TMI Blog2011 (7) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... business or profession'. Thus the definition is an inclusive one and it is not exhaustive - In the case of Assessee Corporation the warehouse is the apparatus with which carries of its business. The warehouse is not simply is not a place or premises where business is carried on. It is a tool or instrument with which the business is carried, therefore it is rightly claimed to be the plant eligible for depreciation at the rates applicable to the plant - in favour of assessee. Depreciation on wooden crates - @ 100% OR 25% - Held that:- As decided in CIT v. Madurai Soft Drinks (P.) Ltd. [2004 (10) TMI 58 - MADRAS HIGH COURT] that 'crates and bottles were entitled for depreciation at the rate of 100 per cent' - The bottles and shells also satisfied the durability test because it was nobody's case that their life was so transitory or negligible as to warrant an interference that they had no function to play in the assessee's trade, therefore to be taken as 'plant' for the purpose of the Act and the assessee is entitled to depreciation in respect of them under section 32(1)(ii) - in favour of assessee. - IT APPEAL NO. 651 (HYD.) OF 2007 - - - Dated:- 22-7-2011 - G.C. GUPTA, CHANDRA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years 1997-98 to 1986-87, found that the assessee is entitled for exemption under section 10(29) only in respect of the income attributable to letting out of warehouses. The supervision charges received by the assessee were found to be not eligible for exemption under section 10(29). Therefore, the objection of the Revenue that the claim was made against the income exempted under section 10(29) may not be correct. 5. The issue that now arises for consideration is, when FCI deducted the transit loss from the payments relatable to storage charges despite the objections raised by the assessee, can it be said that the assessee has received the amount? No doubt the material available on record indicates that the transit loss has to be borne by FCI. The assessee also, from the very beginning, objected to the transit loss claimed by FCI. It was also clarified at one point of time that transit loss has to be claimed separately by way of separate bill and it cannot be deducted from the storage charges. In spite of all this, the transit loss was deducted from the storage charges. Therefore, in our opinion, the amount relatable to transit loss which was actually deducted may not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee corporation has submitted that the warehouses and godowns were tools and apparatus used to carry out the business of storage of commodities which is the main business of the assessee and therefore, they have been classified as plant and machinery eligible for depreciation at the rate of 25 per cent. The assessee in this regard has placed reliance on the decision of Hon'ble Supreme Court in the case of CIT v. Karnataka Power Corpn. [2001] 247 ITR 268/[2000] 112 Taxman 629. However, the Assessing Officer did not accept the contention stating that warehouses and godowns fall in the block of buildings as per Appendix - I of IT Rules, 1962 entitled for depreciation at 10 per cent. Similarly as regards wooden crates, the assessee's claim of 100 per cent was not accepted on the ground that the same fall under the category of plant and machinery entitled for depreciation at 25 per cent. The Assessing Officer also observed that the assessee's reply was silent with regard to depreciation on bore well and electrical installations and according the Assessing Officer presumed that the assessee had no objection to restrict the claim to 10 per cent and 15 per cent respectively. With t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are provided for undertaking spraying. Moisture is one of the most essential and important factors affecting food grains during storage. Excess moisture leads to sprouting, fermenting, insect and microbial attack. So as to assess the moisture content of stocks from time to time one moisture meter is installed for 10000 MT capacity. For curative treatment of stocks fumigation LDPE Polythene Covers of sizes of 32' 21 17' with guage of 1000 micros and weight of 52 kgs. Are used for 10000 MTs capacity. Sand snakes made of HDPE or Jute sacks with a length of 40" with dia of 7" filled with sand are used in cover fumigations for the purpose of air tightness. Enamel plates are used for analysis of samples during inspections. Sieve set is provided for classification of stocks based on levels of infestation during inspection. A Thermo Meter is provided to monitor the ambient temperature for the purpose of fumigation. The corporation owns several warehouses provided with these facilities. 7.4 He further submitted thus a tool or apparatus used by the assessee corporation to carry on its business. It is plant in its hands. The word 'plant' is defined in section 43(3) to 'include ships, vehic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 Taxman 792 (Delhi) 7.6 Further, he drew our attention to the following judgments in the case of CIT v. Amol Dicalite Ltd. [2006] 286 ITR 648 (Guj.) the Ore Shed in the case of a manufacture of filter aids was held to be 'plant'. It was held that the Ore Shed perform the function of a plant and was integral part of it. The observations of the Court in this case are extracted below: "As far as the second question is concerned, this court finds from the facts adduced by the assessee, held that the ore shed performs functions of the 'plant' and is an integral part of it. On appreciation of evidence adduced, the CIT(A) has held that without this ore shed including ore hopper with foundation and feed steel type tank, it will not be possible to feed the material in the plant for further process. The finding recorded by the CIT(A) is that the trucks carrying raw material are emptied on a special platform in the ore shed which is equipped with built in machinery to transfer this material to the plant for further process and therefore, the ore shed should be treated as part of the plant. These findings have been upheld by the Appellate Tribunal which is quite evident from the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer as to whether the scaffolding materials had been really leased out or had been sold. It was nobody's case before any of the authorities that there was any disguised sale of scaffolding materials. The only dispute before the authorities was the rate of depreciation that is as to whether it was 33A per cent or hundred per cent. The Tribunal had not even put the assessee on notice about the above observation at the time of hearing and no opportunity was given to the assessee about the point raised suo motu by the Tribunal. Each of scaffolding materials would constitute 'plant' as defined in section 43(3). The definition of the word 'plant' in section 43(3) is inclusive and not exhaustive and it has to be given a wider meaning. Thus, by treating the transactions as a lease the scaffolding materials were entitled to hundred per cent depreciation." 