Ammonia Storage Tank erected on Land is P&M, cannot be Subject to House Tax: P&H HC on 31 years Old Matter [Read Order]

While dealing with the house tax, the Punjab and Haryana High court ruled that an ammonia gas storage tank erected on the land cannot be treated as a taxable building. The structure is part of a plant and machinery, said the court.

The root of this matter is an order passed by the LSG Secretary to the Government in 1995. The Division Bench of Justice Deepak Sibal and Justice Rupinderjit Chahal heard the matter.

The Municipal Council, Nangal after getting the details of capital cost and completion of ammonia gas storage tank construction, determined the rental value of installation under Section 3(c) of the Punjab Municipal Act, 1911, by calculating it at 5% of the capital cost of Rs. 1.51 crores.

The council after allowing 10% rebate towards maintenance and repair, net annual value was finalised to Rs. 6.83 lakhs where house tax was levied on National fertilisers Limited.

National fertilisers Limited, who constructed the storage tank near its manufacturing factory, objected to the levy and submitted that the tank was an integral part of the plant and machinery. It is not an ordinary structure and it is part of the manufacturing process.

The high court while considering the issues raised, said:

“The mere fact that the installation was permanently erected upon the land or involved substantial civil construction cannot, by itself, be determinative of its legal character. The Court is required to examine the substance, function and purpose of the installation.

The court noted that the storage tank was not a mere conventional building. The storage facility with refrigerator and compressed systems actively performed industrial function. Therefore it cannot be treated as an ordinary building for levying house tax.

The Supreme Court, in the matter of New Manek Chowk Spinning and Weaving Mills Co. Ltd, clarified that the power under Entry 49 of List II of the 7th schedule grants to collect tax on land and buildings, however it does not authorise to tax the plant and machinery merely because it is attached to land or building.

The High Court, considering the overall design, installation, nature and function of the structure concluded that the storage tank was an integral part of the manufacturing process and shall be treated as plant and machinery. Thus, no house tax can be levied by the state government merely because it is erected on land.

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