Reserved Judgement IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Trade Tax Revision No. 41 of 2008 Dated of Decision: 29.07.2010 M/s Jaiprakash Industries Limited …Revisionist Versus Commissioner of Commercial Taxes Uttarakhand, Dehradun …Respondent Present: Mr. S.K. Posti, learned counsel for the revisionist. Mr. Sudhir Kumar, learned brief Holder for the State. Connected with Trade Tax Revision No. 42 of 2008 M/s Jaiprakash Industries Limited …Revisionist Versus Commissioner of Commercial Taxes Uttarakhand, Dehradun …Respondent Present: Mr. S.K. Posti, learned counsel for the revisionist. Mr. Sudhir Kumar, learned brief Holder for the State. Trade Tax Revision No. 43 of 2008 M/s Jaiprakash Industries Limited …Revisionist Versus Commissioner of Commercial Taxes Uttarakhand, Dehradun …Respondent Present: Mr. S.K. Posti, learned counsel for the revisionist. Mr. Sudhir Kumar, learned brief Holder for the State. Trade Tax Revision No. 44 of 2008 M/s Jaiprakash Industries Limited …Revisionist Versus Commissioner of Commercial Taxes Uttarakhand, Dehradun …Respondent Present: Mr. S.K. Posti, learned counsel for the revisionist. Mr. Sudhir Kumar, learned brief Holder for the State. CORAM:- HON’BLE MRS. JUSTICE NIRMAL YADAV HON’BLE MR. JUSTICE SUDHANDHU DHULIA 2 Nirmal Yadav, J. In all the abovementioned Trade Tax Revisions the common question involved is: - (i) Whether the Assessing Authority was justified in imposing the tax on the air conditioning and cold storage plant for the assessment year 1995-96, 1996-97, 1997-98 and 1998-99 under Section 3 (F) of the U.P. Trade Tax Act, 1948 (hereinafter referred to as the Act) by holding that Air Conditioning and Cold Storage Plant is a movable property. (ii) Whether the learned Tax Tribunal was justified in equating the Air Conditioning Plant and Cold Storage Plant of the Hotel with the Water Pump by holding that Plant is fixed only for the purpose of operational efficiency. All the Trade Tax Revisions have been heard together and have been finally decided by this common judgment. However, for the sake of convenience and for the purpose of referring to the documents and pleadings, Trade Tax Revision No. 41 of 2008 is taken the as leading case. Brief facts are that M/s Jai Prakash Industries Limited carrying the business relating to works contract and after constructing the Hotel at Mussoorie known as ‘Residency Manor’ with its movable and immovable assets leased out to M/s JayPee Hotel, New Delhi at the quarterly lease rent of Rs. 95 lacs vide Memorandum Of Understanding (hereinafter referred to as MOU) dated 7th September 1995 and lease agreement no. JIL/02/95 dated 01.10.1995. The lessor company leased out various movable assets viz. Sanitary fittings and installations, electrical fittings plant and machinery, kitchen equipments, air conditioning and 3 cold storage, lifts, furniture, fixture and other miscellaneous assets (hereinafter referred to as movable assets) for the period of three years on the terms specified in the Lease Summary Schedule annexed to the agreement. The Assessing Authority assessed the tax liability on the basis of the nature of the assets and the assets, which were movable, were taxed as per the assessment orders for the years referred to above. Feeling aggrieved by the order of the Assessing Authority, the revisionist preferred first appeal before the Deputy Commissioner Trade Tax, Dehradun who vide order dated 24th August 2001 dismissed the appeal and confirmed the order passed by the Assessing Authority. Against the order of the Deputy Commissioner, the revisionist preferred Second Appeal before the Trade Tax Tribunal. The tribunal vide its order dated 15th March 2005 dismissed the appeals of the revisionist and confirmed the order of the Deputy Commissioner. Being aggrieved by the order of the learned Tribunal the assessee preferred revisions before this Court.This Court while agreeing with the findings recorded by the Trade Tax Tribunal dismissed the revisions, however, review petition was filed by the revisionist stating that the First Appellate Authority had not dealt with the question if the air conditioning and storage plant is a fixed asset or movable property. This Court vide order dated 17th August 2007 directed the Second Appellate Authority (the Tax Tribunal) to decide the question as to whether air conditioning and cold storage plant are movable property and were rightly taxed. Accordingly, the learned tribunal considered this question and vide order dated 4th March 2008 held that air conditioning and cold storage plant is a movable property, therefore, the assessee is liable to be taxed on the basis of the lease rent under Section 3 (F) of the Act. Still aggrieved by the order of the learned tribunal, the revisionist has filed the present revisions. 4 Heard Mr. S.K. Posti, learned counsel for the revisionist, Mr. Sudhir Kumar, learned brief holder for the State and perused the material available on record. Learned counsel for the revisionist argued that the hotel of the revisionist is of International level and in order to make their hotel centrally air-conditioned. Air Conditioning Plant consisting of compressor and boilers are permanently fixed and embedded in the earth. The controlled air from the plant passes to different parts of the hotel through ducts casted in the hotel building, therefore, it cannot be at any cost stated that air conditioning plant is a movable property. Cold storage plant is also fixed at one place of hotel and it cannot be detached or shifted from one place to another. It is further argued that learned tribunal erred in equating the air conditioning plant with a water pump, which is attached to earth only for the purpose of operational efficiency. It is submitted