1999 PLP 1752 (PTD)

Investment allowance

Plant

Manufacture of tiles

Drying shed constitutes plant -Assessee entitled to investment allowance in respect of such sheds

Indian Income Tax Act, 1961, S.32-A. Tiles cannot be said to be ripe for marketing unless they are dried properly and hence, drying of tiles is an essential part of the manufacturing process and that being so, it has to be done at sheds. Therefore, sheds which are meant for drying of the tiles are an integral part of the process of manufacture and part of plant and machinery. Hence, they come within the definition of plant and machinery and, as such, the assessee is entitled to the benefit of investment allowance in respect of such sheds. B.L. Nema for the Assessee. V.K. Tankha for the Commissioner. This is an income-tax reference at the instance of the assessee and the following question of law has been referred by the Tribunal for answer by this Court: "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the sheds used for drying tiles in the process of manufacturing of tiles were not 'plant' and as such the assessee was not entitled to investment allowance thereon?" The brief facts giving rise to this reference are that the year of assessment involved in 1982-83, the previous year ending Diwali, 1981. The assessee is a registered firm. The assessment for the assessment year 1982-83 was completed under section 143(1) of the Income Tax Act, 1961, on April 8 1983, in which the assessee was allowed investment allowance of Rs.35,

219. This assessment was found erroneous and prejudicial to the interest of the Revenue by the Commissioner of Income-tax. He was of the opinion that the tile shed was building and not plant and machinery, hence no investment allowance was allowable. The contention of the assessee before the Commissioner of Income-tax was that the tile shed was meant for drying o.` tiles, which is an important process in the manufacturing of tiles and as such an integral part of the industry. But the Commissioner took the view that I will not come within the definition of the words "plant and machinery" Therefore, the Commissioner of Income-tax reversed the order of the Assessing Officer. Aggrieved by this order, the assessee approached the Tribunal and the Tribunal affirmed the finding of the Commissioner: Hence, an application was made by the assessee for making a reference to this Court and accordingly the aforesaid question of law has been referred by the Tribunal for answer by this Court. We have heard learned counsel for the parties and perused the record. , As per the facts, it appears that tiles, after certain process, have to he dried and for that, they have to be placed on rocks for drying in sheds. This process of drying is part of the manufacturing process and sheds which are constructed for this purpose formed part of plant and machinery. Tiles cannot be said to be ripe for marketing unless they are dried properly and hence drying of tiles is an essential part of the manufacturing process and that being so, it has to be done at sheds. Therefore, sheds which are meant for drying of the tiles are an integral part of the process of manufacturing and part of plant and machinery. Hence, it comes within the definition of plant and machinery and, as such, the assessee is entitled to the benefit of investment allowances. The question is answered in favour of the assessee, and against the Revenue M.B.A./2018/FC Reference answered.