2008 (6) TMI 363 - HC - Income Tax

Depreciation - poultry sheds and water lines for sheds as plant for the purposes of depreciation allowance and investment allowance under the Income-tax Act Building specifically designed to further the cause of manufacture or production is plant entitled for depreciation and investment allowance Extra shift allowance has to be calculated not in respect of any particular item or machinery which has been used for double shift or triple shift. - If it is shown that any portion of the has worked extra shift then the benefit is available in respect of the entire plant except the items of machinery or plant against which the letters N. E. S. A. are inscribed in sub-item (ii) of the Table in Part I of Appendix I or those which have been specifically excluded from the grant of extra shift depreciation allowance

Summary

Issues Involved:
1. Whether poultry sheds and water lines for sheds qualify as "plant" for the purposes of depreciation allowance and investment allowance under the Income-tax Act.
2. Whether extra shift allowance (ESA) can be allowed on poultry sheds, fencing, water tanks, and wells.

Detailed Analysis:

1. Poultry Sheds and Water Lines as "Plant":
The primary issue was whether poultry sheds and water lines for sheds should be classified as "plant" under the Income-tax Act, thus qualifying for depreciation and investment allowance. The Income-tax Appellate Tribunal (ITAT) had concluded that poultry sheds, due to their specialized design and construction tailored for hatchery operations, constituted "plant." This conclusion was based on the fact that these sheds were equipped with provisions for light, air, feeding arrangements, water systems, manure collection, and medication, making them integral to the hatchery business.

The court examined various precedents, including:
- CIT v. Taj Mahal Hotel: The Supreme Court held that sanitary and pipeline fittings in a hotel were "plant" because they provided essential amenities.
- CIT v. McGaw Ravindra Laboratories (India) Ltd.: The Gujarat High Court differentiated between roads (not plant) and specialized specifications for analysis (plant).
- R. C. Chemical Industries v. CIT: The Delhi High Court provided principles to determine whether a building is a plant, emphasizing the functional role of the structure in the business.
- Pathange Poultry Farm v. CIT: The Karnataka High Court held that individual cages in a poultry shed were part of a larger plant.
- Scientific Engineering House P. Ltd. v. CIT: The Supreme Court included documentation services within the definition of "plant."
- CIT v. Dr. B. Venkata Rao: The Supreme Court ruled that a building designed as a nursing home was a "plant."
- CIT v. Anand Theatres: The Supreme Court held that buildings used for hotels or cinemas were not "plant."
- CIT v. Karnataka Power Corporation: The Supreme Court clarified that buildings designed to serve special technical requirements could be treated as "plant."

Based on these precedents, the court held that the poultry sheds, given their specialized design for hatchery operations, qualified as "plant" under section 43(3) of the Act. The court emphasized that the definition of "plant" is inclusive and broad, covering various items essential for business operations.

2. Extra Shift Allowance (ESA):
The second issue was whether ESA could be allowed on poultry sheds, fencing, water tanks, and wells. The ITAT had ruled in favor of the assessee, allowing ESA on these items once they were classified as "plant."

The court referred to the Supreme Court judgment in South India Viscose Ltd. v. CIT, which clarified that ESA is allowable if the concern had worked double or triple shifts, irrespective of whether individual items of machinery or plant had worked those shifts. The court noted that ESA should be calculated based on the number of days the concern operated extra shifts, not on the usage of specific items.

Therefore, the court upheld the ITAT's decision, allowing ESA on the poultry sheds, fencing, water tanks, and wells, as they were considered part of the "plant."

Conclusion:
Both questions were decided against the Revenue and in favor of the assessee. The court directed the Registrar General to send a copy of the judgment to the Income-tax Appellate Tribunal, Chandigarh Bench.