that the compressor and boiler of the air-conditioning plant are permanently fixed at one place. It has further been argued that there is a difference between a water pump and the air conditioning plant as the air conditioning plant is permanently attached to the earth and there is no intention on the part of the revisionist to sever it from earth for sale or to use it for other place at any point of time as it is a part and parcel of the hotel building. Learned counsel for the revisionist further argued that there was no material with the Assessing Authority to show that the air conditioning plant was to be severed or separated for sale or for installation to some other place and therefore, by no stretch of imagination it cannot be termed as movable property. In the absence of any such material on record the air conditioning plant, which is a part of the building and embedded to earth, should be considered as immovable property. The plant is used by the revisionist in the fixed condition at one place and it has no intention to remove it and to take it some other place. It is further 5 argued that the revisionist had leased out the hotel building along with the entire fixture and the equipments; thus, there was no intention on the part of the revisionist to separately lease out the fixtures or equipments separately. In his support learned counsel for the revisionist referred to the judgment of Division Bench of Allahabad High Court in the case of Oriental Bank of Commerce Vs. State of U.P. and others along with other connected petitions reported in [2008 UPTC 487] and the case of T.T.G. Industries Ltd. Madras Vs. Collector of Central Excise Raipur reported in [2004 (4) SCC 751]. On the other hand learned counsel for the respondent argued that no doubt if any goods are immovable property; they cannot be leviable to tax under Section 3 (F) of the Act. It is also true that whether an article is permanently fasten to anything attached to the earth requires determination of intention as well as the factum of fastening to anything attached to the earth and this has to be ascertained from the facts and circumstances of each case. Learned counsel for the respondent further submitted that a bare perusal of the MOU and agreement entered into between the hotel ‘Residency Manor’ and Jaypee Industries Limited would show that air conditioning plant is a movable property. The lessor was apparently having the intention that the air conditioning should be one of the fixed assets while leasing out the Hotel building. He referred to the paragraph-3 of the MOU which reads as under:- “AND WHEREAS JIL has also provided in the Hotel necessary moveable assets comprising sanitary fittings, electrical fittings, plant & machinery, kitchen equipment and air conditioning plant, cold storage, lifts, furniture and fixtures and other miscellaneous items at its own cost except few moveable assets which have been provided by JHL at its own cost and for which JHL is entitled to receive a hire charge of Rs. 1.50 per month from JIL as per the mutual agreement between JIL and JHL described in Record Note of discussions held on 21.1.1995.” 6 He further referred to clause 4 of the MOU of assets which provides as under:- “The moveable assets of the hotel belonging to JIL shall be handed over to JHL on three years lease basis for which a detailed agreement shall be negotiated and executed separately by 30th September 1995.” In view of the Cluse-4 of the MOU a separate agreement i.e. lease agreement no. JIL/02/95 was executed between the parties on 14th September 1995, which was to be effective from 1st October 1995. The first paragraph of this agreement provides that the lessor had agreed to lease out the various moveable assets referred therein, the same is reproduced below:- “LEASE:- The Lessor hereby agrees to lease to the lessee and the Lessee hereby agrees to take on lease from the Lessor subject to the terms of this Lease Agreement No. JIL/ /95 (hereinafter referred to as “the Agreement”) the various moveable assets: viz. Sanitary fittings & installations, Electrical fittings, Plant & Machinery, Kitchen Equipment, Aircoditioning and Cold Storage, Lifts, Furniture & fixtures and other miscellaneous fixed assets herein after referred to as the Moveable assets described, in the Lease Summary Schedule annexed hereto on ‘As is Where is’ basis.” One of the clauses of the agreement is with regard to the ‘surrender’, which provides that unless the lease is renewed as per the terms of the agreement, the lessee shall deliver to the lessor the moveable assets at the place at which it is located in good working condition. It further provides that upon such surrender of the moveable assets the lessor reserves the right to dispose off the assets in any manner as the lessor may deem fit. In the Lease Summary Schedule, the air conditioning plant has been separately valued at 212 lacs. The lease rental for all the moveable assets is fixed as 95.25 lacs per quarter. 