Calcutta High Court
Commissioner Of Income-Tax vs Shree Gopikishan Industries Pvt. Ltd. on 11 June, 2003
Equivalent citations: (2003)184CTR(CAL)1, [2003]262ITR568(CAL)
Author: D.K. Seth
Bench: D.K. Seth
JUDGMENT D.K. Seth, J.
1. In this case the question arises as to whether a building of a cold storage is a plant. Mr. Soumitra Pal, learned counsel appearing for the Revenue, had sought to draw a distinction between a plant and a building. According to him, if it is a setting or canopy for sheltering a particular business, then it would not be a plant. The building has a more durability than a plant. Therefore, only the thermocole part of the building is the plant and not the rest. He relied on the decision in CIT v. Anand Theatres . Seeking to make a distinction on the facts, he drew inspiration from the said decision and contended that the building housing the cold storage can never be a plant since it has a distinct existence providing a shelter for housing the chambers being the thermocole part of the building which is less durable than the building. He attempted to draw a distinction on this aspect, namely, that the building which is a durable one is required to house or shelter the plant which is constructed by the thermocole part of the building which is less durable. Therefore, it would not be a plant for the purpose of depreciation at 33.33 per cent.
2. We have heard Mr. Pal and gone through the materials. The Tribunal had held the cold storage to be a plant relying on two decisions, one of the Punjab and Haryana High Court in CIT v. Yamuna Cold Storage and the other of the Allahabad High Court in CIT v. Kanodia Cold Storage . In fact, the decision in the Allahabad High Court does not help us in deciding the question. It was only a decision where a reference was sought for and the authority was asked to state the case. The Punjab case also does not really help in the facts and circumstances of the case. The question is now well settled in Anand Theatres' case . The test is not the functional one alone. The test is something more coupled with the functional test. The fact of the case whether it satisfied the test of a shelter or canopy or a setting or it satisfied the test of a means or apparatus or tools for carrying on the business. Each case has to be decided on its own merits. In the said decision, it was held that in the rarest of rare cases, a building can also be a plant provided it satisfies the test.
3. Running a cold storage is governed by the West Bengal Cold Storage (Licensing and Regulation) Act, 1966, and the West Bengal Cold Storage (Licensing and Regulation) Rules, 1967, in West Bengal. Without a licence, no cold storage can be commissioned nor can continue to function. The running of the cold storage is closely monitored and maintained under the said provisions of the 1966 Act and the 1967 rules as amended from time to time. Under Section 4(6), a licence can be cancelled for breach of any of the conditions of the licence or contravention of the Act. In certain circumstances of breaches, under Section 4A, the management of the cold storage can be taken over by the State Government or the State Government can appoint a person to manage the cold storage so taken over. Under Section 19, a licensee is liable to comply with the direction given to it. Under Section 20, a licensing officer may enter upon to inspect the premises with a view to satisfying himself that the requirements of the Acts are being complied with. Under Section 20B, the State Government may constitute Expert Committee for securing expert opinion for efficient management of cold storages. Under Section 20C, on receipt of report and the recommendation of the Expert Committee, the Government may issue such direction to the licensee as it thinks fit and proper and a licensee is bound to comply with such directions or orders of the State Government under Section 20D. Any breach invites penalty under Section 21 and an offence under the Act is cognisable. An order passed under the Act cannot be questioned in any court.
