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TMI Blog2003 (4) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... movable property. 4.. The assessee preferred an appeal before the Deputy Commissioner (Appeals), Bikaner. On appeal, the appellate authority waived the penalty holding that the assessee being a co-operative society had no personal interest, and therefore, there being no mala fide intention, is not liable to be penalised by putting penalty. The liability of tax was however, maintained. 5.. A second appeal was preferred before the Rajasthan Tax Board, Ajmer. By the order impugned, the Tax Board has held that the plant and machinery imbedded to earth are covered by the connotation "immovable property" and therefore, they are not liable to be taxed. 6.. Aggrieved by the judgment of the Rajasthan Tax Board, the assessing officer has preferred the present revision petition. It has been contended on behalf of the assessing officer that the plant and machinery used for ginning and pressing cotton, cannot be treated as immovable property. They are not imbedded in earth in such a fashion so as to give them a character of immovable property. The General Clauses Act, 1897 (Central) hereinafter referred to as ("the General Clauses Act") defines "immovable property" to be one which includes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to use engine, it has to be attached to the earth and the attachment lasts only so long as the engine is used. While not in use, it can be detached and shifted to some other place. The inference which is sought to be drawn from above is that no case is made out to make the engine part of the land as immovable property and therefore, it cannot be treated to be immovable property. 10.. The petitioner has further defined that when there is immovable property from physical point of view, every benefit arising out of it and every interest in such property is also regarded as immovable property. The Registration Act expressly includes immovable property, benefits to arise out of land, hereditary allowances, rights of ways, lights, ferries and fisheries. A debt secured by a mortgage of immovable property is an interest in land and is, therefore, regarded as immovable property. The petitioner has illustrated his stand by saying that right to collect lac from jungle, flash from pond, right to take minerals, rent from "hat" or market place or house are various illustrations of benefits arising out of land. 11.. According to the petitioner, the present section defines the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Board is not correct. The assessee was liable to be taxed. 16.. Taxing of building, plant and machinery as defined in terms of clause 3, Notification No. S.No. 816: F.4(24)FD/Gr. IV/9044 dated June 27, 1990 is as under: "3(a) The transfer of the right to use plant and machinery (b) The transfer of the right to use equipment including office equipment, computers, instruments or appliances." 17.. Learned counsel for the petitioner has placed reliance on the division Bench of this Court reported in AIR 1965 Raj 15 (Lokashan Jain Udyog Mandir Ltd. v. Kalooram) wherein it has been held thus: "…………that considering the terms of the tenancy between the plaintiff and the third party, there could be no question of the machinery in the case being permanently fastened to anything which is attached to the earth. Further, the machinery was not fixed by the plaintiff for any such object as the permanent beneficial enjoyment of the building in which the press was located and therefore it did not fulfil the essential requirements of the clause 'attached to the earth' in section 3, the Transfer of Property Act. Therefore the machinery in this case did not fall w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding is situate. Therefore, the boiler engine and decorticator which are fixed and embedded in the factory building for the beneficial use of the building as a factory, are immovable property in addition to the land and the building." 21.. This case also is of no consequence. On the contrary, it supports the case of the respondent and also supports the reasoning of the Tax Board. 22.. Learned counsel for the petitioner has further relied on a Supreme Court decision in the case of Duncans Industries Ltd. v. State of U.P. reported in AIR 2000 SC 355; (1999) 9 JT 421 (SC); (2000) 1 SCC 633, wherein, it has been held as under: "The question whether a machinery which is embedded in the earth is movable property or an immovable property, depends upon the facts and circumstances of each case. Primarily, the court will have to take into consideration the intention of the parties when it decided to embed the machinery, whether such embedment was intended to be temporary or permanent. A careful perusal of the agreement of sale and the conveyance deed along with the attendant circumstances and taking into consideration the nature of machineries involved clearly shows that the machiner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter. English law relating to fixtures cannot be bodily applied to conditions in this country. Broadly speaking, the degree, manner extent and strength of attachment of the chattel to the earth or building, are the main features to be regarded. All the three aspects, in the description, show that the attachment should be such as to partake of the character of the attachment of the trees or shrubs rooted to the earth, or walls or buildings imbedded in that sense, the further test is whether, such an attachment is for the permanent beneficial enjoyment of the immovable property to which it is attached. For a chattel to become part of immovable property and to be regarded as such property, it must become attached to the immovable property as permanently as a building or a tree is attached to the earth. If, in the nature of things, the property is a movable property and for its beneficial use or enjoyment, it is necessary to imbed it or fix it on earth, though permanently, that is, when it is in use, it should not be regarded as immovable property for that reason." 