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TMI Blog1992 (12) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative for the appellants, Shri C.V. Khandelwal at great length. He has stressed upon the point to treat and accept the building as plant in which the machines and pipelines are installed for smooth carrying out the business of grinding wheat, chana dal etc. Shri Khandelwal's main argument is that without the help of the building no such work as undertaken by the appellants to manufacture aata, maida and besan by grinding them on the machines fitted with the pipelines cannot be carried out. Therefore he has urged that the same may be treated as plant for allowing depreciation and investment allowance on them. In the ordinary course the depreciation is allowable on the buildings but the investment allowance is not allowable unless the buildings are accepted as plants. 3. The learned departmental representative, Shri Gautam Kar also advanced considerable arguments at great length. His contentions are that there is no doubt that the machines and pipelines installed in the building are of the nature of the plant but according to him the building in which such machines and pipelines are installed neither can be treated as plant nor such contention is acceptable. Therefore he has st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10,00,000 or below than that. Today the limit of investment has gone more than Rs. 50,00,000. Therefore what was small scale industry at the time of making assessment cannot hold good at the time of hearing these appeals. 6. It was also submitted before the Assessing Officer that the factory buildings were especially categorised in the schedule of depreciation in the Income-tax Rules, 1962. The copies of the building plans were exactly normal plan's of a factory building. What is factory building is nothing more than erecting walls from four sides from ground floor to the top floor. In the construction of the building h aving walls from four sides is definitely the normal building. There is no doubt that there are roofs and concrete pillars partitioning floors and halls. The entire floor space on each floor was being utilised for installation of machinery and pipelines. Another point which worked in the mind of the Assessing Officer was that the appellant's claim of depreciation allowance under the head "furniture and fittings". How the appellants have claimed depreciation allowance is not a material point. The material point is whether the claim made by them was proper or not. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay High Court in the case of CIT v. Tata Hydro Electric Power Supply Co. Ltd. [1980] 122 ITR 288. According to him strengthening of the Dam resulted in a new plant installed in terms of the provisions of section 33 of the Income-tax Act, 1961. According to him the facts of the case were different from the facts of the appellants' case. He has further held that the construction of the cold storage plant was an essential part of the machinery as held by the Delhi High Court in the case of CIT v. Pure Ice Cream Co. [1981] 129 ITR 394. Again he arrived to a conclusion that factory building of the appellants was not an integral part of plant and machinery and that it is only a setting in which the manufacturing process is carried out by the assessee's company. 8. While distinguishing the decisions cited on behalf of the appellants' company the CIT (Appeals) has relied on the decision of the Bombay High Court in the case of CIT v. Sandvik Asia Ltd. [1983] 144 ITR 585. He has considered whether it can be determined that the business carried on by the appellants in the building can be treated as apparatus for carrying on the business. The functioning test was applied in that case by agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith gravitational force to destoner which removes any other small stones, if any, from the raw material. Thereafter, the cleaned raw material comes to the second floor by gravitational force and feeded to cookie cylinder which removes round sized impurities from the wheat, chana. Then the material is again brought back to first floor for feeding to a machine where the material is stored and then again sent to the first floor. The material is again brought down to second floor for washing in the washer wizzer machine. 10. The said washed out wheat or chana dal is again taken up to the 4th floor with the help of elevators and stored in silos. The goods are stored for 24 hours in the silos and the said process is called as conditioning and after conditioning the material is removed from silos and fed to the roller machine to first floor. Grinding of wheat into small sized pieces is done in the roller machine and then the material goes on ground floor with the help of said elevators and then sent to second floor. At this stage the raw material is grinded. This grinded raw material is taken to the second floor and supplied to plant shiftors which separate husk and other materials from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of 12 to 24 hours in the silos which are special vertical concrete structures in conical shape. The chana is taken to pulverising process from silos. The rollers are installed on the ground floor. The flow of goods to silos is done with the help of pipes, some water is also added to the grams after the pulverising process is over to soak the material and to loose covers of grams. Thereafter this material is carried away to the top floor for drying purposes on the platform with the help of sun's heat. This soaked materials are dried atleast for 5 to 6 hours. Thereafter the goods are brought down with the help of pipes to the ground floor and supplied to splitters for splittings (de-husking) purposes. Then goods are brought down with the help of gravitational force without any help of power. After completion of the de-husking process the material is again taken to the fourth floor, and given to centrifugal machine for removing powder from the de-husked material. Then the material is passed on to the third floor in separator machine for removing dust. From here with the help of the gravitational force the husk is sent to ground floor for packing. This process does not require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this contention he has relied on the decision of the Supreme Court in the case of Scientific Engg. House (P.) Ltd. v. CIT [1986] 157 ITR 86. While advancing arguments to apply a functional test to treat the factory building as a plant he took us through the provisions of section 32A for granting investment allowance relying on the decision of the Allahabad High Court in the case of S.K. Tulsi Sons v. CIT [1991] 187 ITR 685 and also in the case of Tulsi Theatre v. CIT [1991] 190 ITR 575 wherein it is held that the building constructed has been used as cinema theatre alongwith its fittings and fixures and the cinema building constituted 'plant' and the same was therefore entitled to depreciation and development rebate. In the case of Tulsi Theatre the Allahabad High Court held that the assessee was entitled to depreciation at 10 per cent on it. He has also cited the third decision of the Allahabad High Court in the case of Leela Movies v. CIT [1991] 191 ITR 113 wherein the Allahabad High Court has held that the cinema building constituted 'plant' within the meaning of section 43(3) of the Income-tax Act, 1961 and depreciation could be claimed at 10 per cent in respect of such cinem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building is not disputed. A specialised planning of the building to put the entire fixing of the pipelines on the walls of the building is also not disputed. He has contended that the technical expert's opinion should be objective to help the process of functioning. According to Shri Gautam Kar the use of the entire factory building for the purpose of working of the business is not an exclusive proof. He urged to interpret the entire functioning by applying the functional test objectively. He urged that specialised construction of the building is not proved and it is a general argument. He has contended that various decisions cited on behalf of the appellants are distinguishable on facts. According to him the decision of the Bombay High Court in the case of Sandvik Asia Ltd. is binding and the same should be followed. He has contended that the decisions cited above by the appellants are contrary to the meaning of plant as contemplated under section 43(3) of the Act. Mere is no doubt that the plant includes scientific apparatus and surgical equipments used for purposes of business or profession. He has urged that in the case of Mazagaon Dock Ltd. by reading the last paragraph on pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition on Income-tax and relied on the said commentary wherein it is commented that how the factory building becomes the integral part of the plant and machinery. Lastly he has relied on the decision of the Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 on the point that if two sets of decisions are available in respect of the dispute on the same point then the set of decisions favourable to the assessee should be followed. 19. After examining the facts and circumstances and particularly the explanation furnished regarding the actual working of the machinery and pipelines installed in the factory building completely on the four walls of the building itself cannot be treated separately as a building only though the machinery and pipelines installed in it. Without the support of the walls neither the machinery nor the pipelines can be put to actual working for manufacturing of aata, maida, rava, soji, besan etc. Therefore from the explanation furnished on behalf of the appellants and by applying the functional test held in the above quoted certain decisions, there is no alternative except to come to a conclusion that the factory building is not the bui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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