1986 (6) TMI 101 - AT - Income Tax

Summary

Issues:
1. Claim for investment allowance on cages used in poultry farm.
2. Classification of cages as plant and machinery.
3. Eligibility for investment allowance under section 32A of the Income-tax Act, 1961.
4. Higher depreciation on poultry farm buildings.

Analysis:

Issue 1: Claim for investment allowance on cages used in poultry farm
The assessee-firm claimed investment allowance on cages installed in its premises for housing chicks, contending that they constituted plant. The ITO and the Commissioner (Appeals) rejected the claim, stating that the cages were not plant and machinery.

Issue 2: Classification of cages as plant and machinery
The assessee argued that cages should be considered plant as they are specially designed for maximum output and utility in the business. The departmental representative likened the cages to sheds or buildings. The ITAT held that the word 'plant' under the Income-tax Act should be interpreted broadly, citing precedents where various items were classified as plant. The ITAT remitted the matter to the ITO to determine the eligibility for investment allowance.

Issue 3: Eligibility for investment allowance under section 32A
The ITAT emphasized that the eligibility for investment allowance would depend on whether the conditions under section 32A of the Act were met. As this aspect was not considered by the lower authorities, the matter was referred back to the ITO for a decision.

Issue 4: Higher depreciation on poultry farm buildings
The Commissioner (Appeals) ruled that the higher depreciation applicable to Class III factory buildings should not be allowed on the poultry farm buildings. This decision was based on the Tribunal's earlier ruling for the assessment year 1982-83, where it was held that the poultry farm buildings did not qualify as factory buildings. The ITAT upheld this decision, following the Tribunal's precedent.

In conclusion, the ITAT partially allowed the appeal, remitting the matter of investment allowance eligibility back to the ITO for further consideration while upholding the decision on higher depreciation for poultry farm buildings based on precedent.