1993 (7) TMI 61 - HC - Income Tax

Summary

Issues Involved:
1. Whether Kasara Basin Wet Dock constituted 'plant' and if the assessee is entitled to depreciation on the expenditure incurred.
2. Whether dredging of the sea could be treated as 'plant' for development rebate purposes.
3. Whether shipway, Kasara Basin, and building berths constituted parts of the 'plant' for development rebate.
4. Whether the assessee is entitled to relief u/s 80J of the Income-tax Act, 1961, for the Frigate Project.

Summary:

Issue 1: Kasara Basin Wet Dock as 'Plant'
The Tribunal held that Kasara Basin Wet Dock constituted 'plant' and the assessee is entitled to depreciation on the expenditure incurred on excavation and masonry, including R.C.C. work. This issue is covered by the decision in CIT v. Mazagaon Dock Ltd. [1991] 191 ITR 460, and thus, the question is answered in the affirmative, in favor of the assessee.

Issue 2: Dredging of the Sea as 'Plant'
The Tribunal initially held that dredging the sea to create an approach channel was akin to constructing roads and culverts in factory premises, allowing depreciation at the rate applicable to factory buildings. However, it also concluded that the dredging created a major capital asset necessary for ship construction, thus qualifying as 'plant' for development rebate. The High Court disagreed, stating that the approach channel is more akin to 'road' than 'plant', following the Supreme Court's decision in CIT v. Gwalior Rayon Silk Mfg. Co. Ltd. [1992] 196 ITR 149. Therefore, the approach channel cannot be treated as 'plant' and the question is answered in the negative, in favor of the Revenue.

Issue 3: Shipway, Kasara Basin, and Building Berths as 'Plant'
The Tribunal held that the shipway, Kasara Basin, and building berths constituted parts of the 'plant', entitling the assessee to development rebate. This issue is also covered by the decision in CIT v. Mazagaon Dock Ltd. [1991] 191 ITR 460, and thus, the question is answered in the affirmative, in favor of the assessee.

Issue 4: Relief u/s 80J for the Frigate Project
The Tribunal held that the assessee is entitled to relief u/s 80J of the Income-tax Act, 1961, for the Frigate Project. This issue is similarly covered by the decision in CIT v. Mazagaon Dock Ltd. [1991] 191 ITR 460, and thus, the question is answered in the affirmative, in favor of the assessee.

Conclusion:
The High Court answered questions 1, 3, and 4 in the affirmative, in favor of the assessee, based on the precedent set in CIT v. Mazagaon Dock Ltd. [1991] 191 ITR 460. Question 2 was answered in the negative, in favor of the Revenue, following the Supreme Court's decision in CIT v. Gwalior Rayon Silk Mfg. Co. Ltd. [1992] 196 ITR 149. No order as to costs was made.