A.P.State Ware Housing Corporation Ltd.,, Hyderabad v. DCIT, Hyderabad

ITA 651/HYD/2007 | 2003-2004
Pronouncement Date: 22-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 65122514 RSA 2007
Assessee PAN AABCA7364F
Bench Hyderabad
Appeal Number ITA 651/HYD/2007
Duration Of Justice 4 year(s) 1 month(s) 24 day(s)
Appellant A.P.State Ware Housing Corporation Ltd.,, Hyderabad
Respondent DCIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 22-07-2011
Date Of Final Hearing 22-06-2011
Next Hearing Date 22-06-2011
Assessment Year 2003-2004
Appeal Filed On 28-05-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.651/HYD/2007 ASSESSMENT YEAR: 2003-04 THE AP STATE WAREHOUSING CORPORATION LIMITED HYDERABAD. (PAN AABCA 7364 F/A.39) VS THE DY.CIT CIRCLE 1(1) HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI Y. RATNAKAR RESPONDENT BY : SHRI V. SRINIVAS DR ORDER PER CHANDRA POOJARI A.M: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIR ECTED AGAINST THE ORDER OF THE CIT(A) II HYDERABAD DATE D 15.3.2007 AND PERTAINS TO THE ASSESSMENT YEAR 2003 -04. 2. THE FIRST GROUND IN ASSESSEES APPEAL IS WITH REGARD TO ALLOWABILITY OF TRANSIT LOSS INCURRED BY THE ASS ESSEE. 3. AFTER HEARING BOTH THE PARTIES WE ARE OF THE O PINION THAT THIS ISSUE WAS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE ORDER OF THIS TRIBUNAL DATED 28.8.2 009 IN ASSESSEES OWN CASE IN ITA NO.1213/H/2004 & 171/H/2005 FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03 WHEREIN THE TRIBUNAL HELD THAT : 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CORPORATION WAS CONSTITUTED ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 2 UNDER THE WAREHOUSING CORPORATION ACT 1962 BY THE STATE OF ANDHRA PRADESH. THE ASSESSEE IS PROVIDING STORAGE FACILITY TO FCI IN ITS WAREHOUSES. THE ASSESSEE ALSO UNDERTAKES SUPERVISION OF TRANSPORT O F STOCKS FROM VARIOUS PLACES TO THE WAREHOUSE MAINTAINED BY THE ASSESSEE AND FROM THE WAREHOUSE TO OTHER DESTINATIONS. THE QUESTIONS THAT ARISES FOR CONSIDERATION IS WHETHER THE TRANSIT LOS S SUFFERED BY FCI DURING THE COURSE OF TRANSIT SHOULD BE ALLOWED IN THE HANDS OF THE ASSESSEE OR NOT. AS RIGHTLY POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FROM THE VERY BEGINNING THE ASSESSE E IS DISPUTING ITS LIABILITY TOWARDS TRANSIT LOSS. I N SPITE OF THE OBJECTIONS RAISED BY THE ASSESSEE FCI DEDUCTED THE TRANSIT LOSS FROM THE PAYMENT RELATABL E TO STORAGE CHARGES. THEREFORE THE ASSESSEE CLAIMS THAT SINCE THE DEDUCTION WAS MADE BY FCI DESPITE OBJECTION IT HAS TO BE ALLOWED WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. NO DOUBT THE CLAIM MADE BY THE ASSESSEE RELATES TO VARIOUS ASSESSMENT YEARS. ONE OF THE OBJECTIONS OF THE REVENUE IS THA T SINCE THE CLAIM RELATES TO VARIOUS YEARS IT CANNOT BE ALLOWED FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. THE ASSESSING OFFICER ALSO FOUND TH AT THE INCOME WAS EXEMPTED UNDER THE PROVISIONS OF SECTION 10(29) OF THE IT ACT AND THEREFORE IT CANNO T BE ALLOWED WHILE COMPUTING THE TOTAL INCOME. WHILE CONSIDERING THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10 (29) THIS TRIBUNAL IN ITS ORDER DATED 31.1.1994 ITA NOS.2452 TO 2454/H/1997 AND OTHER APPEALS FOR THE ASSESSMENT YEARS 1997-98 TO 1986- 87 FOUND THAT THE ASSESSEE IS ENTITLED FOR EXEMPTI ON U/S 10(29) ONLY IN RESPECT OF THE INCOME ATTRIBUTAB LE TO LETTING OUT OF WAREHOUSES. THE SUPERVISION CHARGES RECEIVED BY THE ASSESSEE WERE FOUND TO BE NOT ELIGIBLE FOR EXEMPTION U/S 10(29). THEREFORE THE OBJECTION OF THE REVENUE THAT THE CLAIM WAS MADE AGAINST THE INCOME EXEMPTED U/S 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 TH AT THE TRANSIT LOSS HAS TO BE BORNE BY FCI. THE ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 3 ASSESSEE ALSO FROM THE VERY BEGINNING OBJECTED TO THE TRANSIT LOSS CLAIMED BY FCI. IT WAS ALSO CLARI FIED 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 FR OM THE STORAGE CHARGES. THEREFORE IN OUR OPINION TH E AMOUNT RELATABLE TO TRANSIT LOSS WHICH WAS ACTUALLY DEDUCTED MAY NOT BE INCOME RECEIVED BY OR ACCRUED TO THE ASSESSEE TILL THE PAYMENT IS MADE BY FCI. THEREFORE THE AMOUNT DEDUCTED TOWARDS TRANSIT LOSS DURING THE FINANCIAL YEARS RELEVANT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HAS TO BE HELD AS AMOUNT NOT RECEIVED BY THE ASSESSEE. ACCORDINGLY IN OUR OPINION THE AMOUNT DEDUCTED BY FCI TOWARDS TRANSIT LOSS FROM THE STORAGE CHARGES HAS NOT BEEN RECEIVED BY THE ASSESSEE OR ACCRUED TO THE ASSESSEE DURING THE FINANCIAL YEARS RELEVANT FO R THE ASSESSMENT YEARS UNDER CONSIDERATION. 