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TMI Blog2017 (2) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... cent. depreciation), but it should be treated as a "building" attracting the lower rate of depreciation (10 per cent.). 3. The appeals were admitted on the following substantial questions of law : (i) Whether on facts and in the circumstances, the Tribunal was justified in holding that there was justifiable material/reasons to issue notice under section 148 of the Income-tax Act, 1961 for reopening of the assessment for the years 2004-05 ? (ii) Whether the Tribunal was justified on facts and in the circumstances of the case to hold that "Gotanagar Truck Terminus" is not a "plant" but a "building" for the purpose of claiming depreciation under section 32 read with section 43 of the Income-tax Act, 1961 and, therefore, the assessee was entitled to claim depreciation at the rate of 10 per cent applicable to "buildings" and not at the rate of 25 per cent., as prescribed for "plant" ? 4. The assessee is a local authority and acts as a nodal agency for the State Government for various developmental activities in Guwahati. They filed their return of income for the concerned assessment years and declared their total income. For the truck terminus, they claimed depreciation at 25 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial as it depends on the nature of the business. He also observed that the Income-tax Act has outlined how much depreciation allowance can be claimed, in respect of the assets used for the purpose of business and that the word plant will not include a truck terminus for the Income-tax Act. Thus it was held that depreciation allowance for the truck terminus should be taken at the lesser rate, applicable for buildings. 8. The aggrieved assessee approached the Commissioner of Income-tax (Appeals) but the appellate authority observed that the Assessing Officer bona fide believed that excessive depreciation was claimed and thus income chargeable to tax has escaped assessment. He also observed that the entire super structure consisting of truck parking yards, RCC ramps for washing trucks, dormitories for truck drivers, toilets, ticket counters, etc. are permanent structures without having any plant or machinery forming a pre-dominant part of such structure. Moreover, the income earned from collection of parking fee is not through any industrial process. Thus it was concluded that the facilities in the truck terminus were specially built but functional test would be unreasonable and unju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit and gain chargeable to tax has escaped assessment in view of Explanation 2(b) to section 147 of the Act . . . 14. Ground No. 3 in both the appeals relate to as to whether Gotangar Truck Terminus is to be considered as plant or not. The said truck terminus consists of RCC ramp for washing trucks, dormitory for truck drivers, lavatories, ticket counters and office rooms. The assessee earned income by allowing the open space to be used for parking of the trucks. The RCC ramps used for washing of trucks, dormitories to accommodate the truck drivers, lavatories, ticket counters and office rooms are complementing the main object to allow open space to be used for parking. The entire super structure is constructed on open land of 27 bighas. Building has been defined in the Act; therefore, one has to go to the meaning of building as per ordinary grammatical sense. Building is now generally used, a fabric of edifice, framed or constructed, deigned to stand more or less permanently, and covering a space of land, for use as dwelling, store house, factory, shelter for beasts or some other useful purposes. 15. As per the assessee, the assessee is entitled for depreciation on the Gota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is earned from the truckter minus for which parking fee is collected and therefore the tangible asset from which earning is made is the parking facility provided to the truck drivers and therefore such income cannot be construed to be earnings generated by the toilets and resting facility provided to the truck drivers. Therefore the assessee contends that the higher rate of depreciation applicable for plant should be allowed for them. 10.5 The learned counsel submits that for the purpose of depreciation under section 32(1), four categories of tangible assets are indicated and building and plant are separately shown in this section and therefore Mr. Borthakur argues that since income is derived from parking fee in the truck terminus and not from the sleeping quarters and the toilets provided for the truck drivers, the higher rate of depreciation for plant is attracted and the conclusion made to the contrary in the reassessment proceeding, is incorrect. 10.6 On the other hand, Mr. S Sarma, the learned standing counsel for the Income-tax Department submits that initiation of reassessment proceeding was made after due consideration of the relevant materials and it is not a case of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed in various decisions of various High Courts as well as of the apex court. The apex court in Sheo Nath Singh v. Appellate Assistant CIT (Central) [1971] 82 ITR 147 (SC), has observed that the words 'reason to believe' suggest that the belief must be that of an honest and reasonable person, based upon reasonable grounds and though the Assessing Officer may act on direct or substantial evidence but he cannot act on mere suspicion, gossip or rumour. It has further been observed that the Assessing Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The apex court has further opined that the court can always examine this aspect, though the declaration or sufficiency of the 'reason to believe' cannot be investigated by the court. The apex court in Lakhmani Mewal Das [1976] 103 ITR 437 (SC) has observed that the grounds or reasons which lead to the formation of belief contemplated by section 147 of the Act must have a material bearing on the question of escapement of income of the assessee from assessment. Once there exist r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken away and the expression reason to believe was reintroduced in section 147. Therefore the apex court opined that the power to reopen assessment can be exercised only when there is tangible material for the Assessing Officer to believe that, income has escaped assessment. 15. Since we are concerned here on whether the income earned from the truck terminus is from a building or plant, we may gainfully refer to the ratio of CIT v. Karnataka Power Corporation reported in [2001] 247 ITR 268 (SC). Here the Supreme Court analysed the earlier decision in Anand Theatre (supra) which was cited by the counsel for the Revenue. In that context, the later judgment noted that the question in Anand Theatre (supra) was for building that was used as hotel or cinema theatre and the rate of allowable depreciation. In this backdrop, the Supreme Court concluded that the structures which are used as hotel or cinema theatre, cannot be given depreciation on the basis that it was a plant. The court found that the building under consideration in Anand Theatre (supra) were the very structure that shelters running of such business and therefore the court held that such income for the purpose of depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is trading with godowns, structure is a temporary measure, it is like a platform as is apparent, the duration is short and the purpose is different. If one goes by the conception of functional test and the activity involved, there can be no scintilla of doubt that the use of the open plinth godowns are not buildings but are plant and therefore the assessee is entitled to depreciation on the basis that they are to be treated as plants and not buildings. The analysis of the Tribunal that the platforms come under the definition of 'building' under the rules is not correct because the Tribunal has really not appreciated the essential and fundamental activity of these platform, the nature of agreement and the factual foundation. If the contract and the activity are understood in proper perspective, there can be no iota of doubt that the assessee is dealing in business with this kind of platform, but not letting them as buildings. It may apparently so appear but on deeper probe and closer scrutiny, something a different picture gets frescoed from where it becomes clear that it is utilised for the business purposes." 19. In the present case, when we examine the order recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x liability of the assessee is dependent on this very issue, the contention raised by the learned counsel for the Revenue that this question cannot be examined by us in this proceeding under section 260A of the Income-tax Act is rejected. The ratio in National Thermal Power Co. Ltd. v. CIT reported in [1998] 229 ITR 383 (SC) supports our decision. 21. That apart, the High Court cannot only answer the substantial question of law already formulated at the time of admission of the appeals but can also determine other substantial questions, which arise out of the proceeding and therefore, the legality of the reassessment proceeding and the validity of the reassessment order under section 147 of the Income-tax Act are issues, which the High Court can definitely answer in a proceeding under section 260A of the Income-tax Act. 22. Following the above analysis and conclusion, the substantial questions of law are answered in favour of the assessee and we further declare that the Gotanagar truck terminus is a plant and not building, for the purpose of claiming depreciation under section 32 read with section 43 of the Income-tax Act. Consequently the assessee is held entitled to depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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