1983 (8) TMI 156 - AT - Income Tax

Tribunal recognizes kiln as depreciable plant, emphasizing functional test & vital role in manufacturing.

The Tribunal ruled in favor of the assessee, recognizing the kiln as a plant for depreciation purposes. By applying the functional test and emphasizing ... Minor Child, Share Income Issues: Depreciation claim on kiln as plant vs. factory building.Analysis:The judgment involved a dispute regarding the classification of a kiln used for baking roofing tiles and ridges by the assessee. The assessee claimed depreciation on the kiln, considering it as a plant, while the Income Tax Officer (ITO) deemed it as an extension of the factory building. The Commissioner (Appeals) upheld the decision, stating that the kiln was part of the factory building and not a plant. The main contention revolved around whether the kiln qualified as a plant for depreciation purposes under section 32 of the Income-tax Act, 1961.The assessee argued that the kiln should be considered a plant as it was an apparatus used in the manufacturing process. The departmental representative, however, maintained that the kiln was an extension of the factory building and not covered under the definition of plant in section 43(3) of the Act. The Tribunal analyzed the definition of 'plant' under section 43(3), which includes various items used for business purposes, and emphasized the need to apply a functional test to determine if an apparatus qualifies as a plant.Referring to relevant case law, including Jarrold v. John Good & Sons Ltd. and CIT v. Elecon Engg. Co. Ltd., the Tribunal highlighted that the essential characteristic of plant is its use in carrying on the business activities. It was established that if an apparatus is integral to the business operations and functions as a tool in the trading activity, it qualifies as plant, irrespective of its size or value. The Tribunal applied this principle to the kiln in question, emphasizing its indispensable role in the manufacturing process of roofing tiles and ridges.Drawing parallels with previous judgments such as CIT v. Warner Hindustan Ltd., the Tribunal concluded that the kiln, being an essential apparatus for the assessee's business activities, should be classified as plant for the purpose of depreciation allowance. By fulfilling the functional test and being a necessary tool in the manufacturing process, the kiln was deemed eligible for depreciation at the rate applicable to a plant. Consequently, the Tribunal allowed the assessee's claim for extra shift depreciation on the kiln, overturning the decisions of the lower authorities.In conclusion, the Tribunal ruled in favor of the assessee, allowing the appeals and recognizing the kiln as a plant for depreciation purposes. The judgment underscored the importance of the functional test in determining whether an apparatus qualifies as plant under the Income-tax Act, emphasizing the broad and inclusive interpretation of the term 'plant' to encompass essential tools used in business operations.