6. THE NEXT QUESTION THAT ARISES FOR CONSIDERATION IS WHEN THE ASSESSEE CLAIMS TRANSIT LOSS OF VARIOUS YEARS CAN IT BE ALLOWED FOR ASSESSMENT YEARS UNDER CONSIDERATION. AS RIGHTLY POINTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THE AMOUNT CLAIMED BY WAY OF TRANSIT LOSS HAS TO BE ALLOWED IN THE YEAR I N WHICH THE DEDUCTION WAS MADE. IF FCI DEDUCTED THE AMOUNT DURING ONE OF THE FINANCIAL YEARS IT HAS TO BE ALLOWED AS DEDUCTION WHILE COMPUTING THE TOTAL INCOME FOR THE RELEVANT ASSESSMENT YEAR. AFTER SETTLEMENT OF THE DISPUTE IF FCI PAYS THE MONEY THEN IT IS TO BE TREATED AS INCOME OF THE YEAR IN WHICH IT IS ACTUALLY PAID BY FCI. THEREFORE WHILE HOLDING THAT THE AMOUNT DEDUCTED BY FCI HAS TO BE ALLOWED AS DEDUCTION WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE WE HOLD THAT IT HAS TO BE ALLOWED IN THE ASSESSMENT YEAR RELEVANT FOR THE FINANCIAL YEAR IN WHICH THE DEDUCTION WAS ACTUALLY MADE BY FCI. SINCE THE DETAILS OF DEDUCTION MADE BY FCI ARE NOT AVAILABLE ON THE FILE OF THIS TRIBUN AL WE REMIT THE MATTER BACK TO THE FILE OF THE ASSESSI NG OFFICER. THE ASSESSING OFFICER SHALL VERIFY THE DETAILS OF DEDUCTION MADE DURING THE RELEVANT FINANCIAL YEAR AND ALLOW THE SAME AS DEDUCTION WHILE COMPUTING THE TOTAL INCOME. ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 4 4. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THIS TRIBUNAL WE ARE INCLINED TO ALLOW THE CLAIM OF THE ASSESSEE. THIS GROUND OF APPEAL RAISED BY THE ASSE SSEE IS ALLOWED. 5. THE NEXT GROUND IS WITH REGARD TO ALLOWABILITY OF DEPRECIATION ON COST/WRITTEN DOWN VALUE OF THE WAREHOUSES AND GO-DOWNS. 6. BRIEF FACTS OF THE CASE ARE THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS OBSERVE D THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON WAREHOUSES AND GO-DOWNS BORE-WELL AND ELECTRICAL INSTALLATIONS AT 25% AND 100% ON THE WOODEN CRATES. WHEN QUESTIONED AS TO WHY THE CLAIM SHOULD NOT BE RESTRICTED TO THE APPLICABLE RATE THE ASSESSEE COR PORATION HAS SUBMITTED THAT THE WAREHOUSES AND GO DOWNS WERE TOOLS AND APPARATUS USED TO CARRY OUT THE BUSINESS OF STORAGE OF COMMODITIES WHICH IS THE MAIN BUSINESS O F THE ASSESSEE AND THEREFORE THEY HAVE BEEN CLASSIFIED A S PLANT AND MACHINERY ELIGIBLE FOR DEPRECIATION AT THE RATE OF 25%. THE ASSESSEE IN THIS REGARD HAS PLACED RELIAN CE ON THE DECISION OF HONOURABLE SUPREME COURT IN THE CAS E OF CIT VS. KARNATAKA POWER CORPORATION (247 ITR 268). 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 RU LES 1962 ENTITLED FOR DEPRECIATION AT 10%. SIMILARLY A S REGARDS WOODEN CRATES THE ASSESSEES CLAIM OF 100% WAS NOT ACCEPTED ON THE GROUND THAT THE SAME FALL UNDER THE CATEGORY OF PLANT AND MACHINERY ENTITLED FOR DEPREC IATION AT 25%. THE ASSESSING OFFICER ALSO OBSERVED THAT T HE ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 5 ASSESSEES REPLY WAS SILENT WITH REGARD TO DEPRECIA TION ON BORE WELL AND ELECTRICAL INSTALLATIONS AND ACCORDIN G THE ASSESSING OFFICER PRESUMED THAT THE ASSESSEE HAD NO OBJECTION TO RESTRICT THE CLAIM TO 10% AND 15% RESPECTIVELY. WITH THIS THE ASSESSEES CLAIM OF DEPRECIATION WAS RESTRICTED TO RS.1 27 62 774/- AS AGAINST THE CLAIM OF RS.3 97 99 331/-. 7. THE ASSESSEES COUNSEL HAS FURTHER STATED THAT W.E.F. ASSESSMENT YEAR 2003-04 ALL THE INCOME OF T HE CORPORATION INCLUDING WAREHOUSING INCOME HAS BEEN SUBJECTED TO TAX WITH THE DELETION OF SECTION 10(29 ) FROM THE STATUTE BOOK. WHILE COMPUTING THE TOTAL INCOME THE ASSESSEE CORPORATION CLAIMED THAT WAREHOUSES GODOW NS BOREWELLS AND ELECTRICAL INSTALLATIONS CONSTITUTE P LANT AND MACHINERY ENTITLED TO DEPRECIATION AT THE RATE OF 2 5%. IT WAS FURTHER STATED THAT THE DEPRECIATION AT THE RAT E OF 100% WAS CLAIMED ON WOODEN CRATES SINCE IT DOES NOT GIVE LONG AND ENDURING BENEFIT AND HENCE ARE TREATE D AS CONSUMABLES. 7.1. