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TMI Blog2010 (11) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... on question compelling disposal by a common order. All the referred cases are at the instance of the Revenue. The only question referred to this court is : "whether, on the facts and in the circumstances of the case, poultry shed should be treated as plant, thereby allowing the assessee-company a higher rate of depreciation as applicable to plant and not the rate of depreciation as applicable to building ?" Before considering the rival contentions of the junior counsel for the Revenue and the counsel for the assessees, it is appropriate to notice the background of the referred cases and I. T. T. As. by referring to R. C. No. 53 of 2001 and I. T. T. A. No. 376 of 2006. 2. In R. C. No. 53 of 2001, M/s. Srinivasa Hatcheries (Private) Limited, Hyderabad, which runs a hatchery and poultry farm, buys one-day old chicks, grows them, hatches them and after incubating them, sells one-day old commercial chicks to poultry farms. In the return for the assessment year 1991-92, they claimed depreciation at 20 per cent. on the poultry sheds treating them as "plant". The Assessing Officer declined to accept the same and completed the assessment treating the poultry sheds as "building" allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are specially designed. Poultry sheds are tools and apparatus for the purpose of business and, therefore, they cannot be treated as "building". He would vehemently contend that poultry shed is a "plant" and the assessees would be entitled to claim depreciation at 25 per cent. He placed reliance on CIT v. Dr. B. Venkata Rao [2000] 243 ITR 81 (SC), CIT v. Karnataka Power Corporation [2001] 247 ITR 268 (SC) and CIT v. Dr. Ganga R. Menon, Palghat Poly Clinic [2003] 259 ITR 661 (Ker). 6. The point for consideration is whether poultry shed should be treated as "plant" thereby allowing the assessees to claim higher rate of applicable to depreciation ? 7. Sections 28 to 41 of the Act contain the procedure for computation of profits and gains of business or profession. Section 32 of the Act allows the assessee certain deductions in respect of depreciation of tangible assets like buildings, machinery, plant or furniture. Deduction in respect of depreciation of intangible assets like know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature is also permitted. Section 43 contains definitions of the terms used in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness is carried on is not acceptable because poultry shed is a mere place where business activities of the assessee is carried on. Therefore, the poultry sheds are treated as buildings and accordingly, depreciation rate applicable to buildings is allowed." 10. The Commissioner of Income-tax (Appeals) did not agree with the conclusion of the Assessing Officer. He came to the conclusion-without much reason--that poultry shed is to be allowed depreciation at the rates of plant and machinery. The learned Tribunal did not devote much time or space to this aspect. It merely relied on its earlier decision in Srinivasa Hatcheries P. Ltd. for the assessment year 1989-90 and agreed with the Commissioner of Income-tax (Appeals). Therefore, in so far as finding of fact is concerned, there is no reasoning by the Appellate Commissioner or the Tribunal. We may recall the reasoning of the Assessing Officer that poultry shed is not a tool, with the help of which, the assessee carried on business and that it is a mere place where business activity of the assessee is carried on. This is indisputable even in these referred cases, and for that matter, in all other matters. Indeed, the assessee did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modation' is also given under the Explanation which includes accommodation in the nature of a guest house and it specifically excludes 'premises used as a hotel'. So, the Legislature has not considered hotel building by itself as a plant. The phrase is 'premises used as a hotel' where machinery or plant is installed. (3) Under clause (v) of sub-section (1) of section 32, specific provision is made for a 'new building', the erection of which is completed after March 31, 1967, which is 'used as a hotel'. If the conditions mentioned therein are satisfied then for a building which is used for a hotel, a sum equivalent to 25 per cent. of the actual cost of the erection of the building is granted as depreciation. Further, the Legislature has considered building as separate from the hotel business and building is not considered as a plant for running the hotel. Therefore, building and the use of such building as a hotel are considered distinct. (4) All throughout section 32 for building it is specifically mentioned that 'whenever it is erected', while for machinery and plant, the words used are 'whenever it is installed' and there is no question of installing building. Section 32( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h which the business is carried on. If a building is merely a setting or place to accommodate some apparatus, then that cannot be termed as plant but if that plays an important role in carrying on the business then it will fall within the definition of the term 'plant'. It would be a plant if it is a tool of the trade with which one carries on his business. The poultry shed cannot be considered as an apparatus or tool for running the poultry business but is merely a shelter or home or setting in which the business is carried on. Thus, the poultry shed cannot be termed as plant but would fall under the term 'building'." 14. Karnataka Power Corporation [2001] 247 ITR 268 (SC) is a case wherein it was held that the question whether a place is a "building" or a "plant" is a question of fact and that (page 271) : ". . . where it is found as a fact that a building has been so planned and constructed as to serve an assessee's special technical requirements, it will qualify to be treated as a plant ". The Supreme Court therein held that, "power generating station is a plant eligible for investment allowance under section 32A of the Act". Dr. B. Venkat Rao [2000] 243 ITR 81 (SC) and Dr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged production of chicks, it is clear that the assessee does not contribute to the formation of chicks. The formation of chicks is a natural and biological process over which the assessee has no hand or control. In fact, what the assessee is doing is to help the natural or biological process of giving birth to chicks. The chicks otherwise can also be produced by conventional or natural method and in that process also, the same time is taken when the chicks come out from the eggs. What the assessee by application of mechanical process does in the hatchery is to preserve and protect the eggs at a particular temperature. But the coming out of chicks from the eggs is an event of nature. The only difference seems to be that, by application of mechanical methods, the mortality rate of chicks is less and the assessee may get chicks more in number. This, however, would not mean that the assessee produces chicks and that chicks are 'articles or things'. We are, therefore, of the opinion that the assessee is neither an industrial undertaking nor does the business of hatchery carried out by the assessee fall within the meaning of section 32A and section 80J of the Act." 17. After the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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