THE BASIS OF THE MATERIAL PLACED BEFORE IT CAME TO THE CONCLUSION THAT THE BUILDINGS OF THE POULTRY SHEDS HAD BEEN SPECIFICALLY DESIGNED WITH A VIEW TO PROTECT THE BIRDS FROM DISEASE. THEY HAD BEEN DESIGNED TO ENSURE PROPER LIGHTING AND CIRCULATION OF AIR ; PROPER AND SCIENTIFIC FEEDING ARRANGEMENT ; PROPER WATER SYSTEM; PROPER ARRANGEMENT FOR COLLECTION OF MANURE AND DROPPINGS ; PROPER ARRANGEMENT FOR MEDICATION AND VACCINATION ; AND A RIGHT ENVIRONMENT CONDUCIVE FOR LAYING OF EGGS BY THE BIRDS. THESE BUILDINGS HAD BEEN DESIGNED IN A MANNER SO AS TO PROTECT THE BIRDS AND INCREASE THEIR PRODUCTIVITY . THE ARGUMENT MADE ON BEHALF OF THE REVENUE THAT THE BUILDING CAN BE USED WITH CERTAIN MODIFICATION FOR CERTAIN OTHER PURPOSES CANNOT BE ACCEPTED. IT IS HOW THE BUILDING IS DESIGNED WHICH IS THE MAIN 11 ITA NO S. 907, 908 & 909/PN/2013, M/S. MHATRE POULTRY FARM, RAIGAD FACTOR WHICH IS TO BE TAKEN INTO CONSIDERATION. THE LAW IS CLEAR THAT IF IT IS FOUND THAT THE BUILDING HAS BEEN DESIGNED SPECIFICALLY TO FURTHER THE CAUSE OF MANUFACTURE OR P RODUCTION THEN THE SAME IS A PLANT. APPLYING THE AFORESAID TESTS , WE HOLD THAT THE POULTRY SHEDS ARE PLANT WITHIN THE MEANING OF SECTION 243, AS IT THEN STOOD. 6. IN THIS CASE THEIR LORDSHIPS HAVE CONSIDERED THE DECISION OF THE ANAND THEATRES (SUPRA) AS WELL AS THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. KARNATAKA POWER CORPORATION 247 ITR 268 (SC) WHICH IS A SUBSEQUENT DECISION OF THE LARGER BENCH WHICH IS IN RESPECT OF INVESTMENT ALLOWANCE ON POWER GENERATING STATION BUILDING . 7. AGAIN IN T HE CASE OF V.N. DUBEY (SUPRA) THE IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE HON'BLE HIGH COURT AND HELD THAT THE POULTRY SHEDS CONSTITUTE PLANT AND ELIGIBLE FOR THE DEPRECIATION @ 25%. IN OUR OPINION THE ISSUE IS DIRECTLY COVERED IN FAVOUR OF THE ASSES SEE BY THE DECISION IN THE CASE OF SHIVALIK HATCHERIES (P) LTD. (SUPRA). WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). WE, ACCORDINGLY, CONFIRM THE SAME. 8. THE LD. COUNSEL SUBMITS THAT THOUGH THE ASSESSEE HAS TA KEN THE PLEA BEFORE THE LD. CIT(A) THAT THE ISSUE INVOLVED IS THE INTERPRETATION OF LAW AND IT IS A DEBATABLE ISSUE AND THE ASSESSING OFFICER CANNOT TAKE THE RESORT TO SEC. 154 TO WITHDRAW OR RESTRICT THE DEPRECIATION WHICH IS NOT ANSWERED OR DECIDED. B UT UNDER RULE 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES HE IS RAISING THE PLEA THAT THE ASSESSING OFFICER HAS NO JURISDICTION TO DECIDE THE ISSUE WHETHER POULTRY SHEDS IS A BUILDING AS CONTEMPLATED U/S. 32 OF THE INCOME - TAX ACT AS IT IS NOT MISTAKE APPAR ENT ON THE RECORD. HE RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF V OLKAR BROTHERS 88 ITR . WE FIND FORCE IN THE ARGUMENT OF LD. COUNSEL . T HE INTERPRETATION OF THE TERM P OULTRY S HED WHETHER IT CONSTITUTES BUILDING OR PLANT U/S. 32 OF THE INCOME - TAX ACT IS A DEBATABLE ISSUE AND IT CANNOT BE TREATED AS MISTAKE APPARENT ON THE FACE OF THE RECORD. MOREOVER, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE 12 ITA NO S. 907, 908 & 909/PN/2013, M/S. MHATRE POULTRY FARM, RAIGAD IN THE CASE OF SHIVALIK HATCHERIES (P) LTD. (SUPRA) AS WELL AS V.N. DUBEY (S UPRA). WE, THEREFORE, HOLD THAT THE ASSESSING OFFICER HAS NO JURISDICTION TO DECIDE THE ISSUE OF THE RATE OF DEPRECIATION ON THE POULTRY SHEDS U/S. 154 OF THE INCOME - TAX ACT AS THE PRINCIPLES LAID DOWN IN THE CASE OF V OLKAR BROTHER S (SUPRA) ARE SQUARELY A PPLICABLE TO THE FACTS OF THE ASSESSEES CASE. WE, ACCORDINGLY, HOLD THAT THE ORDERS PASSED BY THE ASSESSING OFFICER U/S. 154 ARE WITHOUT AUTHORITY OF LAW . T HE PLEA TAKEN BY THE ASSESSEE IS SUPPORTED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COU RT IN THE CASE OF B.R. BAMASI 83 ITR 223. WE, ACCORDINGLY, ALLOW THE PLEA OF THE ASSESSEE SUPPORTING THE ORDER OF THE LD. CIT(A) ON THE ISSUE OF POWER OF THE ASSESSING OFFICER TO RECTIFY THE ASSESSMENT ORDERS U/S. 154 OF THE ACT. ACCORDINGLY, GROUND TAKE N BY THE REVENUE IN ALL THE APPEALS ARE DISMISSED. 9. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 21 - 07 - 20 1 4 SD/ - SD/ - ( R . K . PAN DA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 21 ST JULY, 2014 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 4 5 THE CIT(A) - I, THANE THE CIT - II, THANE THE DR, ITAT, B BENCH, PUNE. 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SEC RETARY INCOME TAX APPELLATE TRIBUNAL PUNE