Commissioner Of Income Taxchennai v. M/S.anand Transportno

In the High Court of Judicature at Madras Dated: 07.03.2017 Coram The Honourable Mr.JUSTICE RAJIV SHAKDHERandThe Honourable Mr.JUSTICE R.SURESH KUMAR Tax Case (Appeal) No.82 of 2017 Commissioner of Income TaxChennai .... Appellant Vs. M/s.Anand TransportNo.1, 9th Street,Dr.Radhakrishnan Salai,Mylapore, Chennai - 34. .... Respondent APPEAL filed under Section 260A of the Income Tax Act, 1961against the order dated 14.08.2015 made in I.T.A.No.737/Mds/2014on the file of the Income Tax Appellate Tribunal, 'A' Bench,Chennai for the assessment year 2005-06. preferred aainst theorder dated 16.12.2013 made in I.T.A.No.136/2013-2014 on thefile of the commissioner of Income – Tax Appeals Central) 5,Chennai 34 for the Assessment year 2005-2006 and against theorder dated 05.02.2013 made in PAN/GIR No.AAAFA137D order of theAssessing officer under Section 143(3) of the Income Tax Act, onthe file of the Assistant Commissioner of Income Tax Circle I,Chennai, for the Assessment year 2004-2005. For Appellant : Mr.T.Ravikumar Standing Counsel for Income TaxFor Respondent : Mr.M.P.Senthil KumarJ U D G M E N T (Judgment of the Court was delivered by RAJIV SHAKDHER,J.) 1. This appeal is directed against the order of the IncomeTax Appellate Tribunal (in short 'the Tribunal'), dated14.08.2015, qua the Assessment Year (A.Y) 2005-06. 2. The following questions of law have been raised in the https://hcservices.ecourts.gov.in/hcservices/ appeal for our consideration: "1. Whether under the facts and circumstancesof the case, the Income Tax Appellate Tribunal wascorrect in granting depreciation on "Jetty" at 100%under the head "Building - Temporary Structure"instead of allowing depreciation at 25% under thehead "Plant"? 2. Whether under the facts and circumstancesof the case, the Income Tax Appellate Tribunal wascorrect in holding that the Jetty was a temporarystructure, without appreciating the fact that thestructure had enduring benefit to the assessee? 3. Whether under the facts and circumstancesof the case, the Income Tax Appellate Tribunal wascorrect in relying on the decision of the DelhiTribunal, when the law is settled in favour of thedepartment by the decision of the Chennai Tribunal?" 3. Mr.T.Ravikumar, counsel for the Revenue, at the outset,says that, question No.3 does not arise from the impugnedjudgment of the Tribunal and, therefore, in any case, does notrequire any discussion by this Court. 4. A perusal of the first question would show that,essentially, the issue, which arose for consideration before theTribunal, was, whether, the Jetty, erected by the assessee, wasentitled to 100% depreciation or, was to be treated as a plantand, therefore, allowed depreciation, at the rate of 25%.5. A perusal of the record shows that the followingfindings of fact have been returned by the Tribunal: (i) That the Jetty was a structure, which was temporary innature, as against a "permanent establishment". (ii) The Assessee was required to dismantle and remove allequipment and structures, installed at the Jetty, at its owncost. (iii) That, even though, the option was given to theAssessee to continue to use the Jetty for a period beyond thetenure of the contract, i.e., till 31.03.2010, that, by itself,did not convert the Jetty into a permanent structure.5.1. To be noted, the aforesaid findings of fact, whichwere returned by the Tribunal arose, in the background of thefollowing circumstances: 5.2. The Assessee had filed a return for A.Y.2005-06, on30.01.2006, whereby, it had admitted a total income ofRs.4,53,88,570/-. The said return, filed by the Assessee, wasprocessed, on 28.03.2007 and, after passing a rectificationorder, under Section 154 of the Income Tax Act, 1961 (in short'the Act'), refund, in the sum of Rs.6,670/- was ordered, infavour of the Assessee. (iii) That, even though, the option was given to theAssessee to continue to use the Jetty for a period beyond thetenure of the contract, i.e., till 31.03.2010, that, by itself,did not convert the Jetty into a permanent structure.5.1. To be noted, the aforesaid findings of fact, whichwere returned by the Tribunal arose, in the background of thefollowing circumstances: 5.2. The Assessee had filed a return for A.Y.2005-06, on30.01.2006, whereby, it had admitted a total income ofRs.4,53,88,570/-. The said return, filed by the Assessee, wasprocessed, on 28.03.2007 and, after passing a rectificationorder, under Section 154 of the Income Tax Act, 1961 (in short'the Act'), refund, in the sum of Rs.6,670/- was ordered, infavour of the Assessee. 5.3. It appears that, the return of the Assessee wasexamined, along with the depreciation schedule appended thereto. https://hcservices.ecourts.gov.in/hcservices/ 5.4. A perusal of the depreciation schedule revealed thatthe Assessee had claimed depreciation, in the sum ofRs.8,86,66,504/-. Out of this amount, the Assessee had claimed100% depreciation, qua a loading platform (i.e., the Jetty),amounting to Rs.6,94,59,742/-. 