Record v. Commissioner Ofincome Tax, (2007) 295 Itr 448 (Ail

ITA No.163 of 2008| IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.163 of 2008 (O&M)Date of decision: 28.8.2014 The Commissioner of Income Tax I, Chandigarh Vs, ..-.-- Appe M/s Rana Polycot Limited .....Responde CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Ms. Urvashi Dhugga,Advocatefor the appellant.Mr. Ravi Shankar, Advocate for the respondent. Ajay Kumar Mittal, J. inThis order shall dispose of ITA Nos.163, 167 of 2008 and 459of 2009 as according to the learned counsel for the parties,the facts and theissue involved in all the three appeals are similar. However, the facts arebeing extracted from ITA No.163 of 2008, |ITA No.163 of 2008 has been preferred by the revenue undersection 260A of the Income Tax Act, 1961 (in short, “the Act’) against theorder dated 20.7.2007, Annexure A.3 passed by the Income Tax AppellateTribunal, Chandigarh Bench ‘A’ (in short, “the Tribunal’) in ITANo.26/Chandi/2007 for the assessment year 2003-04, claiming followingsubstantial questions of law:- “1. Whether in the facts and circumstances of the case, the ITATwas right in holding the electrical installations to be givendepreciation @ 25% while a separate head for depreciation for electrical installations @ 15% has been provided in the IT Act,196] 2) Whether the ITAT was right in holding the Power ControlPanels, electric Power Cables, Electric Cable, automatic CircuitBreaker which are aids in efficient functioning of the plant andmachinery to be considered as plant and machinery and notelectrical installations? 3) Whether the ITAT was right in allowing the depreciation onall the items under the head electrical installations @ 25%instead of 15% when the assessee itself bifurcated the heads forP&M as plant and machinery and electrical installationsSeparately and after providing depreciation on electricalinstallations @ 25% there is no item under the head electricalinstallation to be provided depreciation @ 15%?” 3,A few facts relevant for the decision of the controversyinvolved as narrated in ITA No.163 of 2008 may be noticed. The assesseecompany is engaged in the business of manufacturing and trading of cottonyarn and knitted garments. It filed its return for the assessment year 2003-04on 12.11.2003 declaring loss of|Rs.3,47,81,170/-. While framing the orderof assessment under section 143(3) of the Act on 28.2.2006, Annexure A.1,the Assessing Officer made disallowance of Rs.16,79,593/- from out of thedepreciation claimed on electrical installations on the ground that thesewere purely electrical fittings and thus, eligible for depreciation @ 15%rather than 25% as applicable to plant and machinery. The Assessing officeralso levied surcharge on the MAT while computing the assessee's incomeunder Section 115JB of the Act. The assessee challenged the order of theAssessing officer before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 23.10.2006, Annexure A.2, the CIT(A) allowed theappeal. Not satisfied with the order, the revenue filed appeal before theGURBAX SINGHribunal. Vide order dated 20.7.2007, Annexure A.3, the Tribunal partly2014.10.28 11:53I attest to the accuracy andintegrity of this documentHigh Court Chandigarh ITA No.163 of 2008|4allowed the appeal. The Tribunal decided the question regarding allowanceof depreciation at the rate of 25% in favour of the assessee while the otherissue regarding levy of surcharge on MAT under section 115JB of the Actwas decided in favour of the department. Hence the instant appeals by theTEVEeENU 4We have heard learned counsel for the parties and perused the record. ITA No.163 of 2008|4allowed the appeal. The Tribunal decided the question regarding allowanceof depreciation at the rate of 25% in favour of the assessee while the otherissue regarding levy of surcharge on MAT under section 115JB of the Actwas decided in favour of the department. Hence the instant appeals by theTEVEeENU 4We have heard learned counsel for the parties and perused the record. 