7.8 The Madhya Pradesh High Court in the case of Babulal Agrawal v. CIT [2005] 272 ITR 454/144 Taxman 621 the observations of the Court in this case are extracted below: "on a careful perusal of the same, we are of the considered view that it is the functional test which becomes the real criteria for treating a particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible to the depreciation at higher rates. The contention of the assessee are that the prawn ponds are tools of the business of the assessee, therefore, they constitute plant, in its hands are accepted". 7.11 In the case of Studio building was considered by Kerala High Court in the case of CIT v. Navodaya [2004] 271 ITR 173/135 Taxman 258 wherein it was held that: "The word 'plant' has been given an inclusive meaning in section 43 of the Income-tax Act, 1961. In order to find out whether a building is a plant or not the following tests would be decisive: (1) functional test is a decisive test (2) an item which falls within the category of building cannot be considered to be a plant. Buildings with particular specification for atmospheric control like moisture or temperature are not plants (3) in order to find out as to whether a particular item is a plant or not, the meaning which is available in the popular sense i.e. the meaning people conversant with the subject matter would attribute to it, has to be taken (4) the term 'plant' would include any article or object, fixed or movable, live or dead, used by a businessman for carrying on his business and it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Tribunal had specifically found that the building was used only for manufacturing and supplying medicine and no other business. It was nothing but a plant. It constituted an apparatus and a tool for the assessee by means of which business activities were being carried out. Hence, the assessee was entitled to depreciation at a higher rate. 7.13 In the case of Assessee Corporation the warehouse is the apparatus with which carries of its business. The warehouse is not simply is not a place or premises where business is carried on. It is a tool or instrument with which the business is carried, therefore it is rightly claimed to be the plant eligible for depreciation at the rates applicable to the plant. 7.14 He submitted that the electrical installations were also held to be a plant in the case of Indian Turpentine Rosin Co. Ltd. (supra), CIT v. Jagadeeshchandran Co. (supra), CIT v. Tea Estates India Ltd. [1994] 207 ITR 311/77 Taxman 394 (Cal.) and CIT v. Hoechst Dyes Chemicals (P.) Ltd. [1999] 240 ITR 1/106 Taxman 684 (Bom.). 8. The next ground is with regard of allowability of depreciation on bore-wells and electrical installations at the rate of 25 per cent as they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired. On occasions, a building may be designed and constructed to suit the requirement of the particular industry, trade or business. But that would not make such building as 'plant'. It only shelters running of such business. For each and every business, trade or industry, a building is required to carry on such activity. That means, the building place, some role and in other words, its function is to shelter the business but it has no other function except in some rare cases. If the contention of the assessee is accepted, virtually all such building would be considered to be a plant and distinction with the Legislature has made between the building and machinery or plant would be obliterated." 12. Further, it would be difficult to draw a line between a building which is specifically constructed for the aforesaid purposes and building which are used for the aforesaid purposes by converting any other premises for such purposes. Depreciation as a general principle represents the diminution in value of a capital asset when applied to the purpose of making profit and gain. The object is to get a true picture of the real income of the business. Hence, it can be inferred that the Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment rebate in respect of the warehouses on the ground that they constituted its 'plant'. It was observed by the Hon'ble' Court that in order to find out if a building or structure or part thereof constitutes 'plant' the functional test must be applied. It must be seen whether the subject matter involved, that is, the building or structure or part thereof, constitutes an apparatus or a tool of the taxpayer or whether it is merely a space where the taxpayer carries on his business. If the building or structure or part thereof is something by means of which the business activities are carried on, it would amount to a plant but where the structure plays no part in the carrying on of those activities but merely constitutes a place within which they are carried on it cannot be regarded as a plant. 15. Finally, it was held that on the facts, it could not be said that the warehouses were something by means of which the assessee's business activity was carried on. They did not play any part whatsoever in the carrying on of its business activity, but merely provided a place within which the business activity was carried on. Hence, the warehouse of the assessee did not fall within the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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