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE WAREHOUSES WERE ESPECI ALLY AND SCIENTIFICALLY CONSTRUCTED TO STORE COMMODITIES . THE STRUCTURE OF THE WARE HOUSES IS AS UNDER: 7.2. HE SUBMITTED THAT THE NORMAL SIZE OF THE GODOWN IS OF THE 5000 MT CAPACITY. IT CONSISTS OF 3 EQUAL COMPARTMENTS AND EACH EQUAL LENGTH OF 137-3. TOT AL LENGTH OF 413 AND 73 IN WIDTH. IT HAS BOTH SIDES VERANDAS OF 8 WIDTH. THE GODOWN IS HAVING MINIMUM PLINTH HEIGHT OF 2 8 AND HAS 18 MINIMUM HEIGHT ABOVE ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 6 PLINTH LEVEL AND 12-6 HT GABLE. THE GODOWN IS HA VING CROSS VENTILATION WITH AIR INLETS AND VENTILATORS ( 42 NOS. AIR INLETS AND 54 NOS. VENTILATORS). THE GODOWN IS HAVING 12 NOS ROLLING SHUTTERS ON BOTH SIDES OF LONG WALLS WITH A PROVISION OF COLLAPSIBLE GATES. THE GODOWN FLOORIN G IS HAVING GRADED METAL ROLLING OVER CEMENT CONCRETE WI TH SMOOTH FINISHING. THE GODOWN IS HAVING TUBULAR TRU SSES AT 18 HEIGHT WITH AC SHEET ROOFING WITH WIND PRESS URE OF 200 KGS./SQM. THE GODOWNS EACH COMPARTMENT IS HAVING 12 NOS. STACKS EACH OF SIZE 20 X 30 WITH A CAPACITY OF 1670 MT. 7.3. HE SUBMITTED THAT IN THE GODOWN WOODEN CRATE S ARE SPREAD AS DUNNAGE TO AVOID THE STOCKS GETTING DAMAGED DUE TO SEEPAGE FROM FLOOR. 2600 NOS OF CRA TES OF 5 X 3 ARE REQUIRED FOR 10000 CAPACITY. BAMBOO MA TS ARE SPREAD ON THE CRATES TO PREVENT SWEATING OF THE BAGS AND PREVENT DAMAGE OF BOTTOM LAYERS FROM MOISTURE I F ANY ON THE FLOOR. 2880 NOS. OF MATS 5 X 3 WERE RE QUIRED FOR 10000 MTS CAPACITY. TO CONTROL THE INSECT INFE STATION AND CROSS INFESTATION INSECTICIDES ARE TO BE APPLIE D PERIODICALLY AT RECOMMENDED DOSAGES. FOOT SPRAYERS 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 ASSES THE MOISTURE CONTENT OF STOCKS FROM TIME TO TIME ON E MOISTURE METER IS INSTALLED FOR 10000 MT CAPACITY. FOR CURATIVE TREATMENT OF STOCKS FUMIGATION LDPE POLYTH ENE COVERS OF SIZES OF 32X21X17 WITH GUAGE OF 1000 MI CROS AND WEIGHT OF 52 KGS. ARE USED FOR 10000 MTS CAPACI TY. SAND SNAKES MADE OF HDPE OR JUTE SACKS WITH A LENGT H ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 7 OF 40 WITH DIA OF 7 FILLED WITH SAND ARE USED IN COVER FUMIGATIONS FOR THE PURPOSE OF AIR TIGHTNESS. ENAM EL PLATES ARE USED FOR ANALYSIS OF SAMPLES DURING INSPECTIONS. SIEVE SET IS PROVIDED FOR CLASSIFICAT ION OF STOCKS BASED ON LEVELS OF INFESTATION DURING INSPEC TION. A THERMO METER IS PROVIDED TO MONITOR THE AMBIENT TEMPERATURE FOR THE PURPOSE OF FUMIGATION. THE CORPORATION OWNS SEVERAL WAREHOUSES PROVIDED WITH T HESE FACILITIES. 7.4. HE FURTHER SUBMITTED THUS A TOOL OR APPARATUS USED BY THE ASSESSEE CORPORATION TO CARRY ON ITS BUSINES S. IT IS PLANT IN ITS HANDS. THE WORD PLANT IS DEFINED IN S ECTION 43(3) TO INCLUDE SHIPS VEHICLES BOOKS SCIENTIFI C APPARATUS AND SURGICAL EQUIPMENT USED FOR THE PURPO SE OF BUSINESS OR PROFESSION. THUS THE DEFINITION I S AN INCLUSIVE ONE AND IT IS NOT EXHAUSTIVE. THE SUPREM E COURT IN THE CASE OF CIT VS. TAJ MAHAL HOTELS REPO RTED IN (82 ITR 44) AS HELD THE WORLD PLANT IS GIVEN A WI DE MEANING. 7.5. HE RELIED ON THE FOLLOWING JUDGEMENTS: 1. HINTON INSPECTOR OF TAX VS. MADEN & IRELAND LTD . (39 ITR 357) (HOUSE OF LORDS.) 2. CIT VS. JAI DRINKS PVT. LTD. (173 ITR 100) (JAI PUR) (RAJ. HC) 3. CIT VS. NATIONAL AIR PORT LTD. (126 ITR 196) (DE L. HC) 4. CIT VS. ELECTRO METALLURGICAL WORKS (P) LTD. (20 7 ITR 494) (BOM. HC) 5. CIT VS. N L MEHTA CINEMA ENTERPRISES (P) LTD. ( 216 ITR 437) (BOM. HC) ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 8 6. CIT VS. SWADESHI MINING & MANUFACTURING CO. LTD. (116 ITR 259) (CAL. HC) 7. CIT VS. TAJ MAHAL HOTEL (82 ITR 44 (SC) 8. CIT VS. GUJARAT STATE FERTILIZER CO. LTD. (219 ITR 550) (GUJ. HC) 9. CIT VS. INDIAN TURPENTINE & ROSIN CO. LTD. (75 ITR 533) (ALL. HC) 10. CIT VS. S.R.P. TOOLS LTD. (242 ITR 636) (MAD. HC) 11. CIT VS. JAGADEESHCHANDRAN & COMPANY(75 ITR 697 ) (MAD. HC) 12. SUNDARAM MOTORS (P) LTD. & OTHERS VS. CIT (71 ITR 587) (MAD. HC) 13. CIT VS. MOHAN MEAKIN BREWERIES LTD. (122 ITR 203)(HIMACHAL PRADESH HC) 14. CHITPORE GOLABARI CO. LTD. VS. CIT (82 ITR 75 3) (CAL. HC) 15. CIT VS. KANODIA COLD STORAGE (100 ITR 155) (AL LA. HC) 16. CIT VS. GUJARAT STATE FERTILISER CO. LTD. (255 ITR 294) (GUJ. HC) 17. CIT VS. YAMUNA COLD STORAGE (129 ITR 728) (P&H) HC 18. CIT VS. UNION BANK OF INDIA LTD. (102 ITR 270) (BOM HC) 19. CIT VS. PUNJAB AND SIND BANK (244 ITR 393) (DEL .HC) 20. CIT VS. WARNER HINDUSTAN LTD. (117 ITR 15) (AP HC) 21. CIT VS. OIL INDIA LTD. (198 ITR 701) (CAL. HC) 22. KALINGA TUBES LTD. VS. CIT (96 ITR 20) (ORISSA HC) 23. CIT VS. CALTEX OIL REFINING INDIA LTD. (102 IT R 260)(BOMBAY HC) 24. HARIJAN EVAM NIRBAL VARG AVAS NIGAM LTD. VS. CI T (229 ITR 776) (ALLAHABAD HC). ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 9 25. CIT VS. PURE ICE CREAM COMPANY (129 ITR 394) (DEL.HC) 26. CIT VS. SALEM TEXTILES LTD. (237 ITR 662) (MDS. ) HC 27. CROMPTON ENGINEERING COMPANY MADRAS LTD. VS. C IT (193 ITR 483) (MAD. HC) 28. CIT VS. DELHI AIRPORT SERVICES (255 ITR 91) (DE L.) 7.6. FURTHER HE DREW OUR ATTENTION TO THE FOLLOWIN G JUDGEMENTS IN THE CASE OF CIT VS. AMOL DIACALITE LT D. (286 ITR 648) THE ORE SHED IN THE CASE OF A MANUFAC TURE 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 EVIDENC E 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 C IT(A) IS THAT THE TRUCKS CARRYING RAW MATERIAL ARE EMPTIED O N 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 EVI DENT FROM THE FINDINGS RECORDED IN PARAS. 3.1 (B) AND 3. 1.(C) OF THE ORDER OF THE TRIBUNAL. THE FINDING THAT THE ORE SHED PERFORMS THE FUNCTION OF THE PLANT AND IS AN INTEGRAL PART OF IT IS BASE D ON APPRECIATION OF THE EVIDENCE ADDUCED BY THE ASSESSE E AND THIS FINDING IS NOT DEMONSTRATED TO BE ERRONEOUS. ON A CAREFUL SCRUTINY OF THE EVIDENCE IT IS CLEAR THAT T HE ORE SHED IS SITUATED WITHIN THE FACTORY PREMISES AND THIS IS A SPECIAL TYPE OF STRUCTURE WHEREIN THE MACHINERY ARE BUILT I N AND THE FACILITIES ARE CREATED SO THAT THE LOOSE RAW MA TERIAL IS SMOOTHLY FED TO TREAT THE ORE SHED AS PLANT. THE E VIDENCE ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 10 SHOWS THAT THE ORE SHED PERFORMS THE FUNCTIONS OF T HE PLANT AND IS AN INTEGRAL PART OF THE PLANT AND MACHINERY. THE FINDING THAT THE ORE SHED IS PLANT IS RECORDED ON T HE BASIS OF EVIDENCE ADDUCED AND IS A QUESTION OF FACT. UNDER THESE CIRCUMSTANCES THE DIRECTIONS GIVEN BY THE TRIBUNAL TO TREAT THE ORE SHED AS PLANT AND ALL OW DEPRECIATION AND EXTRA SHIFT ALLOWANCE CANNOT BE R EGARDED AS ERRONEOUS. THEREFORE THE SECOND QUESTION REFER RED TO THIS COURT FOR ITS OPINION WILL HAVE ALSO TO BE ANS WERED IN THE AFFIRMATIVE AND IT IS ACCORDINGLY ANSWERED. 7.7. IN THE CASE EXPRESS NEWSPAPERS LTD. VS. DCIT I N 280 ITR 452 (MADRAS HIGH COURT) HELD THAT THESE SCAFFOLDING MATERIAL CONSTITUTE PLANT AND OBSERVED AS FOLLOWS: THE ASSESSEE COMPANY DERIVED ITS INCOME FROM PROPERTY FINANCE AND LEASING BUSINESS. IT CLAIMED DEPRECIATION FOR THE ASSESSMENT YEAR 1989-90 ON SCAFFOLDING MATERIAL GIVEN ON LEASE AT THE RATE OF HUNDRED PERCENT ON THE GROUND THAT EACH OF THE SCAFFOLDING MATERIAL COSTS LESS THAN RS.5 000/- AND HENCE THE ENTIRE VAL UE SHOULD BE ALLOWED AS DEPRECIATION ON THE GROUND THA T EACH OF THE SCAFFOLDING MATERIAL CONSTITUTED PLANT USE D FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER ALLOWED DEPRECIATION ONLY AT THE RATE OF 33A PER CENT HOLDI NG THAT THE SCAFFOLDING MATERIALS WERE AN INTEGRATED UNIT A ND HENCE COULD NOT BE BIFURCATED INTO SEVERAL PIECES O F RS.5 000 EACH IN VALUE. THE CIT(A) CONFIRMED THE RESTRICTION OF THE CLAIM OF DEPRECIATION TO 33A PER CENT. THE TRIBUNAL TREATED THE TRANSACTION AS A SALE AND DIRE CTED THE ASSESSING OFFICER TO VERIFY THE TRANSACTIONS. ON A PPEAL: HELD ALLOWING THE APPEAL THAT THE TRIBUNAL ERRONE OUSLY TOOK INTO ACCOUNT IRRELEVANT AND EXTRANEOUS FACTORS WHILE PASSING THE ORDER. THE TRIBUNAL HELD THAT THE FACT S NEED TO BE VERIFIED BY THE ASSESSING OFFICER AS TO WHETHER THE SCAFFOLDING MATERIALS HAD BEEN REALLY LEASED OUT OR HAD BEEN SOLD. IT WAS NOBODYS 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 PERCENT. TH E ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 11 TRIBUNAL HAD NOT EVEN PUT THE ASSESSEE ON NOTICE AB OUT THE ABOVE OBSERVATION AT THE TIME OF HEARING AND NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE ABOUT THE POI NT RAISED SUO MOTU BY THE TRIBUNAL. EACH OF SCAFFOLD ING MATERIALS WOULD CONSTITUTE PLANT AS DEFINED IN SE CTION 43(3). THE DEFINITION OF THE WORD PLANT IN SECTI ON 43(3) IS INCLUSIVE AND NOT EXHAUSTIVE AND IT HAS TO BE GIVEN A WIDER MEANING. THUS BY TREATING THE TRANSACTIONS AS A L EASE THE SCAFFOLDING MATERIALS WERE ENTITLED TO HUNDRED PERC ENT DEPRECIATION. 