5.5. It is, in these circumstances, that notice, underSection 148 of the Act, was issued to the Assessee, on28.03.2012. The Revenue appeared to be of the view that, theJetty was in the nature of a "plant" and not a temporarystructure, on which, 100% depreciation could be claimed. 5.6. In respect of the said notice, a reply was filed bythe Assessee vide communication dated 25.04.2012. 5.7. Via this reply, the Assessee indicated to the Revenuethat, its original return filed on 30.01.2006, should be treatedas a return, in response to the notice, issued under Section 148of the Act. 6. The record shows that due to the change in Officers, anotice under Section 129 of the Act was issued to the Assessee,along with the Show Cause Notice (in short SCN), calling uponthe Assessee to explain, as to why excess depreciation claimed,ought not to be disallowed. 7. The Assessee via its authorised representative, gave thefollowing explanation to the Revenue. 7.1. That the Assessee was, essentially, in the business ofloading and unloading of bulk cargo, relating to exports andimports, transportation of cargo, both within and outside theports and by sea and, attending to all works, incidental to theworks connected with the main business. 7.2. The Assessee was awarded a contract by MMTC, on06.05.2004. 7.3. The subject Jetty/loading platform was erected,albeit, temporarily, to facilitate loading of iron ore ontovessels, in furtherance of the contract awarded by MMTC, infavour of the Assessee. 7.4. The Assessee further explained that, the loadingplatform consisted of a belt conveyor (along with electrical andpanels). It was the Assessee's case that, in this behalf, ithad incurred, on the whole, a sum of Rs.6.95 crores,approximately, which, as indicated above, was the amount claimedas depreciation. 7.5. Furthermore, the Assessee took the stand that, uponcompletion of the contract, it was required to dismantle theloading platform/Jetty, which, as indicated above, wasconstructed at its own cost. 7.6. In sum, it was the Assessee's case that the loadingplatform/Jetty was a temporary structure set up for commercialconsideration and, not for securing any capital asset. TheAssessee emphasized the fact that the entire project had a lifeof only three years and, therefore, being a temporary structure, https://hcservices.ecourts.gov.in/hcservices/ 7.6. In sum, it was the Assessee's case that the loadingplatform/Jetty was a temporary structure set up for commercialconsideration and, not for securing any capital asset. TheAssessee emphasized the fact that the entire project had a lifeof only three years and, therefore, being a temporary structure, https://hcservices.ecourts.gov.in/hcservices/ it was entitled to 100% depreciation, as per the provisions ofSection 32 of the Act, read with Rule 5 framed thereunder. 8. The Assessing Officer, however, relying upon thejudgment of the Allahabad High Court in the matter of Tulsi (SK)& Sons V. CIT, (1991) 187 ITR 685, applied the "functional test"and came to the conclusion that, the Jetty/platform was a plant,as it was an apparatus/tool, which only enabled the Assessee tocarry on its business. 8.1. The Assessing Officer's observation was that the Jettyconsisted mainly of a belt conveyor and electrical support, andthat, the civil work was negligible. The Assessing Officerfurther held that the conveyor belt could be dismantled andreused. 8.2. Therefore, for all these reasons, the AssessingOfficer held that the Jetty/loading platform was really in thenature of a plant and not a temporary structure, as contended bythe Assessee. 8.3. Accordingly, the Assessing Officer alloweddepreciation on the Jetty/loading platform, at the rate of 25%.Excess depreciation, claimed by the Assessee, was, consequently,disallowed. 9. Being aggrieved, the Assessee carried the matter inappeal to the Commissioner of Income Tax (Appeals) [in short,'the CIT(A)]. The CIT(A) sustained the reasoning given by theAssessing Officer. 10. As indicated right at the outset, the Tribunal hasreturned a finding of fact that the Jetty/Loading platform was atemporary structure. It cannot, but be submitted that, if,Jetty/Loading platform is held to be a temporary structure,then, the Assessee would be entitled to depreciation at the rateof 100%. 11. Therefore, to appreciate the contours of the issue athand, one may have to set out the relevant entry incorporated inthe appendix No.1 appended to the Act, as obtaining in therelevant A.Y., i.e., A.Y.2005-06. 11.1. In paragraph 7 of the judgment of the Tribunal, therelevant Entry has been extracted. For the sake of convenience,the same is extracted hereunder: ".... 