5Learned counsel for the revenue submitted that in theassessment years in question i.e. 2003-04 and 2005-06, the items on whichdepreciation has been claimed by the assessee fall within the definition“furniture and fittings” including electrical fittings and according toAppendix I of the Income Tax Rules, 1962 (in short, “the Rules’) at therelevant time, the rate of depreciation on these items was 15%. It wasfurther submitted that electrical fittings in Note 5 given below the said tablein Appendix I includes electrical wiring, switches, sockets, other fittingsand fans etc. It was urged that the assessee has been claiming depreciationOn various items which fall under this definition and therefore 15%depreciation was rightly allowed by the Assessing Officer. Reliance wasplaced on judgment of the Allahabad High Court in.Janta Sugar Industries vs. Commissioner ofIncome Tax, (2007) 295 ITR 448 (AIL). onOn the other hand, learned counsel for the assessee submittedthat the electrical installations on which the assessee was claimingdepreciation are part of ‘plant and machinery’ on which depreciation at therate of 25% was admissible. Learned counsel referred to the affidavit dated16.3.2009 filed in ITA No.167 of 2008 giving details of the items and theirUsdZe, vaUnder Section 32 of the Act, there are two broad categories ofassets for depreciation: (1) tangible assets and (ii) intangible assets. Itprovides for allowance of depreciation in respect of tangible assets likebuildings, machinery, plant or furniture owned by the assessee and used forthe purposes of the business or profession. Sub Section (3) of Section 43contains inclusive definition of the term ‘plant’ though it does not define‘Plant’ as such. Thus, plant would include apparatus or instrument used by abusinessman for carrying on his business or profession. S|The Apex Court inScientific Engineering House Pvt. Limited vs. CIT,(1986) 157 ITR 86 had laid that the following tests are to beapplied for determining whether an apparatus is plant or not:- 1) Does the article fulfil the function of a plant in the assessee's trading activity; i1) Is it a tool of his trade with which he carries on his businessWhere the answer is in the affirmative, it is termed as plant. Q Whether a particular item is a plant or not, it would include anarticle with which business is carried on as distinguished from an apparatuswhich is merely a part of the premises in which the business is carried on. Inother words,if electrical installations are utilised in efficient functioning ofthe plant and machinery, it would be considered as plant and machinery andnot electrical installations whereas if it is provided in the administrativeportion of the office, it cannot be said to be falling within the domain ofplant and machinery, 10. Examining the factual matrix herein, reference is made to theatfidavit dated 16.3.2009 filed in ITA No.167 of 2008, the details giventherein are as under:- ITA No.163 of 2008| - ITA No.163 of 2008| Q Whether a particular item is a plant or not, it would include anarticle with which business is carried on as distinguished from an apparatuswhich is merely a part of the premises in which the business is carried on. Inother words,if electrical installations are utilised in efficient functioning ofthe plant and machinery, it would be considered as plant and machinery andnot electrical installations whereas if it is provided in the administrativeportion of the office, it cannot be said to be falling within the domain ofplant and machinery, 10. Examining the factual matrix herein, reference is made to theatfidavit dated 16.3.2009 filed in ITA No.167 of 2008, the details giventherein are as under:- ITA No.163 of 2008| - ITA No.163 of 2008| 11.It was submitted by learned counsel for the assessee that itemsat serial Nos.5, 10, 12, 19, 21, 22 and 23 are used in theadministrative/otfice wing of the assessee and were thus, exigible todepreciation @ 15% being electrical installations whereas on other itemswhich were used in plant, the rate of depreciation was 25%. In the light ofthe affidavit filed in this Court, in our opinion, it would be appropriate thatthe matter is remitted to the Assessing Officer who shall calculate thedepreciation admissible to the assessee on various items of electricalinstallations as per legal principles enunciated hereinbefore. We orderaccordingly. 12.)In so tar aS pronouncement in Janta Sugar Industries’Case(supra) relied upon by the revenue is concerned, the issue was the rate atwhich the depreciation is admissible on the generator which was notspecifically specified in Appendix | to the rules. It was held thatdepreciation was admissible at the general rate of 10% on the generator. Thequestion being different, it has no applicability to the issue in hand in theseappeals. 13.In view of the above, the substantial questions of law standanswered in the manner indicated above and the appeals are disposed of assuch. (Ajay Kumar Mittal)Judge August 28, 2014 (Fateh Deep Singh)Judge “gS