2010 (7) TMI 884 - HC - VAT and Sales Tax

Whether the assessing authority was justified in imposing the tax on the air-conditioning and cold storage plant for the assessment years 1995-96, 1996-97, 1997-98 and 1998-99 under section 3F of the U.P. Trade Tax Act, 1948 by holding that air-conditioning and cold storage plant is a movable property? Whether the learned Tax Tribunal was justified in equating the air-conditioning plant and cold storage plant of the hotel with the water pump by holding that plant is fixed only for the purpose of operational efficiency? Held that - Even from the MOU and agreement executed by the revisionist themselves their intention is indicated that the air-conditioning plant is one of the movable assets, which was leased out by the revisionist by a separate agreement to the Jaypee Hotel. Accordingly, we answer the question No. 1 in the affirmative holding that air-conditioning and cold storage plant is a movable property. The test as to whether the machine or article is immovable or movable property, is that the machine or article could be sold in the market and could be removed for installation at other place. Therefore, the question No. (ii) does not survive at all. Appeal dismissed.

Issues Involved:
1. Whether the assessing authority was justified in imposing the tax on the air-conditioning and cold storage plant by holding that it is a movable property.
2. Whether the Tax Tribunal was justified in equating the air-conditioning plant and cold storage plant with a water pump for operational efficiency.

Detailed Analysis:

Issue 1: Imposition of Tax on Air-Conditioning and Cold Storage Plant as Movable Property

The core issue revolves around whether the air-conditioning and cold storage plant should be considered movable property and thus subject to tax under section 3F of the U.P. Trade Tax Act, 1948. The assessing authority initially imposed the tax, treating these plants as movable property. This decision was upheld by the Deputy Commissioner, Trade Tax, Dehradun, and subsequently by the Trade Tax Tribunal.

The revisionist argued that the air-conditioning plant, consisting of compressors and boilers, was permanently fixed and embedded in the earth, making it an immovable property. They contended that the controlled air from the plant passed through ducts cast in the hotel building, making it inseparable from the structure. The cold storage plant was also fixed at one place, further supporting their claim that these assets were immovable.

In contrast, the respondent maintained that the air-conditioning plant was movable, as evidenced by the lease agreements. The Memorandum of Understanding (MOU) and the lease agreement explicitly referred to the air-conditioning and cold storage plants as movable assets. The agreements provided for the surrender and potential disposal of these movable assets, indicating the intention of the lessor to treat them as movable property.

The court agreed with the respondent, emphasizing the clarity of the lease agreements. The terms of the MOU and the lease agreement No. JIL/02/95 indicated that the revisionist intended to lease out the movable assets separately from the immovable assets. The court also referenced the Supreme Court's decision in Sirpur Paper Mills v. Collector of Central Excise, which stated that merely fixing a machine to the earth for operational efficiency does not make it immovable property. Consequently, the court affirmed that the air-conditioning and cold storage plant are movable properties and upheld the tax imposition.

Issue 2: Equating Air-Conditioning and Cold Storage Plant with Water Pump

The second issue questioned whether the Tribunal was justified in equating the air-conditioning and cold storage plant with a water pump. The revisionist argued that the Tribunal erred in this comparison, as the air-conditioning plant was permanently attached to the earth, unlike a water pump.

The court clarified that the Tribunal had not equated the air-conditioning plant with a water pump but had merely referenced the Supreme Court's observation in Sirpur Paper Mills. The Supreme Court had used the water pump example to illustrate that fixing a machine to the earth for operational efficiency does not make it immovable property. The test for determining whether an article is movable or immovable is whether it can be sold in the market and removed for installation elsewhere.

Given this context, the court found that the second issue did not survive as a valid question. The Tribunal's reference to the water pump example was appropriate and consistent with the Supreme Court's reasoning.

Conclusion:

The court concluded that there was no merit in the revisions. The Tribunal's decision was not perverse and did not overlook any material facts. The air-conditioning and cold storage plant were correctly classified as movable property, subject to tax under section 3F of the Act. The revisions were dismissed, affirming the Tribunal's order.

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