1. The assessee in this appeal is a private limited company engaged in the business of poultry farming. We are concerned with the asst. yr.
1992-93 for which the previous year ended on 31st March, 1992. The first ground relates to the disallowance of Rs. 2,000 out of staff welfare expenses of Rs. 81,000. After hearing the rival submissions, we see no reason to interfere. The ground is dismissed.
2. Before we take up the second ground, we may dispose of the third ground, which is against the disallowance of the provision of Rs. 48,832 for expenses as under : It is common ground that the bills in respect of the aforesaid expenses were not received during the relevant accounting year. However, what the learned counsel for the assessee says is that these expenses are foreseen expenses and they relate to the year of account and, therefore, the assessee made a provision therefore, notwithstanding that the bills were not received. He drew our attention to the fact that subsequently the assessee had made payments in respect of the aforesaid provision and in the year of payment, no deduction has been claimed. Our attention was drawn to Exhibit-2 of the paper book, where the details of the payments made subsequently have been given, Taking note of the submissions of the learned counsel for the assessee and having regard to the fact that expenses were not claimed in the next year and also having regard to the fact that these are usual expenses which are not unforeseen and for which the assessee is entitled to make a provision, we set aside the orders of the Departmental authorities and restore the same to the file of AO, who may verify whether the expenses pertain to these years from the details furnished by the assessee, for which adequate opportunity shall be given, and if they in fact pertain to this year, they may be allowed as a deduction. Subject to these directions, the matter is restored to the file of the AO.3. We may now take up ground No. 2, which is against the disallowance of depreciation on poultry sheds. This is the third year of the claim.
The written down value (WDV) of the poultry sheds is Rs. 20,71,036 and they have been included in the WDV of the plant and machinery block, which stands at Rs. 31,27,022. In the return, the assessee claimed depreciation on the poultry sheds at the rate of 25 per cent which is the rate applicable to plant, on the footing that poultry sheds are to be treated as plant and not as mere setting or place from which the poultry business is carried on, The AO treated the poultry sheds as building on the ground that the decisions relied on by the assessee in support of the claim have not been accepted by the Department and further that in the case of another poultry farm, the CIT(A), Pune had upheld the view taken by the AO that the sheds are to be treated only as buildings. Accordingly, he restricted the claim of depreciation to 10 per cent on the footing that the sheds are buildings.
4. On appeal, various contentions were taken before the CIT(A) and reliance was placed on many decisions of the Tribunal, which are all cited by the CIT(A). The assessee also explained the nature of the poultry sheds and their special features and as to how they are specially designed to meet the requirements of the poultry farm. The attempt of the assessee was thus to explain to the CIT(A) that the poultry sheds were not merely the places or setting from which the business was carried on, but were an apparatus or tool of the assessee's business and therefore, have to be considered as plant, The CIT(A), however, was not convinced and following his order in the case of another poultry farm, upheld the view taken by the AO.5. Before we proceed further, we may notice that the Pune Bench of the Tribunal in the case of Baramati Agro Ltd. case (ITA Nos. 1251/Pn/91 and 1118/Pn/93 dt. 10th Oct., 2000) has taken the view that poultry sheds cannot be considered as plant and machinery. A copy of the said order was made available to us. This is what the Tribunal has held : "On the facts and in the circumstances of the case and in law, the lower authorities have erred in not treating the poultry shed as plant and machinery and in withdrawing the depreciation to the tune of Rs. 5,17,128." 2. This issue stands covered against the assessee and in favour of the Revenue by the judgment of the Hon'ble Supreme Court in the case of CIT v. Venkateshwara Hatcheries (P) Ltd. (1999) 237 ITR 174 (SC) and CIT v. Anand Theatres (2000) 244 ITR 192 (SC). Accordingly, we decline to interfere and dismiss, the ground." 6. The learned counsel for the assessee contended that the aforesaid order of the Tribunal should not be followed because in the said order, there is no discussion about the nature and functions of the poultry sheds. According to him, the Tribunal has merely followed the judgment of the Supreme Court in the case of Venkateshwara Hatcheries (P) Ltd. (supra), without appreciating the fact that in the said judgment, the issue related to the claim of investment allowance under Section 32A and the claim was rejected by the Supreme Court on the ground that there was no manufacturing or production of articles or things in the case of a poultry farm. The present issue, it was pointed out, was different. It related to the question of depreciation and what is required to be examined is whether the poultry sheds fulfil the functional test so that they could be considered as plaint, or, whether they are merely to be considered as the place