26.. From the reading of the ruling of the Madras High Court, what has to be understood is the dominant intention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aler whose turnover in the previous year in respect of sales or supplies of goods exceeds…………" "Section 2(s). 'Taxable turnover' means that part of turnover which remains after deducting therefrom the aggregate amount of proceeds of sale of goods: (i) on which no tax is leviable under this Act, (ii) which have already been subjected to tax under this Act…… " "Section 2(o). 'Sale' with all its grammatical variations and cognate expressions, means every transfer of property in goods (other than by way of mortgage, hypothecation, charge or pledge) by one person to another for cash, or deferred payment or other valuable consideration and includes (i) a transfer, otherwise than in pursuance of a contract, of property in goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (iii) a delivery of goods on hire-purchase or other system of payment by instalments; (iv) a transfer of the right to use goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board of Revenue (Taxes), Ernakulam v. Bobby Rubber Industries] wherein it has been held thus: "……….dismissing the petition, that only movable property is comprehended within the definition of 'goods'. The hydraulic press, the use of which was allowed to various customers was part and parcel of the plant and machinery installed by the respondent in its premises. There was no agreement or understanding between the parties that before the grant of permission to use the hydraulic press by various customers it was to be served from the earth. In such circumstances, it could not be held that the hydraulic press was movable property falling within the definition of 'goods' and, therefore, the rent received for the use of the hydraulic press by various customers could not be subjected to tax under the Act. Moreover, by allowing the use of the hydraulic press installed in the premises of the respondent by various customers on machine-hour basis it could not be said that there was a transfer of the right to use the hydraulic press by the respondent to various customers so as to attract the provisions of Explanation (3B) to section 2(xxi) of the Act. It was at best a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the earth for the purpose of beneficial enjoyment of the studio which is an immoveable property and not for the beneficial enjoyment of those instruments. The instruments are essential fixtures of studios. Therefore, the hiring of studios for the purpose of recording songs, background music and dubbing of sound did not amount to transfer of right to use any movable property and hence such transactions did not fall within the definition of 'sale' as contained in clause (10) of section 2 of the Act." 35.. According to the answering respondents, earlier, a Tax Tribunal was functioning in the State and the Tribunal had held in a case of non-petitioner-assessee vide its judgment dated July 4, 1996 that factory, building and machinery embedded into earth cannot be taxed. That judgment has attained finality. 36.. I have given my thoughtful consideration and perused the record. The incidence of tax has been sought to be related to the plant and machinery in question vide notification dated June 27, 1990 referred to hereinabove. In this notification what is contained in clause 3(a) is that what is taxable in transfer of right to use plant and machinery. The taxability of plant and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e understood. The plant and machinery of a factory does not generally move, unless the factory becomes obsolete or becomes such that it is not possible for the owner to make use of it or he becomes incapable of running the factory. Such contingency do not arise every day. Such are the contingencies which occur not only occasionally but in rare circumstances. Thus, it is not a situation where such contingencies can be said to be available for askance. 39.. Removal of a plant and machinery from earth is a very tough decision which the owner of such plant has to take and that being the position, the point canvassed by the Revenue that since the plant and machinery can be removed after use, therefore, it should be treated to be movable property does not stand to reason. 40.. In the instant case, it is not the plant and machinery alone. The land too was leased out to the lessee. The question which has to be considered at this point is that without the land, was it possible to use the plant and machinery? The answer cannot be in the positive. Because for making use of plant and machinery, the land has to be there and unless, plant and machinery is imbedded to the land, the use of plant ..... 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