7.8. THE MADHYA PRADESH HIGH COURT IN THE CASE OF BABULAL AGARWAL VS. CIT REPORTED IN 272 ITR 454 THE OBSERVATIONS OF THE COURT IN THIS CASE ARE EXTRACTE D BELOW: ON A CAREFUL PERUSAL OF THE SAME WE ARE OF THE CO NSIDERED VIEW THAT IT IS THE FUNCTIONAL TEST WHICH BECOMES T HE 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 MAGNIT UDE. IN THE INSTANT CASE AS IS PERCEPTIBLE THE ASSESSEE I S NOT INVOLVED IN LETTING OUT THE PREMISES TO EARN RENT. IT IS EVINCIBLE FROM THE ANALYSIS MADE BY THE FIRST APPEL LATE AUTHORITY THE ASSESSEE IS TRADING WITH GODOWNS ST RUCTURE 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 FUNCTI ONAL TEST AND THE ACTIVITY INVOLVED THERE CAN BE NO SCINTILL A OF DOUBT THAT THE USE OF THE OPEN PLINTH GODOWNS ARE NOT BUI LDINGS BUT ARE PLANT AND THEREFORE THE ASSESSEE IS ENTITLE D TO DEPRECIATION ON THE BASIS THAT THEY ARE TO BE TREAT ED AS PLANTS AND NOT BUILDINGS. THE ANALYSIS OF THE TRIB UNAL THAT THE PLATFORMS COME UNDER THE DEFINITION OF BUILDIN G UNDER THE RULES IS NOT CORRECT BECAUSE THE TRIBUNAL HAS R EALLY NOT APPRECIATED THE ESSENTIAL AND FUNDAMENTAL ACTIVITY OF THESE PLATFORM THE NATURE OF AGREEMENT AND THE FAC TUAL FOUNDATION. IF THE CONTRACT AND THE ACTIVITY ARE U NDERSTOOD IN PROPER PERSPECTIVE THERE CAN BE NO IOTA OF DOUB T THAT THE ASSESSEE IS DEALING IN BUSINESS WITH THIS KIND OF P LATFORM BUT NOT LETTING THEM AS BUILDINGS. IT MAY APPARENT LY SO APPEAR BUT ON DEEPER PROBE AND CLOSER SCRUTINY SOM ETHING A DIFFERENT PICTURE GETS FRESCOED FROM WHERE IT BEC OMES CLEAR THAT IT IS UTILISED FOR THE BUSINESS PURPOSE. ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 12 CONSEQUENTLY THE REFERENCE IS ANSWERED IN THE NEGA TIVE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 7.9. THE SUPREME COURT IN THE CASE OF CIT VS. KARNATAKA POWER CORPORATION REPORTED IN 247 ITR 26 8 (SC) HAS HELD AS FOLLOWS: THE QUESTION WHETHER A BUILDING CAN BE TREATED AS PLANT BASICALLY IS A QUESTION OF FACT AND WHERE I T IS FOUND AS A FACT THAT A BUILDING HAS BEEN SO PLANNED AND CONSTRUCTED AS TO SERVE AN ASSESSEES SPECIAL TECHN ICAL REQUIREMENTS IT WILL QUALIFY TO BE TREATED AS A PL ANT FOR THE PURPOSES OF INVESTMENT ALLOWANCE. HELD ACCORDINGLY THAT THERE WAS A FINDING BY THE FACT FINDING AUTHORITY THAT THE ASSESSEES GENERATI NG STATION BUILDING WAS SO CONSTRUCTED AS TO BE AN INT EGRAL PART OF ITS GENERATING SYSTEM. IT WAS PLANT ENTI TLED TO INVESTMENT ALLOWABLE. 7.10 IN THE CASE OF CIT VS. VICTORY AQUA FARM LTD (271 ITR 530) AND HELD THAT : THE PRAWN PONDS WHERE PRAWNS ARE GROWN ARE PLANT AND ELIGIBLE TO THE DEPRECIATION AT HIGHER RA TES. 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 CONSIDER ED BY KERALA HIGH COURT IN THE CASE OF CIT VS. NAVODAY A (271 ITR 173) WHEREIN IT WAS HELD THAT: THE WORD PLANT HAS BEEN GIVEN AN INCLUSIVE MEANING IN SECTION 43 OF THE INCOME TAX ACT 1961. IN ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 13 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 LI KE MOISTURE OR TEMPERATURE ARE NOT PLANTS (3) IN ORDER TO FIND OUT AS TO WHETHER A PARTICULAR ITE M IS A PLANT OR NOT THE MEANING WHICH IS AVAILABLE IN T HE POPULAR SENSE I.E. THE MEANING PEOPLE CONVERSANT WITH THE SUBJECT MATTER WOULD ATTRIBUTE TO IT HAS TO BE TAKEN (4) (IV) 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 NOT NECESSARILY CONFINED TO ANY APPARATUS WHICH IS USED FOR MECHANICAL OPERATIONS OR PROCESS OR IS EMPLOYED IN MECHANICAL OR INDUSTRIAL BUSINESS. THE ARTICLE MUST HAVE SOME DEGREE OF DURABILITY (5) THE BUILDING IN WHICH THE BUSINESS IS CARRIED ON CANNOT BE CONSIDERED TO BE A PART (6) THE ITEM SHOULD BE USED AS A TOOL OF THE TRADE WITH WHICH THE BUSINESS IS CARRIED ON. FOR THAT PURPOSE THE OPERATIONS IT PERFORMS HAVE TO BE EXAMINED. IN THE ABOVE CASE THE ASSESSEE FIRM ENGAGED IN THE PRODUCTION OF CINEMATOGRAPH FILMS CLAIMED HIGHER DEPRECIATION ON ITS STUDIO. THE CLAIM WAS REJECTE D BY THE ASSESSING OFFICER. THE MEMBERS OF THE APPELLATE TR IBUNAL VISITED THE STUDIO ALONG WITH THE DEPARTMENTAL REPRESENTATIVE AND THE ASSESSEES REPRESENTATIVE. IT WAS NOTICE THAT THE STUDIO WAS SITUATED IN A BIG LANDSC APE. THE BUILDING WAS DESIGNED IN SUCH A WAY WITH THE WO ODEN PARTITIONS WHICH WOULD BE REMOVED FOR CREATING DIFF ERENT SETTINGS OR SCENES. THE TRIBUNAL HELD THAT PART OF THE STUDIO BUILDING CONSTITUTED PLANT. ON A REFERENCE: HELD THAT IN THIS CASE THE ASSESSEE HAD SATISFIED THE FUNCTIONAL TEST. PART OF THE STUDIO BUILDING W OULD COME WITHIN THE TERM PLANT AND IN THAT VIEW THE ASSES SEE WAS ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 14 ENTITLED TO DEPRECIATION AT THE RATE APPLICABLE TO PLANT AND MACHINERY. 