“Things are not what they appear to be…” – Zen Quote

A natural pond specially designed to raise prawns is a ‘Plant’ ruled the Supreme Court, in a brief ruling in the case of Victory Acqua Farm Ltd, relying upon its earlier ruling in the case of Karnataka Power Corporation. In Karnataka Power Corporation’s case, specially designed Power generating stations were held to be ‘Plant’ on the basis that they were integrated with and formed an inseparable part of the Power generating equipment.

The Revenue had rested its hopes on an even earlier ruling by the Apex Court in the case of Anand Theaters, wherein the Apex Court had ruled that merely because a building is specially designed for use as a movie theater, it would not assume the character of a ‘Plant’.

In Victory Aqua’s case, the Apex Court approved the application of the ‘functional test’ and effectively upheld the Taxpayers contention that the Ponds were tools of its business. The attempt by Revenue authorities to challenge the finding that the Ponds were specially designed was not entertained on the ground that it was too late in the day to dwell into factual findings which were on record.

The classification as ‘Plant’ is more advantageous to Taxpayer as ‘Plant & Machinery’ is entitled to higher depreciation allowance than Buildings.