COMM.OF INCOMETAX AP I HYD V. M/S.DIAMOND HATCHERIES P.LTD HYD

ITTA/49/2001

AI Insights

The case revolves around the classification of structures erected for poultry and hatchery business as 'plant' under the Income Tax Act, 1961, which would allow for depreciation at a higher rate. The Tribunal had previously treated these structures as plants, following an earlier decision. However, the High Court, referencing a Division Bench decision, concluded that such structures do not qualify as plants since they are not directly involved in the business activities but serve as facilities for the business operations. Consequently, the court directed that these should be classified as buildings for depreciation purposes.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 719100 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 30-07-2013
• Assessment Year: misc
• Other Referred Cases: Assistant Commissioner of Income Tax, Circle 4 (3), Hyderabad Vs. Ratnam Poultry Private Limited, Hyderabad, Commissioner of Income-Tax Vs. Padmavathi Hatcheries Private Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Depreciation; Income Tax; Plant and machinery; Poultry shed; Hatchery business
• Section: 43(3)

Judgement Text

"HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE K.C.BHANU I.T.T.A.No.49 of 2001 Date: 30.07.2013 Between: The Commissioner of Income Tax, A.P.-I, Hyderabad. .....Appellant AND M/s Diamond Hatcheries Pvt. Ltd., Hyderabad. ...Respondent HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE K.C.BHANU I.T.T.A.No.49 of 2001 JUDGMENT: (per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta ) This appeal is directed against the judgment and order of the learned Tribunal dated 19.09.2000 in I.T.A.No.469/Hyd/96. This appeal was admitted by an order dated 10.04.2001 on the following substantial question of law: “Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in directing grant of depreciation at the rate of 25% by treating the structures erected for poultry and hatchery business as plant?” We have heard the learned Counsel for the parties and gone through the judgment and order of the learned Tribunal. It appears that the learned Tribunal, on that issue, has followed its earlier decision dated 20.02.1996 in Assistant Commissioner of Income Tax, Circle 4 (3), Hyderabad Vs. Ratnam Poultry Private Limited, Hyderabad (I.T.A.No.1727/Hyd/1992 and C.O.No.52/Hyd/1992). The said decision was not recorded by the learned Tribunal in the impugned judgment and order. The issue is whether the hatchery or poultry sheds can be treated as “plant” or not? Section 43 (3) of the Income Tax Act, 1961 defines “plant”, which reads as follows: “Plant includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession, but does not include tea bushes or livestock or buildings, or furniture and fittings”. The aforesaid definition is no doubt inclusive. From a reading of the aforesaid sub-section, it appears that the plant should be treated as those articles, which are directly applied for carrying on business. Therefore, the structures used for the purpose of hatchery or poultry business activity cannot be treated as plant and machinery. The plant and machinery are involved directly in the activity of business. We had no opportunity to see the reasoning of the earlier decision of the learned Tribunal on what basis or logic, it treated the said structures as plant and machinery. In our considered opinion, the poultry shed cannot treated as a plant since it is not directly connected to the business activity. On this identical issue, a Division Bench of this Court in Commissioner of Income-Tax Vs. Padmavathi Hatcheries Private Limited[1], has decided in the manner as follows: “We, therefore, hold that a poultry shed is not a ‘plant’ enabling the assessee to the higher rate of depreciation as applicable to a ‘plant’ and that it is entitled to claim depreciation as applicable to a ‘building’ only.” For the aforesaid circumstances, the issue raised is answered in favour of the Revenue. Accordingly, the judgment and order of the learned Tribunal to that extent is set aside and the judgment and order of the Assessing Officer is restored. We direct the Assessing Officer to recompute the depreciation in view of this finding. Accordingly, the appeal is allowed. No order as to costs. Miscellaneous petitions, if any pending, shall stand disposed of. ___________________ K.J. SENGUPTA, CJ _______________ K.C.BHANU, J 30.07.2013 Gsn [1] (2011) 335 ITR 325 (AP) "