TMI Blog2004 (4) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... 961 (for short "the Act of 1961"), whereby the Income-tax Appellate Tribunal (for brevity "the Tribunal"), has referred the following question for answer by this court: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in allowing depreciation on the plinth platforms at the rate prescribed for the 'building' and not treating them as 'plant'?" To understand the factual scenario, it is necessitous to state certain facts. The assessee had filed a return showing loss of Rs. 7,66,455. A notice under section 143(2) of the Act of 1961 was served on him. It is pertinent to state here that the assessee had filed a return in the status of an association of persons consisting of 15 members. The source of income was indicated as rent received from the Food Corporation of India on hire of open plinth godowns for storage of foodgrains. The assessee had claimed depreciation of Rs. 10, Rs. 89 and Rs. 996 on the open plinth structure of godowns. The Assessing Officer required the assessee to inform how monthly income from leased godowns was considered as business income and why it should not be treated as income from house property. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not used mainly for residential purposes." Thereafter an application was filed and the Tribunal, as has been indicated hereinabove, referred the aforesaid question. We have heard Mr. Sumit Nema, learned counsel for the assessee, and Mr. Rohit Arya, learned senior counsel for the respondent-Revenue. The singular issue that arises for consideration is whether the income from open plinth godowns for storage of foodgrains would be treated as business income or income from house property. In this regard, we may note that the assessee had entered into an agreement with the Food Corporation of India whereby the structure area, namely, open plinth godowns, were given. The activity undertaken was also highlighted before the authorities below. It is submitted by Shri Nema, learned counsel for the assessee, that the activity was not for letting out a property but it was activity in the nature of adventure, therefore, it was assessed under the head of "Income from business". It is noticeable that in the agreement entered into between the assessee and the Food Corporation of India, the assessee had offered certain facilities which were incorporated in the tender. On a perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry fittings and pipe lines installed in the hotel constituted plant within the meaning of section 10(5) of the Act of 1922. In that context, their Lordships held as under: "Now it is well-settled that where the definition of a word has not been given, it must be construed in its popular sense if it is a word of every day use. Popular sense means 'that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it'. In the present case, section 10(5) enlarges the definition of the word 'plant' by including in it the words which have already been mentioned before. The very fact that even books have been included shows that the meaning intended to be given to 'plant' is wide. The word 'includes' is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. When it is so used, these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import, but also those things which the interpretation clause declares that they shall include. The word 'include' is also susceptible of other constructions which it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of it claimed development rebate and the question was whether the sanitary and pipeline fittings installed fell within the definition of plant given in section 10(5) of the 1922 Act which was similar to the definition given in section 43(3) of the 1961 Act and this court after approving the definition of plant given by Lindley L.J. in Yarmouth v. France [1887] 19 QBD 647, as expounded in Jarrold v. John Good and Sons Ltd. [1962] 40 TC 681 (CA), held that sanitary and pipeline fittings fell within the definition of plant. In IRC v. Barclay, Curie and Co. Ltd. [1970] 76 ITR 62 (HL), the House of Lords held that a dry dock, since it fulfilled the function of a plant, must be held to be a plant. Lord Reid considered the part which a dry dock played in the assessee-company's operations and observed: 'It seems to me that every part of this dry dock plays an essential part .... The whole dock is, I think, the means by which, or plant with which, the operation is performed.' Lord Guest indicated a functional test in these words: 'In order to decide whether a particular subject is an "apparatus" it seems obvious that an enquiry has to be made as to what operation it performs. The fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciable asset." In CIT v. Shree Gopikishan Industries P. Ltd. [2003] 262 ITR 568 (Cal), the Division Bench of the Calcutta High Court dealing with the case of cold storage held as under: "Thus, it appears that the storage or the chamber itself is an apparatus and tool of the trade through which the business is carried on. The building of the cold storage housing the chamber is neither a setting nor a canopy. On the other hand, it is the means or apparatus or the tools for the business. It is not only the insulation for which specification is provided for. On the other hand, the walls, roofs of the building are to be constructed or maintained in a particular manner, which is exclusively necessary for the purpose of the cold storage and then the roofs and walls are to be insulated. The insulation without the building cannot produce the result and the building without the insulation also equally disastrous for the purpose. The building with the insulation is an integral part for forming the apparatus or means. A building constructed otherwise than specified would not be able to house the insulation or produce the desired result. A cold storage is to be constructed in a particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WLR 675 (HL)., where it has been held that the dry dock constructed by a company for use of ship builders, ship repairers and marine engineers incurring capital expenditure was a plant for the purpose of the trade. Mr. Rohit Arya, learned senior counsel appearing for the Revenue, has drawn our attention to certain decisions reported in CIT v. National Storage P. Ltd. [1967] 66 ITR 596 (SC) and CIT v. Kanaiyalal Nimani [1979] 120 ITR 892 (Cal). 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 tool as plant or not. As has been indicated by their Lordships of the apex court, the definition of the term "plant" is of a wide magnitude. In the instant case, as is perceptible, the assessee is not involved in letting out the premises to earn rent. It is evincible from the analysis made by the first appellate authority, the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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