4. Under the 1967 rules, the terms and conditions of the licence have been provided for in Rule 4. Clause (b) thereof provides that the cold storage should be suitable for the storage of the agricultural produce stored or proposed to be stored and referred to in the application and it satisfies the conditions regarding the insulation, refrigeration and sanitary or other arrangements and is properly maintained as required by the provisions of the Act and the Rules. Before the grant or renewal of the licence, the licensing officer may direct the execution of any repairs to and alteration in the cold storage to be licensed with regard to a structure, insulation, refrigeration, sanitary or any other arrangements as may be necessary for the purposes of the Act and the Rules as specified by the licensing officer by an order in writing. Under Clause (e), a licensee is liable to provide facilities or assistance as required by the licensing officer or any officer authorised by him in writing in this behalf, for entering, inspecting or examining the cold storage, for examining or inspecting the machinery and equipments, etc. Under Rule 11, the licensee is bound to maintain the cold storage in the manner to meet the conditions stated therein. The cold storage is required to be constructed and maintained as to be damp-proof, heat-proof and protected against entry of or damage to the stored agricultural produce by birds, pests, noxious insects, rats and other rodents. The agricultural produce stored shall be kept and arranged in such a manner as to prevent its deterioration from damp, moisture, heat, blast, or from water from the floor, side walls, roof, doors and windows. It is to be provided with insulation of the floors, roofs, walls, doors and windows or any opening of the cold storage. Any opening of the cold storage is to be made with cork slabs or glass wool or rock wool or thermocole or any other material approved by the licensing officer. Insulation and waterproofing treatment is to be done in a proper manner in accordance with cold storage temperature to be maintained below or above freezing point subject to the approval of the licensing officer. The doors shall be so designed that a person is able to open it from inside as well as outside and that it is reasonably air-tight. The racks are to be so designed and constructed that loading and unloading operation is carried out without endangering the safety of the employees working in the cold storage. It has to be arranged in such a manner for distribution and circulation of air and for facility of loading and unloading operations as provided in Sub-clauses (a) to (d) of Clause (7) of Rule 11. For the purpose of renovation or improvement of insulation, refrigeration and sanitary arrangements or for additions and alteration, subservient to the purposes of the Act and Rules, prior approval of the licensing officer is necessary.
5. 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 specification is provided for. On the other hand, the walls, roofs of the building are to be constructed or maintained in a particular manner, which is exclusively necessary for the purpose of the cold storage and then the roofs and walls are to be insulated. The insulation without the building cannot produce the result and the building without the insulation also equally disastrous for the purpose. The building with the insulation is an integral part for forming the apparatus or means. A building constructed otherwise than specified would not be able to house the insulation or produce the desired result. A cold storage is to be constructed in a particular manner and then insulated. The building of the cold storage is exclusively used for a cold storage and cannot be put to any other use. It is the storage with which the business is carried on. The racks are to be placed in a manner as specifically provided in rule 11 for distribution and circulation of temperature and air as well as for facilitating loading and unloading and preservation of the stores. The cold storage cannot run either with the rack or with the insulation without there being the building. The cold storage building housing the chambers is a consolidated and composite one providing the means or the apparatus or the tools of the business. For the purpose of maintaining the building, the Act and the Rules provide various conditions, which are mandatory in nature. Breach of any of the terms to maintain the building would result in the cancellation of the licence and stoppage of the business. Therefore, the building has no separate existence than the apparatus being the chamber where the goods are stored. Thus, a cold storage building stands altogether on a different footing from a hotel or a theatre accommodating the customers and audiences which are distinctly the setting or canopy or shelter used for the business without requiring any strict specific particulars and designs and system distinctly required for cold storage. Therefore, in our view, the chambers of the cold storage are definitely plant as defined in Section 43(3).
6. We had occasion to deal with this question in CIT v. Birla Jute and Industries Ltd. , therein we had held that the word "plant" is defined in Section 43(3) of the Act. It is not an exhaustive definition. It is an inclusive definition. 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.
7. We find that a cold storage requires to be constructed in a certain specific process and manner and without such specific process and manner a chamber cannot be commissioned and for which a licence is required to be obtained and before grant of licence, the Act and the Rules provide for certification by the appropriate authorities. Without such certification and grant of licence, a chamber cannot be put to commission. In fact, it is the whole building, which houses the chambers to be constructed in a particular manner according to the specification. Without a thermocole, a chamber cannot function. At the same time, without the building the thermocole cannot have a separate existence. Both these parts are integral parts of each other. One cannot survive without the other. Therefore, a cold storage is definitely plant.
8. However, it would not be the whole building of the cold storage that would be treated as plant. It would only be that part of the cold storage building which is used and utilised as chamber for storing the goods in cold storage that would be treated as plant. Rest of the building would not be a plant. It depends on the facts and circumstances of each case and has to be decided having regard to the specification therein.
9. In the circumstances, we remit the matter to the learned Tribunal for deciding the case afresh in the light of the observation as made hereinabove in order to allow at 33.33 per cent, on the part of the cold storage building housing the chambers, after giving opportunity to the parties.
10. This reference is answered in the affirmative, in favour of the assessee as held above and is thus disposed of.
11. All parties are to act on a xerox signed copy of this dictated order on the usual undertaking.
R.N. Sinha, J.
12. I agree.