2009 (9) TMI 16 - HC - Income Tax

Depreciation Poultry Sheds Building versus Plant - Held that - Buildings of the poultry sheds had been specifically designed with a view to protect the birds from disease. It has been designed to ensure proper light and circulation of air; proper and scientific feeding arrangement; proper water system; proper arrangement for collection of manure and droppings; proper arrangement for medication and vaccination; and a right environment conducive for laying of eggs by the birds. The buildings had been designed in a manner so as to protect the birds and increase their productivity. The argument made on behalf of the revenue that the building can be used with a certain modification for certain other purposes cannot be accepted. - The law is clear that if it is found that the building has been designed specifically to further the cause of manufacture or production then the same is a plant. Applying the aforesaid tests, we hold that the poultry sheds are plant within the meaning of Section 43(3), as it then stood.

Summary

Issues Involved:
1. Whether poultry sheds used for the business of hatching constitute 'Plant' for the purpose of granting depreciation under Section 32 of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Definition of 'Plant' and its Application
The core issue revolves around the interpretation of the term 'Plant' as defined in Section 43(3) of the Income Tax Act, 1961, and whether poultry sheds qualify as 'Plant' for the purpose of depreciation.

Relevant Legal Provisions and Precedents:
- Section 43(3) of the Income Tax Act, 1961: The definition of 'Plant' includes ships, vehicles, books, scientific apparatus, and surgical equipment used for the business of profession but excludes tea bushes or livestock. Post the Finance Act of 2003, buildings, furniture, and fittings were also excluded.
- Commissioner of Income-tax, Andhra Pradesh vs. Taj Mahal Hotel (1971): The Supreme Court held that sanitary and pipeline fittings in a hotel fall within the definition of 'Plant' as they are essential for the business.
- Commissioner of Income-tax, Gujarat-III vs. Mc GAW Ravindra Laboratories (India) Ltd. (1981): The Gujarat High Court ruled that expenditure on specifications for analysis and testing of raw materials qualifies as 'Plant', but roads do not unless shown to be part of the plant.
- R.C. Chemical Industries vs. Commissioner of Income-tax, New Delhi (1982): The Delhi High Court laid down principles to decide whether a building is a plant, emphasizing the usage of the building in the business and its indispensability to the functioning of the equipment.
- Pathange Poultry Farm vs. Commissioner of Income-tax (1994): The Karnataka High Court held that small cages in a poultry shed are part of a larger plant.
- Scientific Engineering House Pvt. Ltd. Vs. Commissioner of Income-tax, Andhra Pradesh (1986): The Supreme Court ruled that documentation service materials like drawings and designs are 'Plant' as they are vital for the manufacturing process.
- Commissioner of Income-tax vs. Dr. B.Venkata Rao (2000): The Supreme Court held that a building specifically designed as a nursing home qualifies as a 'Plant'.
- CIT, Trivandrum vs. Anand Theatres (2000): The Supreme Court ruled that buildings used for hotels or cinemas are not 'Plant' as the building itself is not an apparatus for running the business.
- Commissioner of Income-tax vs. Karnataka Power Corporation (2001): The Supreme Court clarified that buildings designed to serve special technical requirements could be treated as 'Plant' based on the specific facts of the case.

Court's Analysis:
The court examined the judgments and principles laid down in the aforementioned cases to determine if poultry sheds could be classified as 'Plant'. The ITAT had concluded that the poultry sheds were designed to protect birds from disease, ensure proper light and air circulation, and facilitate feeding, watering, manure collection, medication, and vaccination, thereby increasing productivity.

Conclusion:
The court held that the definition of 'Plant' is inclusive and wide, encompassing various items essential for business. Given the specific design and purpose of the poultry sheds to enhance productivity and protect the birds, they qualify as 'Plant' under Section 43(3) as it stood before the amendment in 2004. The court rejected the revenue's argument that the sheds could be repurposed for other uses, emphasizing the design and intended use in the business.

Judgment:
The question was answered in favor of the assessee, affirming that poultry sheds used for the business of hatching constitute 'Plant' for the purpose of granting depreciation. The appeal was accordingly rejected.