Joint Commissioner Of Income-Tax v. Anatronics General Co. (P.) Ltd.

Arijit Pasayat, C.J:— In this appeal under section 260A of the Income-Tax Act, 1961 (in short “the Act”) the order of the Income-Tax Appellate Tribunal, New Delhi (in short “the Tribunal”) in I.T.A No. 6110.D/95, dated December 16, 1998, is under challenge, in respect of the question as regards the rate of depreciation on the bottles given on lease to another concern. The dispute relates to the assessment year 1987-88.

2. The factual position which is almost undisputed is as follows:

The assessee-company supplies bottles to other concerns on lease basis. For the relevant assessment year, depreciation was claimed on the bottles valued at Rs. 14,99,508 at 100 per cent. However, the Assessing Officer allowed depreciation at 15 per cent, under the first proviso to section 32(1)(i) of the Act. For disallowing the assessee's claim of depreciation at 100 per cent., it was observed that though the bottles were plant, each bottle cannot constitute plant and only all the bottles which were acquired can be taken as plant. Reference was made to purchases on several dates to hold that the value of the bottles, treated as “plant” purchased on the relevant dates exceeded Rs. 5,000. Ultimately, he held that each bottle did not constitute a plant and all the bottles purchased by the assessee in bulk constituted a plant. To justify the conclusion, it was pointed out that the bottles were supplied in bulk after they were purchased in bulk. The matter was carried in appeal before the Commissioner of Income-Tax (Appeals) (in short, the “CIT (A)”). The matter initially was remitted for fresh adjudication by the said authority and subsequently another order was passed. The Assessing Officer held that the question would be different in the case of a bottling plant where the bottles are individually used and are capable of being used. In those circumstances an individual bottle separately constitutes plant. But in the case of a leasing company, there is no actual or real use of the bottles in the hands of the owner. The bottles are used for leasing business and the bottles are handled only in bulk and hence each bottle cannot be treated separately as a plant for allowance of depreciation at 100 per cent. The first appellate authority i.e, Commissioner of Income-Tax (Appeals), upheld the view. Such conclusion was reversed by the Tribunal by the impugned order. It was held that (a) in the case of a leasing company depreciation is allowable on the articles leased out, (b) each bottle for the purpose of first proviso to section 32(1)(ii) constitutes a plant and not necessarily all the bottles purchased on a particular date in bulk.

3. Learned counsel for the Revenue submitted that the question whether a particular bottle would constitute a plant would depend upon the nature of activities carried on by the assessee.

4. In the case at hand, the assessee being a leasing concern, each bottle cannot be construed to be a plant and only the bulk purchases made which were leased out can be treated as plant.

5. Learned counsel for the assessee on the other hand referred the various decisions, more particularly, the decision of this court in CIT v. Prem Nath Monga Bottlers (P.) Ltd., [1997] 226 ITR 864 to contend that each bottle would constitute a plant.

6. So far as the grant of depreciation on assets which are leased out is concerned, the decision of the apex court in CIT v. Shaan Finance (P.) Ltd., [1998] 231 ITR 308 has set the controversy at rest. It was held that an assessee is entitled to depreciation on the assets which were given on lease. The only question that needs adjudication, therefore, is whether each bottle would constitute a plant. This court in Monga's case, [1997] 226 ITR 864 held that even one bottle can constitute a plant. We find no distinction to be permissible, merely because the assessee was a leasing concern as contended by learned counsel for the Revenue. That would not really change the nature of the plant, i.e, a single bottle. It has been accepted by the Revenue authorities that the bottles would constitute plant. There is no scope for accepting the Revenue's contention to restrict the operation to the purchase on a single day in bulk or on different dates.

7. The definition of “plant” given by Lindley L.J in Yarmouth v. France, [1887] 19 QBD 647 has become locus classicus. He said (page 658): “There is no definition of plant in the Act: but, in its ordinary sense, it includes whatever apparatus is used by a businessman for carrying on his business, not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business.” It is of relevance to note that section 43(3) of the Act defines “plant” by way of an inclusive definition; thereby intending to enlarge the meaning of the expression. In Scientific Engineering House P. Ltd. v. CIT, [1986] 157 ITR 86 (SC), it was observed that in order to qualify as plant, the article must have some degree of durability— 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”. Judged in the above background the Tribunal's conclusions are on terra firma. No question of law much less a substantial question of law arises out of the order of the Tribunal.

8. Appeal is accordingly dismissed.