7.12. THE KARNATAKA HIGH COURT IN THE CASE OF DCIT VS. ASTRA IDL. LTD. (247 ITR 564) HELD THAT: THE BUILDING USED FOR MANUFACTURE OF PHARMACEUTICALS MEDICAL AND MEDICAL PREPARATIONS TO BE PLANT. HE SUBMITTED THAT IN ORDER TO FIND OUT WHETHER A BUILDING IS TO BE TREATED AS A MERE BUILDING OR SHOULD BE CONSIDERED AS A PLANT A FUNCTIONAL TEST HAS TO BE APPLIED. A WIDE MEANING IS TO BE ATTRIBUTED TO THE TERM PLANT BECAUSE OF THE FUNCTIONAL TEST. IN THE ABOVE CASE THE ASSESSEE WAS A COMPANY ENGAG ED IN THE BUSINESS OF MANUFACTURING AND SELLING OF PHARMACEUTICAL MEDICAL AND MEDICAL PREPARATIONS. IT HAS CONSTRUCTED A FACTORY BUILDING FOR THE MANUFACT URE OF PHARMACEUTICAL AND BASIC DRUGS AT BANGALORE. THE ASSESSEE CLAIMED THAT THE BUILDING SHOULD BE TREATE D AS PLANT AND CLAIMED DEPRECIATION AT 15% BESIDES EXTRA SHIFT ALLOWANCE ADDITIONAL DEPRECIATION AND INVESTMENT ALLOWANCE. THE CLAIM WAS REJECTED BY THE ASSESSING OFFICER BUT WAS UPHELD BY THE TRIBUNAL AFTER OBTAIN ING A REPORT REGARDING THE SPECIFICATION OF THE BUILDING FROM THE DEPARTMENTAL ENGINEER AND HELD THAT THE TRIBUNAL HA D SPECIFICALLY FOUND THAT THE BUILDING WAS USED ONLY FOR MANUFACTURING AND SUPPLYING MEDICINE AND NO OTHER BUSINESS. IT WAS NOTHING BUT A PLANT. IT CONSTITU TED AN APPARATUS AND A TOOL FOR THE ASSESSEE BY MEANS OF W HICH BUSINESS ACTIVITIES WERE BEING CARRIED OUT. HENCE THE ASSESSEE WAS ENTITLED TO DEPRECIATION AT A HIGHER R ATE. ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 15 7.13. IN THE CASE OF ASSESSEE CORPORATION THE WAR E HOUSE IS THE APPARATUS WITH WHICH CARRIES OF ITS BU SINESS. THE WAREHOUSE IS NOT SIMPLY IS NOT A PLACE OR PREMI SES WHERE BUSINESS IS CARRIED ON. IT IS A TOOL OR INST RUMENT WITH WHICH THE BUSINESS IS CARRIED THEREFORE IT IS RIGHTLY CLAIMED TO BE THE PLANT ELIGIBLE FOR DEPRECIATION A T THE RATES APPLICABLE TO THE PLANT. 7.14. HE SUBMITTED THAT THE ELECTRICAL INSTALLATI ONS WERE ALSO HELD TO BE A PLANT IN THE CASE OF CIT VS. INDIAN TURPENTINE (75 ITR 533) CIT VS. JAGADEESHCHANDRAN (75 ITR 697) CIT VS. TEA ESTATES (207 ITR 311) AND CIT VS. HOECHST (240 ITR 1). 8. THE NEXT GROUND IS WITH REGARD OF ALLOWABILITY OF DEPRECIATION ON BORE-WELLS AND ELECTRICAL INSTALLAT IONS @ 25% AS THEY FORM PART OF WAREHOUSES AND GO-DOWNS. THE WOODEN CRATES SPREAD IN THE WAREHOUSES HAVE A TEMPORARY LIFE AND THEY ARE REPLACED VERY FREQUENTL Y AND THE CORPORATION IS RIGHTLY ENTITLED TO DEPRECIATION @100%. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE TECHNICAL SPECIFICATIONS GIVEN BY THE AR REGARDING GO DOWNS ARE NOTHING BUT NORMAL FEATUR ES OF A WAREHOUSE FOR EASY AND CONVENIENT HANDLING OF MATERIALS TO BE STORED THEREIN. HE RELIED ON THE J UDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ANA ND THEATRE (244 ITR 192 (SC). 10. ACCORDING TO DEPARTMENTAL REPRESENTATIVE THE RATIO OF JUDGEMENT OF SC IN THE CASE CIT VS. KARNA TAKA ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 16 POWER CORPORATION (247 ITR 268) IS NOT APPLICABLE. IN THAT CASE THE HONBLE SUPREME COURT HAD AN OCCASI ON TO EXAMINE THE ISSUE WHETHER A BUILDING CAN BE TREATED AS A PLANT. IN THAT CASE THE GENERATING STATION BUILDI NG WAS SO DESIGNED AND CONSTRUCTED SO AS TO BE AN INTEGRAL PART OF THE POWER GENERATION SYSTEM AND HENCE THE HON BLE APEX COURT CONSIDERED IT TO BE A PLANT ENTITLED FOR INVESTMENT ALLOWANCES. BUT IN THE PRESENT CASE TH E WAREHOUSE OF THE ASSESSEE ARE NORMAL GO DOWNS HAVIN G NORMAL FEATURES EXPECTED TO BE THEREIN A WAREHOUSE TO PREVENT THE MATERIAL TO BE DAMAGED DUE TO MOISTURE INSECTS ETC. FURTHER HE RELIED ON THE JUDGEMENT OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. KANODIA WAREHOUSING CORPORATION (121 ITR 996) (ALLAHABAD ) 11. