Depreciation

Plant — Poultry Sheds used for the business of hatching constitutes “Plant” for the purpose of granting depreciation under s 32 — as held by HPHC in CIT v Shivalik Hatcheries Pvt Ltd — In favour of: The Assessee ; ITA No. 21 of 2005

Decided on: 16 February 2011

CIT v Shivalik Hatcheries Pvt. Ltd.

High Court of Himachal Pradesh

I.T.A No. 21 of 2005

Deepak Gupta and Sanjay Karol, JJ

Decided on: 16 February 2011

Counsel appeared:

Ms. Vandana Kuthiala, Adv. for the appellant

Mr. Lovneesh Kanwar, Adv. for the respondent

Deepak Gupta, J.(Oral)

This appeal was admitted on the following substantial question of law:-

1. Whether on the facts and circumstances of the case the Hon’ble Tribunal was

right in law holding that Poultry Sheds used for the business of hatching constitute

‘Plant’ for the purpose of granting depreciation particularly in the light of decisions

of the Hon’ble Supreme Court in the following cases wherein it has been specifically

held that such buildings could not be treated as plant for the purposes of depreciation

u/s 32 of the I.T. Act, 1961?

2. It is not disputed that this question is squarely covered by the judgment of this Court

delivered in Commissioner of Income Tax v. M/s.Shivalik Hatcheries Pvt. Ltd., ITR No.6 of

1996 decided on 24.6.2008 wherein after considering the entire law on the point, the same

question was answered in the following terms:-

“The line of demarcation between what is a ‘plant’ or not is a very thin one. Each case

will have to be decided with reference to the particular facts of the case. It, however,

needs to be noted that the definition of ‘plant’ in section 43(3) is not an exhaustive

definition. It is only inclusive in nature. Therefore, there is a wide scope for including in

the definition many items. It is clear that the legislature by including, ships, vehicles, and

books in the definition of plant, had widened the scope of the word ‘plant’. As noted

above, now the legislature has stepped in and specifically excluded buildings from the

definition of the word ‘plant’. This itself indicates that prior to the exclusion with effect

from 1.4.2004, buildings if specifically constructed and felling within the guidelines of

the various authorities referred to here-in-above could be treated as ‘plant’. The various

authorities referred to above also indicate that very wide amplitude has been given to

term ‘plant’. The definition of ‘plant’ engulfs within its ambit many diverse subjects,

such as, ships sailing on the high seas, books used by lawyers or engineers and scalpels

used by doctors.

In the present case, the ITAT, on the basis of the material placed before it came to the

conclusion that the building of the poultry shed has been specifically designed with a

view to protect the birds from disease. It has been designed to ensure proper lighting and

circulation of air; proper and scientific feeding arrangement; proper water system; proper

arrangement for collection of manure and droppings; proper arrangement for medication

and vaccination; and a right environment conducive for laying of eggs by the birds. The

building had been designed in a manner so as to protect the birds and increase their

productivity. The argument made on behalf of the revenue that the building can be used

with certain modification for certain other purposes cannot be accepted. It is how the

building is designed which is the main factor which is to be taken into consideration. The

law is clear that if it is found that the building has been designed specifically to further

the cause of manufacture or production then the same is a plant. Applying the aforesaid

test, we hold that the poultry sheds are plant within the meaning of section 243, as it then

stood.”

3. In view of the law laid down by a Division Bench of this Court in the aforesaid case, the

question is answered against the revenue and in favour of the assessee. The appeal is accordingly

rejected. No costs.