TaxTMI 
TaxTMI 
2022 (3) TMI 459
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....Cable, electric generating set, Electrical Control Panel, Electrical Items, installation work, DG Set, etc. etc. All these show that all such expenditure cannot be part of the plant and machinery. Assessee has claimed the rate of depreciation as available on plant and machinery. The details of expenditure show that majority of expenses were towards the electric fittings where rate of depreciation is only 10%. In view of these facts, we hold that this expenditure has been rightly made towards electrical fittings and applicable depreciation has been allowed on the same. The case laws relied upon by the ld. AR are also having different facts. In the case of CIT vs. MTNL, the nature of the business is different than the nature of business of the assessee. In this case, the assessee was engaged in the business of providing communication network. Similarly, in the case of Siemens Ltd., the company was engaged in manufacture of equipment for generation and transmission of electricity. Thus, in both these cases, facts are different. Assessee's business was to manufacture and sell sheet metal components for automobiles and white goods sector. There is a variation in the nature of the busine....
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....s engaged in the business of manufacturing of steel metal component, assemblies etc. primarily for automobiles and white goods sector. During the year under consideration, the assessee purchased and installed certain items of electrical installation and claimed depreciation on the same at the rate of 15% treating the same as part of plant and machinery. But, according to the Assessing Officer those items falls under the head of "electrical fittings" on which depreciation at the rate of 10% was only allowed under the Act read with Income Tax Rules, 1962, and, therefore, he disallowed the excess claim of the depreciation in assessment years 2007-08 and 2008-09. The first appellate authority and Tribunal both, upheld the disallowance made by the Assessing Officer. In assessment year 2007-08, the Assessing Officer made disallowance of Rs. 51,74,135/- and in assessment year 2008-09 disallowance of Rs. 22,57,685/- (need verification of amount) was made on this account. 5. Before us, the learned Counsel of the assessee referred to Rule 5 of Income-Tax Rules, 1962 (in short "the Rules") and Appendix-I to show that rates of depreciation during relevant period on furniture & fitting was 1....
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.... function of manufacturing and not integral part of manufacturing process. He submitted that assessee is not in the business of power generation and, therefore, electrical installation cannot be part of plant and machinery for the assessee. He submitted that with effect from assessment year 2002-03 'electrical fittings' including electric installation have been specifically brought under the head of 'furniture and fitting' for the purpose of depreciation. He further submitted that electrical item mentioned, include transformer and DG Set which are only for the purpose of supplying electricity to the main machinery and plant of manufacturing and they don't have direct role or function in the manufacturing process and, thus, fail on functional test. In support of his contention, he relied on the decision of the Madras High Court in the case of CIT Vs. JKK Textiles Processing, 242 ITR 165 (Mad.). He further submitted that the assessee has not provided information regarding operation performed by each of those item of electrical installation, so as to comply with the direction of the Hon'ble Delhi High Court and, therefore, issue might be restored back to the file of the Assessing Offi....
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....rms according to designs and specifications and as per the requirement and gave them the Food Corporation of India on hire for a limited period of three years. The assessee derived monthly income for open plinth godowns for the storage of food grains and claimed depreciation contending that activity was not of letting of the property but the activity was adventure in the nature of the trade and therefore the income derived from open plinth was business income. The Tribunal treated the open plinth godowns as plant but allowed depreciation at the rate prescribed for buildings. The Hon'ble High Court applied functional test as to what operation particular apparatus performs. If it is utilized for the business purpose, then it falls in the category of plant. The relevant finding of the Hon'ble High Court is reproduced as under: "In IRC v. Barclay, Curle and Co. Ltd. (1970) 76 ITR 62 (HL), the House of Lords held that a dry dock, since it fulfilled the function of a plant, must be held to be a plant. Lord Reid considered the part which a dry dock played in the assessee-company's operations and observed (at page 67) 'It seems to me that every part of this dry dock plays ....
