Ammonia Storage Tank Integral To Plant Machinery, Can't Be Entirely Taxed As Building: P&H High Court

On 18 September, the Punjab and Haryana High Court held that an ammonia gas storage tank forming an integral part of a manufacturing plant cannot be subjected in its entirety to house tax by treating it as a “building”.

A Division Bench of Justices Deepak Sibal and Rupinderjit Chahal passed the ruling while dealing with cross-petitions filed by National Fertilizers Limited (NFL) and the Municipal Council, Nangal over house tax imposed on an ammonia gas storage tank at NFL's fertiliser plant. The judges held:

“The Ammonia Gas Storage Tank cannot be treated as a building merely because it is a permanent structure erected upon and attached to the land... [It] is an integral part of the Plant and Machinery and cannot, in its entirety, be subjected to House Tax by treating it as a building.”

NFL argued that the tank was specially designed for storing ammonia and enabling its controlled withdrawal. It was equipped with refrigeration machinery, compressors and pressure-control systems and therefore formed an active part of the manufacturing process rather than merely serving as a storage structure.

The Municipal Council, Nangal, contended that the tank was a permanent installation forming part of NFL's immovable property and was therefore liable to house tax.

The Bench found that the tank was functionally integrated with the plant and machinery. It held that the mere fact that an industrial installation is permanently attached to land is insufficient to treat it as a building; its nature, function and role in the manufacturing process must also be examined.

Accordingly, the High Court held that the entire installation could not be subjected to house tax merely by treating it as a building.

For National Fertilizers Limited: Mr. Vishal Aggarwal, Advocate

For Municipal Council, Nangal: Mr. Kamaldeep Singh Sidhu, Advocate