2003 (6) TMI 22 - HC - Income Tax

Whether a building of a cold storage is a plant. Revenue, had sought to draw a distinction between a plant and a building. According to him, if it is a setting or canopy for sheltering a particular business, then it would not be a plant. The building has a more durability than a plant. Therefore, only the thermocole part of the building is the plant and not the rest. - we remit the matter to the learned Tribunal for deciding the case afresh in the light of the observation as made hereinabove in order to allow at 33.33 per cent. on the part of the cold storage building housing the chambers, after giving opportunity to the parties.

Summary

Issues involved:
Whether a building of a cold storage is considered a plant for the purpose of depreciation at 33.33% under section 43(3) of the Income Tax Act.

Analysis:
The primary issue in this case revolves around determining whether a building of a cold storage qualifies as a plant for depreciation purposes. The counsel for the Revenue argued that only the thermocole part of the building should be considered a plant, not the entire structure. The Tribunal had previously held the cold storage to be a plant, citing decisions from the Punjab and Haryana High Court and the Allahabad High Court. However, the judgment in Anand Theatres' case by the Supreme Court established that the test for determining whether a building can be considered a plant is not solely functional but also based on additional criteria.

The operation of a cold storage is regulated by the West Bengal Cold Storage (Licensing and Regulation) Act, 1966, and the associated rules. The Act mandates strict compliance with various conditions, including licensing requirements, maintenance standards, and expert committee oversight. The rules specify detailed provisions regarding the construction, insulation, and maintenance of cold storage facilities to ensure proper functioning and compliance with regulatory standards.

The judgment emphasizes that the building of a cold storage, along with its chambers, constitutes an apparatus and tool essential for conducting the business. The building is not merely a shelter but a crucial component of the cold storage operation. The specific construction requirements outlined in the rules highlight the integral role of the building in housing the insulation and facilitating the storage of goods at controlled temperatures. Any deviation from the prescribed standards could lead to license cancellation and business cessation.

In a previous case, the court had clarified that the definition of "plant" under section 43(3) of the Income Tax Act is inclusive and not exhaustive. It encompasses any object or article, fixed or movable, used in the business operation. Applying this principle to the present case, it is evident that both the building and chambers of a cold storage collectively serve as a plant due to their indispensable role in the business activity. The interdependence between the building and chambers establishes their classification as a plant for depreciation purposes.

The judgment concludes by remitting the matter to the Tribunal for a fresh decision, directing that only the part of the cold storage building utilized as chambers for storing goods should be treated as a plant eligible for depreciation at 33.33%. The decision is made in favor of the assessee, emphasizing the necessity of considering the specific facts and circumstances of each case in determining the plant classification.

In agreement with the primary judgment, the second judge concurs with the decision and the disposition of the case, ensuring that all parties comply with the dictated order for further proceedings.