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE A ND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE CONTENTIONS OF THE DR IS THAT THE JUDGEMENT IN THE CASE OF ANAND THEATRES IS APPLICABLE TO THE FACTS OF THE PR ESENT CASE. ACCORDING TO LEARNED COUNSEL FOR THE ASSESSE E THE WORDS PLANT AND BUILDING ARE NOT MUTUALLY EXCLU SIVE. PLANT MAY INCLUDE BUILDING IN CERTAIN SET OF CIRCUMSTANCES AND THEREFORE APPLYING THE FUNCTIONA L TESTS THE ASSESSEE WOULD BE ENTITLED TO DEPRECIATIO N UNDER THE HEAD IT IS MORE BENEFICIAL TO IT. HE SUBMITT ED THAT THE WAREHOUSES ARE INTEGRAL PART OF OPERATION FOR C ARRYING OUT SUCH BUSINESS AND THEREFORE SUCH BUILDING SHOU LD BE CONSIDERED AS PLANT. THE ABOVE CONTENTION OF TH E ASSESSEE CANNOT BE ACCEPTED IN VIEW OF THE JUDGEMEN T OF ANAND THEATRE CITED SUPRA. THE BELOW MENTIONED OBSERVATION OF THE SUPREME COURT IS VERY RELEVANT: ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 17 FURTHER FOR RUNNING ALMOST ALL INDUSTRIES OR FOR CARRYING ON ANY TRADE OR BUSINESS BUILDING IS REQUIRED. ON OCCASIONS A BUILDING MAY BE DESIGNED AND CONSTRUCT ED 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 BUILD ING IS REQUIRED TO CARRY ON SUCH ACTIVITY. THAT MEANS TH E BUILDING PLACE SOME ROLE AND IN OTHER WORDS ITS F UNCTION IS TO SHELTER THE BUSINESS BUT IT HAS NO OTHER FUNC TION EXCEPT IN SOME RARE CASES. IF THE CONTENTION OF TH E ASSESSEE IS ACCEPTED VIRTUALLY ALL SUCH BUILDING W OULD 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 TH E 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 ASS ET WHEN APPLIED TO THE PURPOSE OF MAKING PROFIT AND GA IN. THE OBJECT IS TO GET A TRUE PICTURE OF THE REAL INC OME OF THE BUSINESS. HENCE IT CAN BE INFERRED THAT THE LEGIS LATURE NEVER INTENDED TO GIVE SUCH BENEFIT OF DEPRECIATION TO A BUILDING WHICH IS USUALLY MORE DURABLE THAN MACH INERY OR PLANT. 13. THE LEARNED AR ALSO PLACED RELIANCE ON A LATER DECISION OF THE SUPREME COURT RENDERED AFTER ANAND THEATRE CASE (2000) (244 ITR 192) HOLDING A BUILDI NG WHERE A POWER GENERATOR SET WAS INSTALLED TO BE A P LANT IN CIT VS. KARNATAKA POWER CORPORATION (2001) (247 ITR 269) (SC) FOLLOWING ITS EARLIER DECISION IN B. VEN KAT RAOS CASE (2000) (243 ITR 81) IN WHICH A NURSING HOME BUILDING WAS HELD TO BE A PLANT ON THAT BASIS THE BUILDING WHEREIN POWER GENERATING PLANT WAS INSTALL ED ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 18 HELD TO BE A PLANT ELIGIBLE TO CLAIM INVESTMENT ALL OWANCE U/S 32A. THE DECISION IN CIT VS. KARNATAKA POWER CORPORATION (2001) (247 ITR 268) (SC) IS CLEARLY DISTINGUISHABLE IN AS MUCH AS INSTALLATION OF PLANT FOR THE PURPOSES OF BUSINESS OF GENERATION OR DISTRIBUTION OF ELECTRICITY OR ANY OTHER FORM OR POWER HAS BEEN SPECIFICALLY ENVISAGED AS ONE OF THE BUSINESS IN WH ICH INVESTMENT IN INSTALLING PLANT OR MACHINERY TO BECO ME ELIGIBLE CLAIM DEDUCTION ON ACCOUNT OF INVESTMENT ALLOWANCE SUBJECT TO FULFILMENT OF OTHER CONDITIONS . THE SC IN KARNATAKA POWER CORPORATIONS CASE (2001) (24 7 ITR 268) WHILE APPLYING THE TEST THAT WHERE A BUILD ING IS SO PLANNED OR CONSTRUCTED AS TO SERVE AN ASSESSEES SPECIAL TECHNICAL REQUIREMENT IT WILL QUALIFY TO B E TREATED AS A PLANT FOR THE PURPOSE OF INVESTMENT ALLOWANCE HELD THAT AN ASSESSEES GENERATING STATION BUSINESS WAS AN INTEGRAL PART OF ITS GENERATION SYSTEM AND THEREF ORE IT IS A PLANT AND IS ENTITLED TO INVESTMENT ALLOWANCE. T HUS THE DECISION IN KARNATAKA POWER CORPORATIONS CASE (2001) (247 ITR 268 (SC) IS DISTINGUISHABLE ON FACT S IN AS MUCH AS THERE THE INVESTMENT IN BUILDING WAS HELD T O BE A BUSINESS APPARATUS OF A BUSINESS OF GENERATING ELECTRICITY TO WHICH THE PROVISIONS OF SECTION 32 A WERE MADE APPLICABLE. 14. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGEM ENT IN THE CASE OF CIT VS. KANODIA WAREHOUSING CORPORAT ION (121 ITR 996). IN THIS CASE ASSESSEE IS A REGISTE RED FIRM HAD CONSTRUCTED FOUR WAREHOUSES. IN THE RELEVANT PREVIOUS YEAR ITS MAIN BUSINESS WAS TO BOOK SPACE F OR STORING POTATOES ON BEHALF OF ITS CUSTOMERS ON RENT AGREED TO WITH M/S KANODIA COLD STORAGE AND THEREAFTER RE ALISE ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 19 HIRE CHARGES FROM THE CUSTOMERS FOR STORAGE POTATOE S. THE ASSESSEE STORED THE POTATOES OF ITS CUSTOMERS I N ITS WAREHOUSES FOR SORTING AND GRADING AND THEREAFTER LOADED THE SAME IN COLD STORAGE. THE ASSESSEE CLAI MED DEVELOPMENT REBATE IN RESPECT OF THE WAREHOUSES ON THE GROUND THAT THEY CONSTITUTED ITS PLANT. IT WAS OBSERVED BY THE HONBLE 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 SE EN WHETHER THE SUBJECT MATTER INVOLVED THAT IS THE B UILDING OR STRUCTURE OR PART THEREOF CONSTITUTES AN APPARA TUS OR A TOOL OF THE TAX PAYER OR WHETHER IT IS MERELY A S PACE 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 PLA YS NO PART IN THE CARRYING ON OF THOSE ACTIVITIES BUT MERELY CONSTITUTES A PLACE WITHIN WHICH THEY ARE CARRIED O N IT CANNOT BE REGARDED AS A PLANT. 