THE COMMISSIONER OF INCOME TAX, COCHIN vs. M/S. HARRISONS UNIVERSAL FLOWERS LTD.

ITA/249/2009HC KeralaKLHC01025010200923 September 2016Author: HONOURABLE MRS. JUSTICE ANU SIVARAMAN,HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN6 pages
AI SummaryRemanded

What were the facts?

The Revenue appealed against the Income Tax Appellate Tribunal's decision, which upheld the Commissioner of Income Tax (Appeals)'s ruling. The assessee, M/s. Harrisons Universal Flowers Ltd., engaged in producing and marketing cut flowers, claimed depreciation on its mother plants. The Revenue contended that mother plants do not qualify for depreciation and that their disallowance should not be considered a prima facie adjustment under Section 143(1)(a) of the Income Tax Act, 1961. The Tribunal and the Commissioner of Appeals had relied on a Calcutta Bench decision regarding tea bushes being plant and machinery.

What did the High Court hold?

The High Court held that the assessee is not eligible for depreciation on mother plants. The Court found that the Tribunal and Commissioner of Appeals erred by not considering the amendment to Section 43(3) of the Income Tax Act, 1961, which excluded tea bushes and livestock from the definition of 'plant'. The Court reasoned that the term 'plant' in Section 32 of the Act refers to non-living objects, not living organisms. The process of vegetative propagation from a mother plant to generate cut-plants for commercial activity does not constitute destruction or conversion of the mother plant, and therefore, it cannot be treated as an asset eligible for depreciation. The ratio of decisions concerning tea bushes is not applicable to the claim for depreciation on mother plants. Consequently, the High Court vacated interim orders and remitted the matters to the Appellate Tribunal for de novo reconsideration in accordance with law, directing the Tribunal to issue fresh notice to the assessee.

What were the issues?

1. Whether the assessee, engaged in the production and marketing of cut flowers, is eligible for depreciation claimed on mother plants, as a question of law and mixed fact and law, under Section 32 of the Income Tax Act, 1961. Assessee's Contention: Not recorded in the judgment. Revenue's Contention: The Revenue argued that mother plants cannot be claimed as depreciation. They further contended that the Tribunal and Commissioner of Appeals erred by relying on the decision in General Fibre Dealers Pvt. Ltd. (Calcutta Bench) because Section 43(3) of the Act was amended by the Finance Act, 1995, with effect from 1.4.1962, to exclude tea bushes and livestock from the definition of 'plant'. The amendment's Statement of Objects and Reasons indicated it was to override judicial pronouncements concerning tea bushes and exclude livestock.

Which sections of the Income-tax Act were involved?

Section 32,Section 43(3),Section 143(1)(a)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN FRIDAY, THE 23RD DAY OF SEPTEMBER 2016/1ST ASWINA, 1938 ITA.No. 249 of 2009 -------------------- ITA 92/COCH/2001 OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 28-01-2004 ASST. YEAR 1996-97. .... APPELLANT(S)/APPELLANT:: ----------------------- THE COMMISSIONER OF INCOME TAX, COCHIN.

BY ADVS. SRI.P.K.R.MENONE, SR. COUNSEL SRI.JOSE JOSEPH, SC RESPONDENT(S)/RESPONDENT:: -------------------------- M/S.HARRISONS UNIVERSAL FLOWERS LTD., WILLINGDON ISLAND, COCHIN-3. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 23-09-2016 ALONG WITH I.T.A.315/2009 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: msv/

I.T.A.No. 249 of 2009 --------------------- APPENDIX PETITIONER(S)' ANNEXURES: ------------------------- ANNEX A COPY OF ORDER U/S.143(1) (a) DT.28.10.1997 FOR THE ASST. YEAR 1996-97. ANNEX B COPY OF THE ORDER DTD.22.1.2001 OF THE COMMISSIONER OF INCOME TAX (APPEALS).

ANNEX C CERTIFIED COPY OF THE ORDER DTD.28.1.2004 OF THE INCOME TAX APPELLATE TRIBUNAL,

The order continues below.

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