A cold storage building is a factory building and thermocole insulation is covered by the definition of 'plant' under the Income Tax Act, 1961.

S.P.Goyal, J.

1. The assessee, M/s. Yamuna Cold Storage, a registered firm, is engaged in the business of cold storage the construction of which wasstarted in December, 1968, and completed in March, 1969. The assessment year in question is 1970-71. The dispute in this reference relates only to the depreciation to be allowed on the building and the cost of thermocole insulation. The ITO allowed 10% depreciation on the building and 15% on the rmocole insulation treating it to be machineay. The AAC during the course of the hearing of the appeal filed by the assessee reduced the depreciation to 5% on both the items treating it to be a godown and as such an ordinary building. Aggrieved thereby, the assessee went in appeal before the Tribunal which restored the order of the ITO holding that the cold storage was a factory building and that the thermocole insulation was covered by the definition of "plant" as denned in Section 43(3) of the I.T. Act. However, on an application by the revenue, the following two questions were referred under Section 256(1) of the Act for the opinion of this court :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the cold storage building of the assessee falls under the description of factory building qualified for depreciation allowance under the Income-tax Act as such ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that thermocole insulation is covered by the definition of the term plant as appearing in Section 43(3) of the Income-tax Act, 1961 ? "

2. So.far as the second question is concerned, D. N. Awasthy, learned counsel for the revenue, has not seriously disputed that the thermocole insulation would be covered by the definition of the term "plant" as appearing in Section 43(3) of the Act. Otherwise also, the matter is not res integra and a Division Bench of the Allahabad High Court in CIT v. Kanodia Cold Storage [1975] 100 ITR 155 held that in common parlance the word "plant" includes within its ambit buildings and equipment used for manufacturing purposes. The definition of "plant" in Section 43(3) is inclusive and does not exclude things normally included in it. Where a building with insulated walls is used as a freezing chamber, though it is not machinery or part thereof, it is part of the air-conditioning plant of the cold storage of the assessee and will be entitled to special depreciation at 15% on its written down value. Respectfully following the rule laid down in the said case, we also hold that the thermocole insulation would be covered by the definition of plant in Section 43(3) and the assessee, therefore, is entitled to 15% depreciation on bills of its costs. Question No. 2 is accordingly answered in the affirmative.

3. As regards the first question, the Tribunal did not record any reasons to opine that the cold storage building was a factory building and relied upon its earlier decision in Aggarwal Cold Storage and General Mills v. ITO (1970) Tax XXX (6)-10.

4. The word " factory buildings" is not defined in the Act but under the Factories Act, 1948 , the word " factory " is denned to mean any premises including the precincts thereof-

2. (m)(i) whereon ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or

(ii) whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on......

The essence of the factory, therefore, lies in the manufacturing process carried thereon which term is again denned as under ( Factories Act, 1948 ):

" 2. (k) Manufacturing process means any process for- (i) making, altering, repairing, ornamenting,