7 Learned counsel for the respondent therefore, argued that from the terms and conditions of the lease agreement no. JIL/02/95, which was separately executed with regard to the moveable properties the intention of the lessor i.e. the revisionist, is clearly indicated that he intended to rent out the moveable assets separate from the immoveable assets. These assets were given on lease only for three years and thereafter in case the lease term was not extended, the lessee had to surrender the moveable assets including air conditionings plant which could be disposed of by the lessor/revisionist in any manner as he deemed fit. It is thus argued that from the lease agreement itself it is well proved that the revisionist itself considered their air conditioning plant to be a moveable property. Learned counsel for the respondent further argued that the learned tribunal has given a clear finding that air conditioning plant and cold storage plant are moveable goods. The plant has been fixed to the earth only for operational efficiency and to avoid the vibration or wobbling of the plant. The tribunal has further given the finding that the abovementioned plant can be removed from the place where it is fixed and can be taken to the other place for installation and can also be sold. Learned counsel for the respondent relied upon a judgment, which has also been relied by the tribunal reported as Sirpur Paper Mills Vs. the Collector of Central Excise Hyderabad reported in [AIR 1998 Supreme Court 1489] the Apex Court in the above case held as under: - “5. Apart from this finding of fact made by the Tribunal, the point advanced on behalf of the appellant, that whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a house-holder may purchase a water pump and fix it on a cement base for operation efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper making 8 machine can be sold in the market. The Tribunal has found as a fact that it can be sold. In view of t hat finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property.” On careful consideration of the rival submissions made by learned counsel for the parties, we agree with argument of learned counsel for the respondent. There is no doubt that if any article is immovable property, no tax can be levied in terms of the Section 3 (F) of the Act. However, all the movable properties are leviable to tax. A perusal of the documents on record clearly shows that revisionist had executed two separate agreements. The MOU to lease out Hotel ‘Residency Manor’ to Jaypee Hotels Limited was executed on 7th September 1995. In the opening paragraph of the agreement various movable assets are mentioned which includes the air-conditioning plants and cold storage plants. The Paragraph-3 of the MOU states that lessor has also provided in the Hotel necessary movable assets comprising sanitary fittings etc. etc. and air conditioning plant, cold storage plant etc. It is further provided in Clause-4 of the MOU that with regard to movable assets detail agreement would be executed separately. Accordingly, lease agreement JIL/02/95 was executed exclusively in respect of moveable assets. The lease agreement provides for the surrender of the movable assets in case of expiry of the term of the lease. This clause clearly states that the lessor reserves its right to dispose of the moveable assets in any manner as it may deem fit. Thus the intention of the lessor with regard to the marketability of the air conditioning plant is clearly indicated from the lease agreements. The facts of T.T.G. Industries case (Supra) are distinguishable from the facts of present case. In the T.T.G. Industries Ltd. case, the Apex Court was considering the erection and installation of hydraulic mudgun and tap hole- 9 drilling machines, which were to be installed at a specially made concrete platform at the level of 25 feet above the ground, which could not be shifted without first dismentaling and then reassembling at another site. It was also noticed by the Court that the volume of the machine and the weight was enormous. In such circumstances, those equipments were not considered as movable goods within the meaning of Excise Act and excisable to excise duty. It was also observed that such equipments are not usually shifted to one place to another nor it was practicable to do so frequently. The counsel, appearing in the said case, had submitted that once these machines were erected and assembled, they continued to operate from where they were positioned till such time they were worn out or discarded. The facts of the case in hand are quite similar to the case of Sirpur Paper Mills (Supra) cited by learned counsel for the respondent. From the finding of facts given by the tribunal, it is clear that the air conditioning plant can be removed from one place and shifted to the other place. Thus it cannot be treated as a part of the immovable property of the hotel building. Even from the MOU and agreement executed by the revisionist themselves their intention is indicated that the air conditioning plant is one of the movable assets, which was leased out by revisionist by a separate agreement to the Jaypee Hotel. Accordingly, we answer the question no. 1 in the affirmative holding that air conditioning and cold storage plant is a movable property. The second question raised by the revisionist is that the tribunal was not justified in equating the air conditioning and cold storage plant with the water pump. In fact, no such question arises in the present case, the learned tribunal has simply referred the observation of the Apex Court in the case of Sirpur Paper Mills (Supra) wherein the Apex Court has merely given an example that if a factory owner or house holder purchases a water pump and fix it on a cement base for operational efficiency and 10 security, it will not make the water pump an immovable property. The Apex Court has further clarified that the test as to whether the machine or article is immovable or movable property, is that the machine or article could be sold in the market and could be removed for installation at other place. Therefore, the question no. (ii) does not survive at all. In view of the above discussion, we are of the view that there is no scope of interference with the order passed by the tribunal and it cannot be said that the tribunal has overlooked any material fact nor we find its decision to be perverse. Thus we find no merit in the revisions and the same are hereby dismissed. (Sudhanshu Dhulia, J.) (Nirmal Yadav, J.) VKG 29.07.2010