Court Rules Poultry Sheds as Buildings, Not Plants

The court held that poultry sheds are to be treated as buildings and not plants, as they serve as shelters for business activities. The decision concluded that poultry sheds do not qualify for higher depreciation rates applicable to plants. The court ruled in favor of the Revenue, stating that poultry sheds are entitled to depreciation rates as applicable to buildings only. The reference was answered in the negative in favor of the Revenue, and all appeals filed by the Revenue were allowed without costs.

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Issues Involved:
1. Whether poultry sheds should be treated as "plant" for the purpose of allowing higher depreciation rates under the Income-tax Act, 1961.

Detailed Analysis:

Background:
The cases referred under section 256(1) and the Income-tax Appellate Tribunal Appeals filed under section 260A of the Income-tax Act, 1961, involve a common question compelling disposal by a common order. All the referred cases are at the instance of the Revenue. The primary question is whether poultry sheds should be treated as "plant," thereby allowing the assessee-company a higher rate of depreciation as applicable to plant and not the rate of depreciation as applicable to building.

Case Details:
1. R. C. No. 53 of 2001:
- M/s. Srinivasa Hatcheries (Private) Limited, Hyderabad, claimed depreciation at 20% on poultry sheds treating them as "plant" for the assessment year 1991-92.
- The Assessing Officer treated the poultry sheds as "building," allowing depreciation at 10%.
- The assessee's appeal was successful, but the Revenue's appeal before the Income-tax Appellate Tribunal was unsuccessful.
- The Supreme Court directed the Tribunal to refer the question to the High Court.

2. I. T. T. A. No. 376 of 2006:
- Involved M/s. Venkateswara Hatcheries, Hyderabad, for the assessment year 1992-93.
- The Commissioner set aside the assessment order, leading to reassessment.
- The assessee contended that poultry shed is a plant within the meaning of section 43(3) of the Act and successfully appealed.
- The Revenue's appeal before the Tribunal was futile.

Contentions:
- Revenue's Argument:
- Relying on decisions of the Supreme Court and Punjab and Haryana Court, the Revenue contended that if any business is carried on in a premises, it is to be treated as a building.
- Poultry sheds used for growing chicks and hatching and incubating their eggs do not satisfy the functional test of being a plant.

- Assessee's Argument:
- Poultry sheds are specially designed to serve the assessee's technical requirements and should be treated as tools and apparatus for business purposes.
- Poultry shed is a "plant," and the assessees are entitled to claim depreciation at 25%.

Legal Provisions:
- Section 32 of the Act: Allows deductions for depreciation of buildings, machinery, plant, or furniture.
- Section 43(3) of the Act: Defines "plant" inclusively, covering everything used for business purposes except buildings, furniture, or fittings.

Court's Analysis:
- Assessing Officer's Reasoning:
- Poultry sheds are mere places where business activities are carried on and not tools for business.

- Commissioner of Income-tax (Appeals) and Tribunal's Reasoning:
- Concluded without much reasoning that poultry shed is to be allowed depreciation at the rates of plant and machinery.

- Case Law:
- Anand Theatres: Held that buildings used for business purposes remain buildings and not plants.
- Shivalik Poultries: Held that poultry sheds are merely shelters for business and not plants.
- Karnataka Power Corporation: Held that if a building is specially planned and constructed for technical requirements, it may qualify as a plant.
- Dr. B. Venkat Rao and Dr. Ganga R. Menon: Held that buildings with special technical requirements for nursing homes and hospitals can be treated as plants.

Conclusion:
- The court held that poultry sheds are buildings and not plants, as they are merely shelters where business activities are carried on.
- The decision in Venkateswara Hatcheries P. Ltd. concluded that poultry sheds do not qualify as plants for higher depreciation rates.
- The court answered the reference in favor of the Revenue and against the assessees, holding that poultry sheds are entitled to depreciation as applicable to buildings only.

Judgment:
- The reference is answered in the negative in favor of the Revenue.
- All appeals filed by the Revenue are allowed without any order as to costs.

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