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....ls of the assessee's trade having a fairly enduring utility though owing to technological advances, they might or would in course of time become obsolete. We are, therefore, clearly of the view that the capital asset acquired by the assessee, namely, the technical know-how in the shape of drawings, designs, charts, plans, processing data and other literature falls within the definition of 'plant' and is, therefore, a depreciable asset." 11. In CIT v. Shree Gopikishan Industries (P) Ltd. (2003) 262 ITR 568 (Cal), the Division Bench of the Calcutta High Court dealing with the case of cold storage held as under (page 571) : 11. In CIT v. Shree Gopikishan Industries (P) Ltd. (2003) 262 ITR 568 (Cal), the Division Bench of the Calcutta High Court dealing with the case of cold storage held as under (page 571) : "Thus, it appears that the storage or the chamber itself is an apparatus and tool of the trade through which the business is carried on. The building of the cold storage housing the chamber is neither a setting nor a canopy. On the other hand, it is the means or apparatus or the tools for the business. It is not only the insulation for which ....
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....ion. It includes 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 an apparatus which is used for mechanical operation or process or is employed in mechanical or industrial business. The test to be applied for such determination is : does the article fulfil the function of a plant in the assessee's trading activity ? Is it a tool of his trade with which he carries on his business ? If the answer is in the affirmative, it will be a plant." 12. In this regard, we may also refer with profit to the decision reported in IRC v. Barclay, Curle and Co. Ltd. (1970) 76 ITR 62 (HL); (1969) 1 WLR 675 (HL)., where it has been held that the dry dock constructed by a company for use of ship builders, ship repairers and marine engineers incurring capital expenditure was a plant for the purpose of the trade. 12. In this regard, we may also refer with profit to the decision reported in IRC v. Barclay, Curle and Co. Ltd. (1970) 76 ITR 62 (HL); (1969) 1 WLR 675 (HL)., where it has been held that the dry dock constructed by a company for use of ship builders, ship repairers and marine engi....
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....hips of the Apex Court, the definition of the term "plant" is of a wide magnitude. In the instant case, as is perceptible, the assessee is not involved in letting out the premises to earn rent. It is evincible from the analysis made by the first appellate authority the assessee is trading with godowns, structure 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 functional test and the activity involved, there can be no scintilla of doubt that the use of the open plinth godowns are not buildings but are plant and therefore the assessee is entitled to depreciation on the basis that they are to be treated as plants and not buildings. The analysis of the Tribunal that the platforms come under the definition of "building" under the rules is not correct because the Tribunal has really not appreciated the essential and fundamental activity of these platform, the nature of agreement and the factual foundation. If the contract and the activity are understood in proper perspective, there can be no iota of doubt that the assessee is dealing in business with this kind of platform, but not letting t....
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.... It is a separate item, used to receive energy from the high tension line. In view of that fact, the conclusion arrived at by the Tribunal that the electrical transformers in dispute will form an integral part of the textile processing machinery of the assessee cannot be accepted. 8. Learned counsel for the Revenue has brought to our notice the decision in CIT v. Kiran Crimpers, . In that case, it was held that in the first instance the rate of general depreciation has to be prescribed under Sub-items (i) and (ii) of item III of Part I of Appendix I to the Income-tax Rules, 1962, thereafter when the question of extra shift allowance arises to be considered under Sub-item (iv), it has to be seen what specific items have been excluded from the applicability of extra shift allowance and if any items have been specifically so excluded either by inscribing N. E. S. A., while including that item under the description of machinery and plant slated for the special rate or the general rate, such item cannot be made available for computation of extra shift allowance. It has also been held that once an apparatus becomes an integral part of another asset as such, it loses its independ....
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.... of the list of the items, we find that items include transformer, panel switchgear, cable, electric Control Panel etc. Item at serial No. 25, 26, 30, 31, 32 and 33 of the list for assessment year 2007-08 has been mentioned as "supply of electrical items". There is no detail of such items available on record. Item at serial No. 34 is transformer oil and item at 36, 37 and 44 is diesel for DG set. The assessee has not explained how these items are qualified as capital expenditure. Further, item at serial No. 40 to 43 is rent for DG set. No specific explanation for qualifying the same as capital expenditure, has not been provided by the assessee. Similarly, in the list for assessment year 2008-09 items are mainly transformer, electrical capacitor panel, DG set, split AC, pumphouse panel, window AC etc and the assessee has not provided function performed by these items in the process of manufacturing. No details of their place or location of installation has been provided before us. No doubt, if any split AC is integral part of machinery itself, the assessee may be entitled for depreciation at the rate of the plant and machinery, however, if a split AC is provided in the chamber of a ....