Tribunal decision: Staff welfare expenses partially allowed, depreciation on poultry sheds accepted as plant.

The tribunal dismissed the disallowance of Rs. 2,000 out of staff welfare expenses and directed the Assessing Officer to verify and allow a provision of Rs. 48,833 for expenses. Regarding the disallowance of depreciation on poultry sheds, the tribunal accepted the assessee's argument that the sheds should be considered as plant for depreciation purposes, contrary to the lower authorities' view. The tribunal allowed the appeal partly, directing verification of expenses provision and accepting depreciation on poultry sheds as plant.

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Issues Involved
1. Disallowance of Rs. 2,000 out of staff welfare expenses.
2. Disallowance of the provision of Rs. 48,833 for expenses.
3. Disallowance of depreciation on poultry sheds.

Issue-wise Detailed Analysis

1. Disallowance of Rs. 2,000 out of Staff Welfare Expenses of Rs. 81,000
The assessee, a private limited company engaged in poultry farming, contested the disallowance of Rs. 2,000 out of its total staff welfare expenses of Rs. 81,000 for the assessment year 1992-93. After hearing submissions from both parties, the tribunal saw no reason to interfere with the disallowance. Consequently, this ground was dismissed.

2. Disallowance of the Provision of Rs. 48,833 for Expenses
The assessee challenged the disallowance of a provision amounting to Rs. 48,833 for expenses, which included:
- Telephone: Rs. 3,157
- Professional and legal fees: Rs. 675
- Audit fees: Rs. 45,000

The tribunal noted that the bills for these expenses were not received during the relevant accounting year. However, the assessee argued that these were foreseen expenses related to the year of account, and thus, a provision was made. It was highlighted that payments for these expenses were made subsequently, and no deduction was claimed in the year of payment. The tribunal directed the Assessing Officer to verify whether these expenses pertained to the relevant year and allowed them as deductions if they did. The matter was restored to the file of the Assessing Officer for verification.

3. Disallowance of Depreciation on Poultry Sheds
The primary issue was the disallowance of depreciation on poultry sheds. The assessee claimed depreciation at the rate of 25%, arguing that the poultry sheds should be treated as plant rather than buildings. The Assessing Officer, however, treated the sheds as buildings and restricted the depreciation to 10%.

On appeal, the CIT(A) upheld the Assessing Officer's view, relying on previous decisions that did not treat poultry sheds as plant. The tribunal reviewed various contentions, including the nature and special features of the poultry sheds. The tribunal referred to the Pune Bench's decision in the case of Baramati Agro Ltd., which had held that poultry sheds could not be considered as plant and machinery, citing the Supreme Court judgments in CIT v. Venkateshwara Hatcheries (P.) Ltd. and CIT v. Anand Theatres.

The assessee contended that these judgments were not directly applicable to the present issue, which pertained to depreciation rather than investment allowance. The tribunal also considered the Supreme Court's judgment in CIT v. Karnataka Power Corpn., which clarified that a building could be considered as plant if it met the functional test.

The tribunal examined the opinion of Dr. P.V. Rao, which detailed the structural, constructional, and functional aspects of the poultry sheds, concluding that they should be considered as plant. The tribunal noted that the opinion had not been contradicted by the Revenue and had been accepted by other tribunal benches.

The tribunal acknowledged that the earlier decision in Baramati Agro Ltd. did not have the benefit of the detailed factual and legal position presented in the current case. The tribunal concluded that the poultry sheds met the functional test and should be considered as plant for depreciation purposes. The assessee's claim for depreciation on the poultry sheds was accepted.

Conclusion
The appeal of the assessee was partly allowed, with the tribunal directing the Assessing Officer to verify the provision for expenses and accepting the claim for depreciation on poultry sheds as plant.

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