2000 (7) TMI 72 - SC - Income Tax

Revenue's appeal dismissed; assessee entitled to investment allowance on generating station building recognized as a plant.

Commissioner Of Income-Tax Versus Karnataka Power Corporation

The SC dismissed the Revenue's appeal, upholding the HC's decision in favor of the assessee on all three questions. The SC affirmed the assessee's ... Investment allowance - 'Plant' in respect of its power generating station building - New Industrial Undertaking - HELD THAT:- It is difficult to read the judgment in the case of Anand Theatres [2000 (5) TMI 4 - SUPREME COURT] so broadly. We must add that the court said : 'To differentiate a building for grant of additional depreciation by holding it to be a 'plant' in one case where a building is specially designed and constructed with some special features to attract the customers and the building not so constructed but used for the same purpose, namely, as a hotel or theatre would be unreasonable.' This observation is, in our view, limited to buildings that are used for the purposes of hotels or cinema theatres and will not always apply otherwise. The question, basically, is a question of fact, and where it is found as a fact that a building has been so planned and constructed as to serve an assessee's special technical requirements, it will qualify to be treated as a plant for the purposes of investment allowance. In the instant case, there is a finding by the fact-finding authority that the assessee's generating station building is so constructed as to be an integral part of its generating system. It must, therefore, be held that it is a 'plant' and entitled to investment allowance accordingly. The third question is answered in the affirmative and in favour of the assessee. The civil appeal is dismissed. The Supreme Court considered an appeal by the Revenue against a High Court decision in favor of the assessee on three questions. The first two questions were answered affirmatively in favor of the assessee based on relevant case law. The remaining issue concerned the entitlement of the assessee to investment allowance on the generating station building, treated as a plant for the purposes of investment allowance.The assessee argued that various components of the generating station building, such as transformer foundation, cable duct system, outdoor yard structures, and tail race channel, were essential parts of the generating plant's special engineering works. The Commissioner and subsequent authorities accepted this argument, allowing investment allowance on the generating station building.The Revenue referenced a previous judgment regarding the distinction between a building and a plant, arguing that the generating station building should not be considered a plant for investment allowance purposes. However, the Court distinguished the previous case, emphasizing that the critical factor is whether the building serves the assessee's special technical requirements.The Court found that the generating station building was an integral part of the generating system, meeting the criteria to be considered a plant for investment allowance purposes. Therefore, the third question was answered in favor of the assessee.In conclusion, the civil appeal was dismissed, with no order as to costs.