ACIT vs. Victory Aqua Farm Ltd (Supreme Court)
S. 32: The "functional" test has to be applied to determine whether an asset is "plant". Even a pond designed for rearing prawns can be "plant"
In Commissioner of Income Tax vs. Anand Theatres 224 ITR 192 it was held that except in exceptional cases, the building in which the plant is situated must be distinguished from the plant and that, therefore, the assessee’s generating station building was not to be treated as a plant for the purposes of investment allowance. It is difficult to read the judgment in the case of Anand Theatres so broadly. The question before the court was whether a building that was used as a hotel or a cinema theatre could be given depreciation on the basis that it was a “plant” and it was in relation to that question that the court considered a host of authorities of this country and England and came to the conclusion that a building which was used as a hotel or cinema theatre could not be given depreciation on the basis that it was a plant
Law laid down in CIT Vs. Orient (Goa)(P) Ltd 325 ITR 554 that s. 172 is applicable only to non-residents carrying on shipping business and not to residents and that the expenditure of demurrage charges cannot be allowed u/s 40(a)(i) in the absence of TDS does not appear to be correct and issue is referred to Full Bench
We are unable to agree with the above view of this Court in Orient (Goa)(P) Ltd. (supra). This is for the reason that the assessee placed reliance upon Section 172 of the Act in respect of payments made by it to a non-resident shipping company by way of demurrage charges. The tax which is deducted at source by the assessee company is on behalf of the recipient of the charges. The issue before the Court was whether demurrage charges which are paid by the assessee to a non-resident company would be allowed as an expenditure in the absence of deduction of tax at source in view of Section 40(a)(i) of the Act
Circumstances in which gains from sale of shares can be assessed as short-term capital gains and not as business profits explained
On consideration of the above facts, the CIT (A) and Tribunal rightly concluded that compliance on the part of the assessee in terms of Instruction No.1827 dated 31 August 1989 issued by the Central Board of Direct Taxes laying down the tests for distinguishing the shares held in stock-in-trade and shares held as an investment, the shares held by the assessee was investment and held the income to be treated as short term capital gains