7. ....... For the assessment year 2005-06, under “Part-A” heading “tangible asset”, and sub-heading I “Building” temporary erections such aswooden structure are falling 5 I.T.A. No.737/Mds/2014under the classification “building” and 100%depreciation was prescribed. Old Appendix-1 Part A (1)(4) reads as follows:- “purely temporary erection such as woodenstructure”....." (emphasis is ours) 12. We have examined the record. According to us, thematter would turn on what is the nature of the structure,purpose for which it is erected, the periodicity for which, itis put in place, and lastly, the use to which the structure isput by the person/entity responsible for its erection. 12.1. Therefore, first and foremost, one needs to discernis, what exactly is a "Jetty". The dictionary meaning of Jetty,as found, in the Oxford English Dictionary, is, as follows:"a landing stage or small pier at which boats candock or be moored; a bridge or staircase used bypassengers boarding an aircraft; a breakwaterconstructed to protect or defend a harbour, stretch ofcoast or riverbank." 12.2. A bare perusal of the meaning of the word Jetty wouldshow that, it is, in the nature of a construction, which isused, either as a landing stage, a small pier, bridge, staircaseor a construction, built into the water to protect the harbour. 12.3. The utility of a Jetty is limited by its construct.It is used to obtain either access to a Vessel, or, protect theharbour. 12.1. Therefore, first and foremost, one needs to discernis, what exactly is a "Jetty". The dictionary meaning of Jetty,as found, in the Oxford English Dictionary, is, as follows:"a landing stage or small pier at which boats candock or be moored; a bridge or staircase used bypassengers boarding an aircraft; a breakwaterconstructed to protect or defend a harbour, stretch ofcoast or riverbank." 12.2. A bare perusal of the meaning of the word Jetty wouldshow that, it is, in the nature of a construction, which isused, either as a landing stage, a small pier, bridge, staircaseor a construction, built into the water to protect the harbour. 12.3. The utility of a Jetty is limited by its construct.It is used to obtain either access to a Vessel, or, protect theharbour. 13. The provisions of the contract, as quoted by theTribunal, would show that, the Jetty/loading platform wasconstructed, in this particular case, by the Assessee, on BOTbasis, for a period of three (3) years, from the date ofcommencement of the vessel loading operation. 13.1. This was the initial arrangement between the Assesseeand the MMTC, which was modified, to enable operation of theJetty, till such time, the Ennore Port allowed operations, or,for a period of three months from 24.06.2009. In additionthereto, under the terms of the contract, MMTC, as it appears,could use the Jetty, till 31.03.2010, on the same terms andconditions as per mutually agreed terms arrived at betweenparties. 14. Quite clearly, the Jetty/loading platform, in thiscase, was erected by the Assessee, in order to effectuate itsbusiness under the contract, entered into with MMTC, which wastenure based, and, therefore, could not have been treated asanything else, but a temporary erection. Upon completion of thecontract, the Assessee was required to dismantle it. The factthat the Jetty had other contraptions attached to it, such as, aconveyor belt, to facilitate the process of loading, cannotconvert such a structure into a plant. Therefore, even, if, thefunctional test is employed, the main function of a Jetty, inthe facts of the instant case, was to provide a passage or, aplatform to ferry articles onto the concerned Vessels. Thiscould have been done manually. That it was done by using aconveyor belt, would not, to our minds, convert a Jetty into a https://hcservices.ecourts.gov.in/hcservices/ plant. 15. In sum, the Tribunal has reached the same conclusionand, thus, reversed the decision of the Assessing Officer andCIT(A) by allowing depreciation at the rate of 100%. 16. For the foregoing reasons, we agree with theconclusions reached by the Tribunal, which, according to us, isa pure finding of fact, reached on the basis of the appreciationof the material placed before the Tribunal. 17. Therefore, in our view, no question of law arises forconsideration, much less a substantial question of law. 18. The appeal is, accordingly, dismissed. However, thereshall be no order as to costs. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar To 1 The Income Tax Appellate Tribunal,'A' Bench, Chennai. 2 The Commissioner of Income Tax,Appeals (Central) I, 46 Mahatma Gandhi Road,NungambakkamChennai 34 3 The Asst. Commissioner of Income Tax,Circle I, Chennai 34 +1cc to Mr.T. Ravi Kumar, Advocate, S.R.No.14527 br(CO)md(17/04/2017) Tax Case (Appeal) No.82 of 2017