THE ASSISTANT COMMISSIONER OF INCOME TAX v. VICTORY AQUA FARM LTD
[Citation -2015-LL-0904-3]

Citation 2015-LL-0904-3
Appellant Name THE ASSISTANT COMMISSIONER OF INCOME TAX
Respondent Name VICTORY AQUA FARM LTD.
Court SUPREME COURT
Relevant Act Income-tax
Date of Order 04/09/2015
Judgment View Judgment
Keyword Tags plant • rearing prawns • natural pond • depreciation on specially designed ponds
Bot Summary: 1 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4430/2006 THE ASSISTANT COMMISSIONER OF INCOME TAX APPELLANT(S) VERSUS VICTORY AQUA FARM LTD. RESPONDENT(S) WITH C.A. No. 4429/2006 C.A. No. 5099-5100/2009 O R D E R The question of law that falls for our consideration is as to whether 'natural pond' which as per the assessee is specially designed for rearing prawns would be treated as 'plant' within Section 32 of the Income Tax Act, 1961 for the purposes of allowing depreciation thereon. We may mention at the outset that one Division Bench of the High Court of Kerala in the case of the same assessee had on earlier occasion decided the aforesaid question in the negative holding that it is not a 'plant'. Since appeals are filed against 2 both the judgments and the validity of the judgment rendered in the first case is also questioned by the assessee, we have to necessarily decide these appeals on merits, rather than remanding the case back to the High Court to be considered by a larger Bench. In the income tax returns filed by the assessee, the assessee had claimed depreciation in respect of these ponds by raising a plea that these prawn ponds are tools to the business of the assessee and they constitute 'plant' within the meaning of Section 32 of the Act. The case of the assessee was that all these were part of the special engineering works that were an essential part of a generating plant and it was entitled to have the same treated as a plant for the purposes of investment allowance. 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 judgment dated 14.10.2004 of the High Court, which is decided in favour of the assessee, the High Court has specifically mentioned that the prawns are grown in specially designed ponds.


1 IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4430/2006 ASSISTANT COMMISSIONER OF INCOME TAX APPELLANT(S) VERSUS VICTORY AQUA FARM LTD. RESPONDENT(S) WITH C.A. No. 4429/2006 & C.A. No. 5099-5100/2009 O R D E R question of law that falls for our consideration is as to whether 'natural pond' which as per assessee is specially designed for rearing prawns would be treated as 'plant' within Section 32 of Income Tax Act, 1961 (hereinafter referred to as 'the Act') for purposes of allowing depreciation thereon. We may mention at outset that one Division Bench of High Court of Kerala in case of same assessee had on earlier occasion decided aforesaid question in negative holding that it is not 'plant'. However, another Division Bench by impugned judgment dated 14.10.2014, even after noticing earlier judgment, has not agreed with earlier opinion and has rendered contrary decision. We are, therefore, at this stage constrained to remark that Division Bench which has given impugned judgment dated Signature Not Verified Digitally signed by ASHWANI KUMAR Date: 2015.09.09 14.10.2004 should have referred matter to larger Bench 18:16:57 IST Reason: as otherwise it was bound by earlier judgment of coordinate Bench. However, since appeals are filed against 2 both judgments and validity of judgment rendered in first case is also questioned by assessee, we have to necessarily decide these appeals on merits, rather than remanding case back to High Court to be considered by larger Bench. Facts in brief are that assessee is company doing business of 'Aqua Culture'. It grows prawns in specially designed ponds. In income tax returns filed by assessee, assessee had claimed depreciation in respect of these ponds by raising plea that these prawn ponds are tools to business of assessee and, therefore, they constitute 'plant' within meaning of Section 32 of Act. Assessing Officer disallowed claim of assessee. two Benches of High Court, as mentioned above, have taken contrary view. It is not in dispute that if these ponds are 'plants', then they are eligible for depreciation at rates applicable to plant and machinery and case would be covered by provisions of Section 32 of Act. It is not even necessary to deal with this aspect in detail with reference to various judgments, inasmuch as judgment of this Court in Commissioner of Income Tax, Karnataka vs. Karnataka Power Corporation [2002(9) SCC 571] clinches issue. Therein Court has taken into consideration earlier judgments on which some reliance was placed by learned counsel for Revenue and are suitably dealt with. relevant portion of said judgment reads as under: 3 5. It was case of assessee that it was entitled to investment allowance as applicable to plant in respect of its power generating station building. In note filed before Commissioner (Appeals) it stated that it had included for purpose value of its Potential Transformer Foundation. Cable Duct System, Outdoor Yard Structures and Tail Race Channel. It explained that process of generation started from letting in water from reservoir into pen-stocks and ducts which were water conductor system into turbines. Once electricity had been produced by generation, it had to be conducted, as it was not possible to store same, and