Rajasthan H.C : Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the building in question was covered within the meaning of the term “Plant” for the purposes of allowance of depreciation and investment allowance ?

High Court Of Rajasthan : Jaipur Bench

CIT vs. R.G. Ispat Ltd.

Sections 32(1), 32A, 43(3)

Y.R. Meena & K.C. Sharma, JJ.

IT Ref. No. 11 of 1992

31st January, 2003

Counsel Appeared

R.B. Mathur, for the Revenue : Anant Kasliwal, for the Respondent

JUDGMENT

BY THE COURT :

On an application under s. 256(1) of the IT Act, 1961, the Tribunal has referred the following question for our consideration : “Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the building in question was covered within the meaning of the term “Plant” for the purposes of allowance of depreciation and investment allowance ?”

The assessee-company claimed before the ITO that the building wherein the plant and machineries are housed should be treated as a “plant” and that depreciation and investment allowance be allowed thereon. The ITO rejected the claim.

In appeal, the CIT(A) set aside the matter to the file of the AO to be decided on the basis of the principles laid down in the order of the Tribunal in case of the assessee for the asst. yrs. 1976-77 and 1977-78. In a fresh order, again the ITO has disallowed the claim.

In appeal before the CIT(A), it was contended by the assessee that the nature of the construction was specifically designed. The building has been made of with heavy steel RRC construction so that heavy machinery placed on the building could have sufficient support and, therefore, the structure had to be extraordinarily built. It was pleaded that in view of the peculiar features of the business of the assessee-company, the building had to be treated as a ‘plant’. The CIT(A) allowed the appeal holding that the building of the assessee is a plant and entitled for investment allowance and higher rate of depreciation. In appeal before the Tribunal, the Tribunal followed the earlier order and confirmed the view taken by the CIT(A).

Mr. Mathur, learned counsel for the Department brought to our notice the decision of the apex Court in case of CIT vs. Anand Theatres Etc. (2000) 160 CTR (SC) 492 : (2000) 244 ITR 192 (SC) and submits that merely particular building construction well-suited to business or especially built for it, it cannot be called ‘plant’, therefore, not entitled for investment allowance and higher depreciation.

6. Mr. Kasliwal, learned counsel for the respondent submits that after decision of the apex (sic) Court in case of CIT vs. R.G. Ispat Ltd. (1995) 124 CTR (Raj) 19 : (1994) 210 ITR 1018 (Raj), their Lordships have subsequently considered the same issue in case of CIT vs. Karnataka Power Corporation (2000) 162 CTR (SC) 249 : (2001) 247 ITR 268 (SC) wherein their Lordships held that if the finding of Tribunal to the effect that generating station building had been constructed to be an integral part of its power generation system building constituted ‘plant’ and distinguished the decision in case of CIT vs. Anand Theatre (supra).

7. When the assessee claimed that this part of the building is a ‘plant’, the ITO has examined and held that it cannot be a plant and observed as under : “The impossibilities of plant and machinery/equipments to function without these concrete structure have not been established before me. These concrete structures/building are, in view of the evidence before me, just mere setting and not the vital need/means of carrying on business.”

8. It is true that if a particular structure is merely helpful for carrying on the activities of the assessee may not be a ‘plant’ but if it is an integral part of the plant and machinery or portion of that building is an integral part of the plant and machinery, that should be considered in the light of the latest decision of the apex Court in case of CIT vs. Karnataka Power Corporation (supra). When the issue has not been considered by Tribunal, in the light of the latest decision of their Lordships in case of CIT vs. Karnataka Power Corporation, we deem it proper that Tribunal should give specific finding of facts to the effect that building or part of the building in this case is forming ‘integral part of plant and machinery’ in the light of the decision in case of CIT vs. Karnataka Power Corporation (supra).

9. With this direction, we restore the matter back to the Tribunal to give this required finding for the purpose of investment allowance, and higher depreciation in case of this assessee especially examine whether the entire building or part of building is eligible for investment allowance and higher depreciation in the light of the decision of apex Court in case of Karnataka Power Corporation (supra).

10. The matter is restored back to the Tribunal with a direction to dispose of and take a fresh decision within 3 months from the date of communication of this order.

The reference, so made, stands disposed of accordingly.

[Citation : 266 ITR 327]

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