15. FINALLY IT WAS HELD THAT ON THE FACTS IT COU LD NOT BE SAID THAT THE WAREHOUSES WERE SOMETHING BY MEANS OF WHICH THE ASSESSEES BUSINESS ACTIVITY WAS CARRIED ON. THEY DID NOT PLAY ANY PART WHATSOEVER IN THE CARRYI NG ON OF ITS BUSINESS ACTIVITY BUT MERELY PROVIDED A PLA CE WITHIN WHICH THE BUSINESS ACTIVITY WAS CARRIED ON. HENCE THE WAREHOUSE OF THE ASSESSEE DID NOT FALL W ITHIN THE DEFINITION OF PLANT AS CONTAINED IN S . 43(3) A ND THAT BEING SO THE ASSESSEE WAS NOT ENTITLED TO ANY DEVELOPMENT REBATE THEREON U/S 33. ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 20 16. IN VIEW OF THE ABOVE DISCUSSION AFTER CONSIDE RING THE ENTIRE FACTS AND CIRCUMSTANCES CASE AND CASE LA W CITED BY THE PARTIES IN OUR OPINION THE WAREHOUSE OWNED BY THE ASSESSEE CANNOT BE CONSIDERED AS A PLANT AND IT IS TO BE CONSIDERED AS FACTORY BUILDING AND DEPRECIATI ON IS TO BE ALLOWED ACCORDINGLY. FURTHER REGARDING DEPRECI ATION FOR BORE WELL AND ELECTRIFICATION THESE ALSO CANNO T BE CONSIDERED AS PLANT AND DEPRECIATION TO BE GRANTED ON THESE ASSETS AS APPLICABLE RATE AS MENTIONED APPEND IX 1 OF IT RULE 1962. THIS GROUND OF THE ASSESSEE IS DISMISSED. 17. THE NEXT GROUND IS WITH REGARD TO DEPRECIATIO N ON WOODEN CRATES AT 100%. 18. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THIS ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF MADRAS HIGH COURT IN THE CASE OF CIT VS. MADURAI SOFT DRINKS (P) LTD. (276 ITR 607) (MDS.) W HEREIN IT WAS HELD THAT CRATES AND BOTTLES WERE ENTITLED FOR DEPRECIATION @ 100%. A SIMILAR VIEW IS ALSO TAK EN BY A DIVISION BENCH OF THE ALLAHABAD HIGH COURT IN CIT VS. AQUEOUS VICTUALS P LTD. (2004) (266 ITR 573) WHERE ALSO THE BOTTLES AND CRATES USED BY THE SOFT DRINK BOTTL ERS WERE HELD ENTITLED TO DEPRECIATION. IN THE SAID DECISIO N THE ALLAHABAD HIGH COURT FOLLOWING A DECISION OF THE A NDHRA PRADESH HIGH COURT IN CIT VS. SRI KRISHNA BOTTLERS PVT. LTD. (1989) (175 ITR 154) HELD THAT BOTTLES WERE ES SENTIAL TOOLS OF THE TRADE. WITHOUT THE BOTTLES AND SHELLS THE SOFT DRINKS COULD NOT BE EFFECTIVELY TRANSPORTED. THE B OTTLES AND THEIR CONTAINERS TOTALLY INTER DEPENDENT. SO W ERE THE SHELLS. THE BOTTLES AND SHELLS ALSO SATISFIED THE DURABILITY ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 21 TEST BECAUSE IT WAS NOBODYS CASE THAT THEIR LIFE W AS SO TRANSITORY OR NEGLIGIBLE AS TO WARRANT AN INTERFERE NCE THAT THEY HAD NO FUNCTION TO PLAY IN THE ASSESSEES TRAD E. THEY WERE THEREFORE PLANT FOR THE PURPOSE OF TH E ACT AND THE ASSESSEE IS ENTITLED TO DEPRECIATION IN RES PECT OF THEM U/S 32(1)(II) OF THE ACT. 19. THE SAID DECISION OF THE ANDHRA PRADESH HIGH COURT IN CIT VS. SRI KRISHNA BOTTLERS PVT. LTD. (17 5 ITR 154) WAS CONFIRMED BY THE APEX COURT BY A DECISION REPORTED IN (1994) 209 ITR (ST.) 85. THE VIEW TA KEN BY THE ALLAHAND HIGH COURT IN CIT VS. AQUEOUS VICTUALS PVT. LTD. (2004) (266 ITR 573) WAS ALSO CONFIRMED BY TH E APEX COURT BY A DECISION REPORTED IN (2004) 266 ITR (ST. ) 2 . APPLYING THE RATIO ENUNCIATED FROM THE AFORESAID DECISIONS TO THE FACTS OF THE PRESENT CASE ON HAND WE ARE OF THE CONSIDERED OPINION THAT THE CRATES ENTITLED FOR DEPRECIATION AT 100%. 20. THE LAST GROUND IS WITH REGARD EXEMPTION U/S 1 1 CONSIDERING THE ASSESSEE AS CHARITABLE ORGANISATION WHICH WAS NOT PRESSED BEFORE. ACCORDINGLY THIS GROUND I S DISMISSED AS NOT PRESSED. 21. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22. 7.2011 SD/- G.C. GUPTA SD/- CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED 22 ND JULY 2011 ITA NO.651/H/2007 AP WAREHOUSING CORPORATION LTD. HYD. 22 COPY FORWARDED TO: 1. THE AP STATE WAREHOUSING CORPORATION LTD. WAREHOUSING SADAN 2 ND FLOOR BEHIND GANDHI BHAVAN NAMPALLY HYDERABAD. C/O VENUGOPAL & CHENOY CAS 4-1-889/16/2 TILAK ROAD HYDERABAD. 2. THE DCIT CIRCLE 1(1) HYDERABAD. 3. THE CIT(A) II HYDERABAD 4. THE CIT HYDERABAD 5. THE DR ITAT HYDERABAD NP