or setting in which the assessee carries on the trade. It was, therefore, contended that this judgment is not relevant to the present controversy. As regards the judgment of the Supreme Court in the case of Anand Theatres (supra), it was pointed out that this decision is confined to a case of hotel or theatre and cannot be extended to a case of poultry farm and this aspect of the matter has been recognised by the Supreme Court itself in its later decision in CIT v. Karnataka Power Corporation (2001) 247 ITR 268 (SC). In this judgment, the earlier judgment in the case of Anand Theatres (supra) has been explained and distinguished and it has been held that it is possible to consider a building as a plant, provided that building answers to the functional test and constitutes the apparatus or tool of the assessee's trade and is not merely the place or building from which the business is carried on; In other words, the contention of the learned counsel for the assessee was that the proposition that a building can never be considered as plant, attributed to the judgment of the Supreme Court in the case of Anand Theatres (supra) has been given a go-by by the Supreme Court itself in the case of Karnataka Power Corporation (supra). It is, therefore, necessary in every case to examine the nature and functions of the buildings in an attempt to find out whether the functional test is answered in the positive. It was, therefore, contended that the order of the Pune Bench in the case of Baramati Agro (supra) requires to be reconsidered, both, because the order does not discuss the functions of the poultry sheds, and also because there has been an explanation of the judgment in the case of Anand Theatres (supra) by the Supreme Court in its subsequent judgment in the case of Karnataka Power Corporation (supra).
7. Turning to the merits of the assessee's claim, Mr. Sathe, the learned counsel for the assessee, placed strong reliance on the orders of the Chandigarh Bench of the Tribunal in the case of Shivalik Hatcheries (P) Ltd. v. Dy. CIT, dt. 6th March, 2002 [reported at (2003; 79 TTJ (Chd) 78--Ed.] in which the later judgment of the Supreme Court in Karnataka Power Corporation (supra) has been considered and it has been held that the poultry sheds must be treated as plant for the purpose of allowing depreciation. It was further pointed out that in this order, the Tribunal has considered the opinion of Dr. P.V. Rao, Director of Research (Veterinary), Andhra Pradesh Agricultural University, setting out the structural, constructional and functional aspects of the poultry sheds and has opined that they cannot be considered as mere buildings and should be considered as plant.
Reliance was placed on the order of the Hyderabad Bench of the Tribunal in the case of Asstt. CIT v. Bhagyalakshmi Hatcheries, dt. 30th Jan., 2002, wherein also the special design, construction and functions of the poultry sheds have been considered elaborately and it has been held that the poultry sheds have to be regarded as plant and not as building. Reliance was also placed on the order of the Hyderabad Tribunal dt. April, 1992, in the same case where the opinion of Dr.
P.V. Rao has been noticed and the nature of functions of poultry sheds have been examined in great detail by the Tribunal and it has been finally held that the poultry sheds answered positively to the functional test and must be considered as an apparatus or tool of the assessee and not merely as a place from which the business is carried on.
8. We were also taken through the opinion expressed by Dr. P.V. Rao in the case of Bhagyalakhsmi Hatcheries Pvt. Ltd. on 17th Feb., 1992, on the basis of which the Hyderabad Bench of the Tribunal came to the aforesaid conclusion. A copy of the opinion has been placed at 49 to 79 of the paper book. Explaining the nature, construction, design and functions of the poultry sheds, as contained in the opinion of Dr. Rao, it was submitted that the poultry sheds should be considered as plant.
9. On behalf of the. Department. Mr. Rajkumar, the learned CIT's (Departmental Representative) first submitted that in the case of Baramati Agro (supra), the Pune Bench has already considered the issue relying on the judgment of the Supreme Court in the case of Anand Theaters (supra) and, therefore, it should be followed in preference to the orders of the Hyderabad Bench or Chandigarh Bench, He cautioned that judicial propriety requires that we should follow our own earlier decision. He further pointed out that if the view is sought to be changed, it would amount to reviewing the earlier order of the Tribunal, which is not permissible. He, therefore, suggested that if we consider that the earlier order in the case of Baramati Agro (supra) requires to be reconsidered, the matter may be placed before a larger Bench.
10. Turning to the merits, he submitted that the assessee is in the business of poultry-farming, whereas the orders of the Tribunal relied on by the assessee were in the cases of hatcheries and hence not applicable. According to Mr. Rajkumar, poultry-farming can be done even by a villager sitting in his hut and it would be ridiculous or absurd to call the hut or the cage in which the poultry farming is done as a plant, eligible for depreciation. He also drew the analogy of a shopkeeper selling birds and keeping them in the cage, feed them, protect them from other animals, etc. Merely because the cage is so designed to protect the birds, it cannot be said, according to Mr.
