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TMI Blog2014 (11) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... , Operate and Transfer (BOT) basis. The appellant filed an income tax return in electronic form declaring a loss of Rs. 10,02,63,570/- for the assessment year 2007-08. The case was selected for scrutiny and notice under Section 143(2) of the Income Tax Act, 1961 ('Act' for short) was issued to the appellant. The Assessing Officer held that the assessee could claim depreciation @ 10% on roads and not @ 25%, as claimed by the appellant assessee and accordingly allowed the amount of depreciation as Rs. 3,70,92,664/- calculated on the amount of Written Down Value. The Commissioner of Income Tax (Appeals) partially upheld the order insofar as the aforesaid aspect is concerned. On further appeal, the Tribunal confirmed the order of CIT (Appeals). 4. ITA No.65/2014 The appellant on November 27, 2003 filed an income tax return declaring loss of Rs. 25,94,56,570/-. The case was selected for scrutiny and notice under Section 143(2) was issued to the appellant on October 15, 2004. The Assessing Officer vide assessment order dated July 28, 2005 allowed depreciation on toll road @ 10%, instead of 25% as claimed by the appellant assessee. The balance 15% was directed to be added to the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Rayon Silk Manufacturing Co. Ltd. [1992] 196 ITR 149 (SC) (g) Maharashtra State Road Development Corporation Ltd. vs. ACIT, Mumbai [2010] 126 ITD 279 (ITAT, Mumbai) (h) Tamil Nadu Road Development Company Ltd. vs. ACIT [2009] 120 ITD 20 (ITAT, Chennai) (i) SK Tulsi And Sons vs. CIT [1991] 187 ITR 685 (All. HC) (j) RC Chemical Industries vs. CIT [1982] 134 ITR 330 (Del. HC) (k) DCIT vs. ASTRA IDL [2001] 247 ITR 654 (Kar. HC) (l) ACIT Mumbai vs. M/s West Gujarat Expressway Limited, ITA No.6841/Mum/2011 (ITAT, Mumbai) (m) CIT vs. Noida Toll Bridge Co. Ltd. [2013] 213 Taxman 333 (All. HC) (n) CIT vs. Anand Theatres [2000] 244 ITR 192 (SC) 7. On the other hand, Mr.Balbir Singh, learned counsel for the respondent-revenue would support the order of the authorities inasmuch as the 'toll road' cannot be construed as a 'plant' as sought to be contended by the learned counsel for the appellant. He would refer to 'Note' under the table to Appendix 1 to the Rules, which relates to rate at which depreciation is admissible, wherein 'buildings' have been defined/referred to include roads, bridges, culverts, wells and tube-wells, to contend that the road being a 'building' for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Part A dealing with tangible assets remained as 10%. One more provision which is of relevance is Section 43 of the Act, wherein the term 'plant' has been defined. The same has been reproduced above. 10. Part A of Appendix I which relates to tangible assets refers to 'buildings' also. The types of buildings contemplated are as under:- (1) Buildings which are used mainly for residential purposes except hotels and boarding houses. (2) Buildings other than those used mainly for residential purposes and not covered by sub-items (1) above and (3) below. (3) Buildings acquired on or after the 1st day of September, 2002 for installing machinery and plant forming part of water supply project or water treatment system and which is put to use for the purpose of business of providing infrastructure facilities under clause (i) of sub-section (4) of section 80-IA. (4) Purely temporary erections such as wooden structures. Note 1 below the table stipulates 'buildings' include roads, bridges, culverts, wells, and tubewells. (emphasis supplied) It is a settled law that depreciation generally speaking is an allowance for diminution in the value due to wear and tear of capital asset employed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant assessment year so also clause 3 to Section 43, it is clear that roads referred to are roads per se without any qualification attached therewith. Had it been road adjunct to building/factory, the rule making authority would have said so or suggested so in Note (1) itself. Thus all roads whether adjunct and within a factory, or a toll road, would get covered under the said heading. There is no dispute, for a toll road operator, road is an asset used for business purposes and can claim depreciation as a 'building'. Even otherwise, the respondent revenue does not dispute that the appellant assessee is entitled to depreciation on the toll road as a 'building'. Rightly so, as 'buildings' include 'roads'. On the other hand in terms of Section 43(3), 'plant' does not include 'buildings'. What follows is 'plant' does not include 'road'. It must be held so as the legislative intent was to include 'roads' as 'buildings' and not as a 'plant'. That being the intent of the legislature, it must be held that 'road' is a 'building' and cannot be construed or held as a 'plant' in any circumstance, even if the tests laid down to decide what is a 'plant' in various judgments are fulfilled. Ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable to the assessment year 2003-2004. We are of the view that the same would not make any difference as in terms of "Note" under the Table in Appendix I of the Rules, 'Road' has been included to be a 'building' for the purpose of depreciation and the said position was in vogue much before the assessment years with which we are concerned. The amendment of 2004 was a reiteration/clarification of the position, existing in Section 32(1)(i) of the Act wherein 'buildings' and 'plant' have been separately referred to, so also in explanation 3(a) of the said Section. In other words, it was the intent of the legislature to construe 'buildings' and 'plant' separately or not to construe a 'buildings' as a 'plant' and vice-versa. Further the object of prescribing a lower rate of depreciation in case of 'buildings' as compared to 'plant' as they have higher durability. On this ground also, a 'road' cannot be construed as a 'plant'. Even assuming that it is for the first time clarified/prescribed that the 'plant' does not include 'buildings' with effect from 01.4.2004 in cases earlier to it, a 'building' (road in the case) can still be construed as a 'plant', if it satisfies the functional te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that these documents regarded collectively would have to be treated as a "book", for, the dictionary meaning of that word is nothing but "a number of sheets of paper, parchment, etc., with writing or printing on them, fastened together along one edge, usually between protective covers; literary or scientific work, anthology, etc. distinguished by length and form from a magazine, tract, etc." (vide Webster's New World Dictionary). The Supreme Court further held that from its physical form, the question was whether these documents satisfy the functional test indicated above. Obviously, the purpose of rendering such documentation service by supplying these documents to the assessee was to enable it to undertake its trading activity of manufacturing theodolites and microscopes and there could be no doubt that these documents had a vital function to perform in the manufacture of these instruments; in fact it was with the aid of these complete and up-to-date sets of documents that the assessee was able to commence its manufacturing activity and these documents really formed the basis of the business of manufacturing the instruments in question. True, by themselves, these documents did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly designed and constructed with some special features to attract the customers and a building not so constructed but used for the same purpose, namely, as a hotel or theatre would be unreasonable. 18. In CIT vs. Dr. B.Venkata Rao [2000] 243 ITR 81, the Supreme Court held that if it was found that the 'building' or structure constituted an apparatus or a tool of the taxpayer by means of which business activities were carried on, amounted to a 'plant' but where the structure played no part in the carrying on these activities but merely constituted a place where they were carried on, 'building' could not be regarded as a 'plant'. 19. In Karnataka Power case, the Supreme Court while considering the appeal filed by the revenue whereby the authorities below has held the generating station to be a 'plant' was of the view that its judgment in Anand Theatre (supra) cannot be read so broadly and held as under:- "It is difficult to read the judgment in the case of Anand Theatres [2000] 244 ITR 192 (SC) so broadly. The question before the Court was whether a building that was used as a hotel or a cinema theatre could be given deprecation on the basis that it was a 'plant' and it was in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls as per technical requirements and the structure is made with heavy reinforced steel and concrete to hold the weight of heavy machines installed in each floor with a load bearing capacity of one ton per square meter and that all the four walls of the structure and ceiling are fitted with flow pipes and other electrical fittings and that the plant cannot be held and run without the said specially designed structure. It can be said that the structure holds the entire plant and machinery and therefore is a integral part of the plant. From this report, it is clear that the building has been constructed specifically for carrying out the manufacturing of atta and flour. The manufacture activities cannot be carried out in any other building except in a building specifically designed for that purpose." 21. Similarly in Kamla Selvaraj (supra) the Madras High Court considering the case of a doctor who claimed extra shift allowance of depreciation treating the business of her nursing home as a 'plant' for the assessment year 1983-84, the Assessing Officer disallowed the claim on the ground that it is not a 'plant', which order was upheld by CIT (Appeals) but the Tribunal concluded that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have been incorporated in the 'building' nor is there any finding to this effect. A 'building' free from atmospheric vagaries might have certain advantages as compared with a normal construction but in the facts of the present case remained the space or shelter where the business of manufacturing saccharine was carried on as opposed to the means. It is noted that the counsel for the assessee conceded that there are other companies and concerns which were carrying on the business of manufacturing saccharine in normal buildings. The Court held that the correct query in the present context appears to be whether the particular features incorporated in the 'building' in question were essential to the manufacturing process and the functioning of the equipment making it an integral part of the 'plant'. According to this Court, the answer being in the negative it is apparent that the 'building' in question remained the location and was not converted into the means for carrying on the business. 24. In Astra IDL Ltd. (supra), wherein the Karnataka High Court on a finding of the Tribunal that the 'building' was used only for manufacturing and supplying medicine and no other business has he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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