SHRI SONESHWARE COLD STORAGE vs. ASST. C.I.T.

Facts

The assessee, Shri Soneshwara Cold Storage, a partnership firm engaged in running a cold storage business, filed its return for AY 1991-92 claiming depreciation at 33.33% on the cold storage building, treating it as a 'plant' under Section 32 of the Income Tax Act, 1961. The Assessing Officer (AO) denied this, treating it as a building and allowing depreciation at 15%. The CIT(Appeals) allowed the assessee's claim. The Revenue appealed to the Income Tax Appellate Tribunal (ITAT), which reversed the CIT(Appeals)'s order, holding that a cold storage building is not a 'plant' based on the Supreme Court decision in CIT vs. Anand Theatres. The assessee has appealed this ITAT order to the High Court.

Held

The High Court held that the Tribunal had grossly erred in relying conclusively on the definition of 'plant' under Section 43(3) of the Act and the decision in CIT vs. Anand Theatres. The Court found that the Anand Theatres decision, which stated that a building is not an apparatus for running a business but rather a shelter, was not applicable to the facts of a cold storage. The Court noted that the CIT(Appeals) had correctly relied on the Allahabad High Court's decision in Kanodia Cold Storage, which held that a building with insulated walls used as a freezing chamber, as part of the air-conditioning plant of a cold storage, should be treated as a 'plant'. The High Court also referred to principles from English cases discussed in Anand Theatres, particularly that a structure may be plant if it fulfills the function of plant in the trader's operations. The Court concluded that the CIT(Appeals)'s finding was just and proper and in consonance with the Act, and that the Tribunal's reversal was an error. The appeal was allowed in favour of the assessee.

Key Issues

1. Whether the Tribunal erred in concluding that a cold storage building is not a 'plant' under Section 32 of the Income Tax Act, 1961, without considering the specific requirements of a cold storage building, particularly in light of the Supreme Court decision in CIT vs. Karnataka Power Corporation? Assessee's contentions: The assessee argued that a cold storage building has special built-up requirements and facilities distinct from a general building like a hotel or cinema. It contended that the Tribunal erred by relying on the Supreme Court's decision in CIT vs. Anand Theatres, which dealt with a cinema theatre, and failed to consider decisions relating to cold storage, such as Shyam Enterprises vs. CIT and CIT vs. Shree Gopikishan Industries Pvt. Ltd. The assessee highlighted distinguishing features between a plant and a building. Revenue's contentions: The Revenue relied on the Supreme Court decision in CIT vs. Anand Theatres, arguing that the word 'plant' as defined in Section 43(3) does not include buildings, and that a building is not an adjunct to carrying on business. It also cited the Calcutta High Court decision in CIT v. Mangolia Dairy Products (India).