Rajkumar, that the cages are to be considered as plant. According to him, there is no difference between the poultry and shopkeeper, in the illustrations given by him, on the one hand and the assessee engaged in the poultry framing in a large scale or in a scientific manner, on the other hand. He submitted that the nature of the building or shed cannot vary depending upon the person who carries on the business or the scale in when it is carried on. Adverting to Dr. Rao's opinion, he stated that at best, it was only advisory in nature and the Tribunal was not bound by the same. With reference to the judgment of the Supreme Court in the case of Kamataka Power Corporation (supra), he pointed out that the requirement is that the building should serve the technical needs of the business if it is to be considered as plant and since there was a finding by the Tribunal in the case of Kamataka Power Corporation (supra) that this requirement was met, the Supreme Court held that the building was a plant. According to Mr. Rajkumar, there are no materials in the present case, to justify such a conclusion. On the basis of these submissions, he contended that the view taken by the Pune Bench in the case of Baramati Agro (supra) should not be departed from.
11. In his brief reply, the learned counsel for the assessee reiterated his earlier submissions and pointed out that the various aspects of the question have not been considered by the Pune Bench in detail and in the light of the Supreme Court judgment in Kamataka Power Corporation (supra), the departure from the view is justified.
12. We have carefully considered the rival contentions. As regards the question whether the later Tribunal can make a departure from the view taken by the earlier Tribunal, the position is well settled that normally it cannot be done. However, a change in the view is permissible if the facts are different or if there is a change in the law, However, the Tribunal should be slow to depart from the earlier view and should be fully satisfied that there is in fact a change either in the facts or in the legal position before it ventures to take a different view. These principles are well settled by the judgment of the Hon'ble Bombay High Court in the case of HA. Shah & Co. v. CIT (1956) 30 ITR 618 (Bom). There it has been held that an earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse, if it had been arrived at after due enquiry or if no fresh facts are placed before the Tribunal giving the later decision and of the Tribunal giving the earlier decision has taken into consideration all material evidence, It has further been held that when a document is a material and it has a considerable bearing upon the very issue that the Tribunal has to decide, a complete omission to consider the document may justifiably lead to the inference that the said document has not been considered by the earlier Tribunal in arriving at its conclusion. Thus, the circumstances under which the later Tribunal can make a Departure from the earlier view have been prescribed. Applying these tests to the earlier order of the Tribunal, we find that there is no discussion about the factual aspects of the poultry sheds, their design construction, etc. The Tribunal would appear to have proceeded on the basis that the issue is covered against the assessee by the two judgments of the Supreme Court--Venkateshwara Hatcheries and Anand Theatres (supra). It does not appear to have been pointed out before the Tribunal that the case of Venkateshwara Hatcheries is on the question whether poultry farming involves manufacture or production for the purpose of claiming investment allowance under Section 32A. As regards the judgment in the case of Anand Theatres, the Tribunal did not have the benefit of the later judgment of the Supreme Court in the case of Karnataka Power Corporation (supra), where Anand Theatres (supra) has been explained and distinguished. Thus, as regards both facts and the legal position, there is a need to re-examine the assessee's claim, In this connection, we should also advert to the various orders of the Benches of the Tribunal in Chandigarh and Hyderabad wherein identical question had been decided in favour of the view that the poultry sheds are plant.
These orders of the Tribunal do not appear to have been placed before the Pune Bench. The opinion of Dr. P.V. Rao which has been placed before us in the paper book and which has formed the basis of the orders of the Hyderabad and Chandigarh Benches of the Tribunal does not appear to have been placed before the Pune Bench and the Bench was deprived of the benefit of these orders as well as the opinion of Dr.
Rao. When all the facts relating to the claim have been placed before us and it has also been pointed out that there is a change in the legal position in the sense that the Supreme Court itself in Karnataka Power Corporation's case (supra) has explained the earlier decision in Anand Theatres (supra) and has given a go by to the concept that a building can never be considered as a plant and has sought to restrict the application of Anand Theatres (supra) to cases of hotels and theatres, we would think that the matter has to be looked at afresh. We are not to be understood as criticising, in any manner, the order of the Tribunal, Pune Bench, in the case of Baramati Agro (supra). In fact, any criticism of decision of a co-ordinate Bench would be opposed to judicial propriety and decorum. All we are pointing out with respect and humility is that the earlier Bench did not have the benefit of the factual position relating to the poultry sheds and the legal position as explained by the Supreme Court in the case of Karnataka Power Corporation (supra).
