Commissioner Of Income Tax v. Brahaspati Agricultural & Poultry

(-1-) IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.528 OF 2005 Commissioner of Income Tax. ....Appellant Vs. Brahaspati Agricultural & Poultry Products Ltd. ..Respondent Mr.Vimal Gupta with Mr. P.S.Sahadevan, for the Appellant. Mr. S.N. Inamdar, for the Respondent CORAM: F.I. R.S.MOHITE, JJ. DATED: 29th January, 2009 P.C.: . The Revenue had framed three questions. In our opinion, the question which will arise would be as follows:- "Whether on the facts of the case the Tribunal was right in holding that cages housed in the shed in a layer (chicken) farm would fall within the expression "plant".? The A.O. by his order was pleased to hold that the cages are structure in which the business of poultry and hatchery is carried out and is a building and cannot be classified as plant and machinery and accordingly proceeded to hold that they being a shed depreciation can be allowed at the rate prescribed (-2-) for building in Appendix I to II of Rules of 1962. . In Appeal the C.I.T. (Appeals) was pleased to consider the distinction between a shed and a cage. The learned C.I.T. (A) has considered the various material placed before it. In our opinion, it would be appropriate if we reproduce the following part of the order:- "It was held, that the cages are not used as independent units but were utilized by the assessee for fabrication of bigger compartments to have a larger number of birds with common facilities of lighting, feeding and watering etc. The assessee was, therefore, using the small cages to so integrate them with his bigger unit that lost their individuality. They became a part of the bigger plant and ceased to either perform the remain capable of performing any function independent of what was performed by the entire unit as one complete plant and machine. The position of these small cages was, therefore, no better than the components of an engine which in a knocked down condition did not perform any function but when assembled together made a vital contribution towards the functioning (-3-) of the engine. Just as the components of an engine could not be treated as plant in themselves, so also these cages could not be termed as plant to individually quality for the depreciation allowance claimed by the assessee. The test of "functional integrality" of any such components, with the whole or bigger unit of which they become a part, in the course of and for the purposes of the assessee’s business, was what would determine whether the components could be treated to be plant in themselves to quality for the depreciation allowance. Therefore, the purchase of 9,000 cages did not tantamount to setting up of 9000 separate plant and the assessee was not entitled to 100 per cent depreciation on each separate cage". According to appellant’s representative this decision also reversal that there was no reservation in any one’s mind that cages are to be treated as plant. 24. The submissions are considered and records verified. The Assessing Officer has possibly overlooked the fact that the assessee has treated poultry sheds separately as building and the cages (-4-) installed inside the poultry shed as part of plant. In the case of Baramati Agro Ltd., also assessed by the same Assessing Officer and relied on by him because the appellate authorities have confirmed the disallowance, the cages installed in the poultry sheds were claimed to be on integral unit and in that context the question was whether depreciation should be allowed on the integrated unit as building or plant. The facts in the case before the undersigned not being identical with the facts in Baramati treated as plant. 24. The submissions are considered and records verified. The Assessing Officer has possibly overlooked the fact that the assessee has treated poultry sheds separately as building and the cages (-4-) installed inside the poultry shed as part of plant. In the case of Baramati Agro Ltd., also assessed by the same Assessing Officer and relied on by him because the appellate authorities have confirmed the disallowance, the cages installed in the poultry sheds were claimed to be on integral unit and in that context the question was whether depreciation should be allowed on the integrated unit as building or plant. The facts in the case before the undersigned not being identical with the facts in Baramati Agro I see no difficulty in treating the cages as item of "plant" distinct from the poultry sheds being treated as "building" because the cages are special scientifically designed units for housing the birds in certain environmental conditions to improve the output. The decision of CIT (Appeals)-II is also on poultry shed (not cages) as plant which claim has been rejected. On the facts, the Assessing Officer was not justified in restricting the depreciation on the cages to 10%. The Assessing Officer is directed to allow appropriate depreciation on cages treating it as an item of "plant". (-5-) 3. Revenue went in Appeal before the learned ITAT. The learned ITAT upheld the order of C.I.T. (A). However, while passing its order it appears that it loosely used the expression "cage" and "shed". What was really in issue before it was the expression "cage" and not "shed". Against the said order the Revenue has preferred the Appeal before this Court. 4. It may be mentioned that the material which was considered by the C.I.T. (A) in its order and which was available to the I.T.A.T. has not been disputed either before the I.T.A.T. or before this Court. 5. Even otherwise it would not be possible to accept the submission, that the shed which is held to be a building, the cages which are movable and inside the shed will also have to be held to be building. There cannot be, in our opinion, a building within a building. All other things will be accessories. The only issue is whether they would constitute plant. In the instant case, in our opinion, the C.I.T. (A) considering the material on record has rightly come to the conclusion that the cages would not be buildings but have to be treated as plant. (-6-) 5. Considering the above, in our opinion the law as framed would not arise and consequently Appeal dismissed. (R.S.MOHITE, J.) (F.I.REBELLO,J.) (R.S.MOHITE, J.) (F.I.REBELLO,J.) (R.S.MOHITE, J.) (F.I.REBELLO,J.)