process of generation continued until electricity was led to transmission tower. water that was used for rotation of turbines had to be removed and this was done through Tail Race Channel. For stepping up electricity, transformers were used in outdoor yard. conduction of electricity was through conductors held in ducts, called Cable Duct System, which were specifically designed for purpose. case of assessee, therefore, was that all these were part of special engineering works that were essential part of generating plant and, therefore, it was entitled to have same treated as plant for purposes of investment allowance. Commissioner accepted correctness of assessee's case. He held that it was clear that generating station buildings had to be treated as plant for purposes of investment allowance. These buildings could not be separated from machinery and machinery could not be worked without such special construction. He, therefore, allowed investment, allowance on generating station, building, as claimed. Tribunal affirmed this finding, as, indeed did High Court. 6. We, therefore, have before us finding of fact recorded by fact finding authority that generating station building is integral part of assessee's generating system. 4 7. Our attention has been drawn by learned Counsel for Revenue to judgment of this Court in Commissioner of Income Tax v. Anand Theatres 224 I.T.R. 192. He submits that, in that judgment, this Court has held that, except in exceptional cases, building in which plant is situated must be distinguished from plant and that, therefore, assessee's generating station building was not to be treated as plant for purposes of investment allowance. 8. It is difficult to read judgment in case of Anand Theatres so broadly. question before court was whether building that was used as hotel or cinema theatre could be given depreciation on basis that it was "plant" and it was in relation to that question that court considered host of authorities of this country and England and came to conclusion that building which was used as hotel or cinema theatre could not be given depreciation on basis that it was plant. We must add that Court said, "To differentiate building for grant of additional depreciation by holding it to be plant in one case where building is specially designed and constructed with some special features to attract customers and building not so constructed but used for same purpose, namely, as hotel or theatre would be unreasonable." This observation is, in our view, limited to buildings that are used for purposes of hotels or cinema theatres and will not always apply otherwise. question, basically, is question of fact, and where it is found as fact that building has been so planned and constructed as to serve assessee's special technical requirements, it will qualify to be treated as plant for purposes of investment allowance. 9. In instant case, there is finding by fact finding authority that assessee's generating station building is so constructed as to be integral part of its generating system. It must, therefore, be held that it is "plant" and entitled to investment allowance accordingly. third question is answered in affirmative and 5 in favour of assessee. attempt was made by learned counsel for Revenue to effect that pond in question was natural and not constructed/specially designed by assessee. We do not find it be so. In judgment dated 14.10.2004 of High Court, which is decided in favour of assessee, High Court has specifically mentioned that prawns are grown in specially designed ponds. Further this very contention that these are natural ponds has been specifically rejected as not correct. Moreover, from order passed by Assessing Officer we find that this was not reason given by Assessing Officer to reject claim. Therefore, finding of fact on this aspect cannot be gone into at this stage. We find that judgment dated 14.10.2004 rightly rests this case on 'functional test' and since ponds were specially designed for rearing/breeding of prawns, they have to be treated as tools of business of assessee and depreciation was admissible on these ponds. We, thus, decide question in favour of assessee and as consequence, appeals of Revenue are dismissed and that of assessee are allowed. ......................J. [A.K. SIKRI] NEW DELHI; ........................J. SEPTEMBER 04, 2015 [ROHINTON FALI NARIMAN] 6 ITEM NO.101 COURT NO.14 SECTION IIIA S U P R E M E C O U R T O F I N D I RECORD OF PROCEEDINGS Civil Appeal No(s). 4430/2006 ASSTT. COMMISSIONER OF INCOME TAX Appellant(s) VERSUS VICTORY AQUA FARM LTD. Respondent(s) WITH C.A. No. 4429/2006 (With C.A. No. 5099-5100/2009 (With Office Report) Date : 04/09/2015 These appeals were called on for hearing today. CORAM : HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN For Appellant(s) Mr. Gurukrishna, Sr. Adv. Mr. Anita Sohani, Adv. Mr. S. A. Haseeb, Adv. Mr. C.N. Sree Kumar, Adv. Mr. Amit Sharma, Adv. Mr. B. V. Balaram Das,Adv. For Respondent(s) Mr. C. N. Sree Kumar,Adv. Mr. Amit Sharma, Adv. UPON hearing counsel Court made following O R D E R appeals of Revenue are dismissed and appeals of assessee are allowed in terms of signed order. Interlocutory application(s) pending, if any, are also disposed of. (Ashwani Thakur) (Renu Diwan) COURT MASTER COURT MASTER (Signed order is placed on file) ASSISTANT COMMISSIONER OF INCOME TAX v. VICTORY AQUA FARM LTD
Report Error