13. Coming to the merits of the assessee's claim, we have gone through the opinion of Dr. Rao as well as the orders of the Hyderabad and Chandigarh Benches of the Tribunal. One thing is clear and, that is, the judgment of the Supreme Court in the case of Anand Theatres (supra) cannot be considered as having laid down that a building can in no case be considered as a plant. Consequently, the judgment in the case of Anand Theatres (supra), as held by the Supreme Court in Karnataka Power Corporation's case (supra) is confined to the cases of theatres and hotels. There are clear observations to this effect in the judgment of Karnataka Power Corporation (supra) at pp. 270 and 271 of the report.
Further, the Supreme Court itself has allowed depreciation in respect of a nursing home building, considering the same as plant [CIT v. Dr.
D. Venkata Rao (2000) 243 ITR 81 (SC)]. Therefore, as a proposition, it cannot be contended that a building can never be considered as a plant.
In view of these two judgments of the Supreme Court, there is no legal bar to the poultry sheds being considered as plant.
14. Having crossed the legal hurdle, we may now notice the facts. The poultry sheds consist of three types of sheds : (1) Brooder sheds, (2) Grower sheds, and (3) Layer sheds. Each of these sheds has been constructed in a special manner as to regulate the climate by providing proper insulation, moisture, toxic gases, etc. This is ensured by the proper selection of the material and design. This has been fully explained in the opinion of Dr. Rao. The tolerance level of the chicks and the chickens is also to be taken into account while planning the design, material and construction. This has also been explained in the opinion. The pitfalls that are to be avoided in the construction are also explained. After explaining all these technicalities in details, Dr. Rao has summed up the position. He has concluded that the poultry sheds contribute to the achievement of the following goals : (a) Protection from diseases and from exposure to rough, natural elements.
He has certified that each of the three types of sheds has its special features so as to facilitate the operations carried on therein to achieve maximum efficiency, minimising the incidence of diseases and mortality. He has further stated that the egg laying capacity of the bird is materially enhanced because of the environmental facilities, construction and design of the sheds.
15. The opinion of the expert has not been contradicted on behalf of the Revenue on the basis of any contra-opinion or material. The opinion has been accepted and acted upon by the Hyderabad Bench of the Tribunal in the case of Bhagyalakshmi Hatcheries vide order dt. April, 1992. The matter is pending before the Hon'ble Andhra Pradesh High Court in the case of Bhagyalakshmi Hatcheries for the asst. yr. 1990-91. There are a number of poultry farms all over the country and this issue has come up to the Tribunal at least before the Pune, Hyderabad and Chandigarh Benches thereof. The opinion of Dr. Rao has been taken long back and has also been relied upon by the Hyderabad Bench. The Departmental authorities are, therefore, well aware of this opinion. Nevetheless, no attempt has been made to challenge the correctness of the opinion or obtain a counter-opinion. The credentials of Dr. Rao or his competence to give the opinion have also not been challenged. We may again state that this opinion does not appear to have been placed before the Pune Bench in the case of Baramati Agro (supra). Since the poultry sheds have been constructed and designed in such a manner as to meet the specific requirements of poultry farming, as explained in the opinion, the functional test has been satisfied. The poultry sheds cannot, therefore, be considered merely as places from which the assessee is carrying on its business.
16. The argument of the learned CIT (Departmental Representative) that the provisions of the Act should not be interpreted in such a manner as would lead to ridiculous or absurd result is certainly unexceptionable.
But, we are afraid, that no such results would follow if we accept the assessee's contention, The analogy of the villager or the shopkeeper who grows birds in cages or in a secluded place near his hut is not apposite. We are concerned with a company whose business is that of poultry-farming. It is done on a large scale. It is also done in a scientific manner. The poultry-farming has become a highly specialised technical field. It is not a simple or domestic act of birds being grown in the village hut or in the shopkeeper's cage. To compare the case of a villager or shopkeeper with that of a larger company such as the assessee which has made huge investment in specialised poultry sheds and which runs the poultry farm in a scientific manner would be to do injustice to the latter. We, therefore, reject the analogy as inappropriate.
17. We are, therefore, of the considered opinion that having regard to the materials placed before us and the legal position obtaining after the judgment of the Supreme Court in the case of Karnataka Power Corporation (supra), the assessee's claim for depreciation on the poultry sheds on the footing that they constitute plant requires to be accepted. We do so.