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TMI Blog1980 (7) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding and was entitled to a doubling of the ordinary rate of depreciation exigible for second class buildings. The disallowance of the depreciation amounted to Rs. 12,950. On appeal by the assessee, the AAC held that the fact that the workers employed in the factory were using the canteen building was no reason for treating the canteen building as a factory building for allowing the higher rate of depreciation. According to the AAC, the principle behind the rule which allowed a higher rate of depreciation to factory buildings was that by reason of the nature of the work being carried on therein, it was susceptible to extra wear and tear. On that principle, according to the AAC, a canteen building can, by no means, be regarded as a factory building. In this view, he confirmed the disallowance made by the ITO. On further appeal by the assessee to the Tribunal, the assessee put forward two contentions. One was that the canteen building must be regarded as an inextricable part of the factory premises and, hence, on this ground alone, the canteen building must be given the same extra depreciation allowance as a factory proper. The other ground was that even if canteen attached to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of the present discussion. With reference to these three classes of buildings, the depreciation allowance prescribed in Appx. I is, 2.5 per cent., 5 per cent. and 7.5 per cent., respectively, of their written down value. There is a remarks column superadded to the table of rates. The remarks as against the first, second and third class buildings are : " Double these rates will be taken for factory buildings excluding offices, godowns, officers' and employees' quarters ". As earlier observed, the expression " factory buildings " has not been defined by the Rules relating to depreciation set out in the Appendix. Learned counsel for the revenue submitted that the expression " factory buildings " must be held to refer to factory buildings par excellence, and the conception behind this expression cannot be extended to cover structures where no manufacturing process is carried on. Referring to the exclusory clause under which offices, godowns and officers' and employees' quarters stand excluded under the remarks column, learned counsel stated that this clause must be regarded as clarificatory rather than as taking out certain specified or named classes of buildings which, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufacture is carried on, although, in normal parlance, we do not refer to the process of cooking as a process of manufacture. But, whatever expression we might employ to describe the culinary process, there is no doubt whatever that the use of fuel and other forms of energy in that part of the canteen, would have the same damaging effect on the life of the building as regular manufacturing process would by the use of plant or machinery in cases where modern mechanical processes are adopted in a kitchen or canteen for the purpose of cooking meals and making other preparations, the analogy of a manufacturing process would be more apparent. These considerations definitely point to the conclusion that a canteen building is, in the proper sense of the term, a factory building for the purpose of depreciation allowance. We are, therefore, in entire agreement with the Tribunal's conclusion that the assessee's canteen building is entitled to depreciation at the rate of 10 per cant. by doubling the rate of 5 per cent. to which ordinary, non-factory second class buildings, are entitled. During the course of arguments at the bar, there was citation by both sides to decided cases. We ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Act, 1937. Section 151(1) of that Act defined a " factory " as meaning any premises in which persons are employed in manual labour in any process incidental to any of the purposes, namely, making of any article or part of any article, the altering, repairing, ornamenting, cleaning, washing or breaking up or demolishing of any article. The definition laid down the stipulation that the premises must be a place in which the work is carried on by way of trade or for purposes of gain. The matter came up before the Court of Appeal. MacKinnon L.J., who delivered the judgment of the court, was inclined to regard a kitchen, functionally as answering the description of a place where an article or part of an article is made or altered and/or where the process of cleaning or washing is performed. The learned Lord justice, however, held that it cannot be regarded as a factory. The reason which the learned judge gave for his conclusion was that holding the kitchen in a hospital to be a factory would be to bring in all the provisions of the Factories Act, 1937, for relentless application to the said building. According to the learned judge, holding a hospital kitchen to be a factory would lead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the expression " factory building ". It may further be observed that the objective behind our factories' legislation was to consolidate and amend the law " regulating labour in factories ". Having regard to this object, the expression " factory " was given a fairly wide connotation, in the case decided by the Supreme Court. It is not appropriate to apply the decisions of courts interpreting and applying the term occurring in the Factories Act as aids to the construction of " factory building" occurring in the depreciation provisions relating to income-tax. We, therefore, do not find any assistance from decisions rendered under that Act, such for instance as New Taj Mahal Cafe Ltd. v. Inspector of Factories [1956] 9 FJR 117; AIR 1956 Mad 600, which was one of the cases cited before us in the course of the hearing. Some decisions having to do with the relevant depreciation rule under the I.T. Rules, 1962, were also cited at the hearing. Three of them, viz. CIT v. Colour-Chem Ltd. [1977] 106 ITR 323 (Bom), CIT v. Lucas-T.V.S. (No. 2) [1977] 110 ITR 346 (Mad) and Hukamchand Mills Ltd. v. CIT [1978] 114 ITR 870 (Bom) may be dealt with together, for they raise more or less a common q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts and drainage inside an aluminium manufacturing factory. The dispute in that case between the taxpayer and the department was not whether those structures should be regarded as part of the factory building, but whether they were buildings at all. The Calcutta High Court had no hesitation in holding that they were buildings. This decision, it may be observed, does not really throw light on the question which we have decided in the present case. One other case which was cited at the hearing was that of the Kerala High Court in CIT v. Casino (P.) Ltd. [1973] 91 ITR 289 (Ker). That was a case where the assessee was the owner of a hotel, but the question which the Kerala High Court had to decide did not pertain to the application of the appropriate rate of depreciation to the building in question. The learned judges had to decide whether the activity carried on by the assessee in the preparation of articles of food in their hotel would constitute " manufacturing or processing of goods " within the meaning of s. 2(6)(d) of the Finance Act, 1968. This case also is not a direct decision on the question of depreciation allowances. For the reasons which we have earlier set out in this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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