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2015 (6) TMI 769 - ANDHRA PRADESH HIGH COURT

2015 (6) TMI 769 - ANDHRA PRADESH HIGH COURT - [2015] 376 ITR 226 (T&AP) - Entitlement to claim 100% depreciation on the centering/shuttering material - Held that:- The bottles containing the soft drink cannot be stock-in-trade inasmuch as the bottle by itself is not the subject of sale. The customer or the retailer returns back the bottle to the assessee after the soft drink is consumed. Likewise, the shells which are sent to the customer or dealer also come back with the empty bottles and they .....

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inted out in Dixon v. Fitch's Garage Ltd. the bottles and the contents are "totally interdependent." So are the shells. The bottles and shells also satisfy the durability test for it is nobody's case that their life is too transitory or negligible to warrant an inference that they have no function to play in the assessee's trade. They are therefore "plant" for the purposes of the Act.

individual components of shuttering/centering material do not lose their individuality merely because .....

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ore, it is possible for the assessee to claim depreciation on individual items thereof under the proviso to Section 32 (1) (ii) of the Act and that it is not necessary for him to prove that each such individual item is capable of being used on a stand alone basis.

Thus electric poles used in an industry for change of power from D.C to A.C would constitute a plant. It cannot be disputed that poles support the shuttering/centring material used by the assessee. On the same parity of reas .....

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decided in so far as it held that individual units of centring/shuttering material would not be plant are not entitled to 100% depreciation under the first proviso to Sec.32 (1) since they cannot be used on a stand alone basis. It is accordingly overruled. The view taken in Live Well Home Finance (P) Ltd (2015 (2) TMI 366 - ANDHRA PRADESH HIGH COURT ) is the correct one - Decided in favour of assessee. - I.T.T.A. No. 95 of 2001 - Dated:- 5-6-2015 - The Acting Chief Justice Sri Dilip B. Bhosale, .....

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acts and in the circumstances of the case, the appellate Tribunal was justified in law in holding that the assessee was entitled to claim 100% depreciation on the centering/shuttering material? 2. The first Division Bench in Commissioner of Income Tax Vs. Raghavendra Constructions([(2011) 332 ITR 235 (AP)]) (for short the first judgment) decided on 19.01.2011, while dealing with the aforesaid question, held that if a thing (material) itself is durable but cannot effectively stand alone without f .....

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sed for formation is a plant. 3. Having noticed the divergent views/opinions expressed by two Division Benches, another Division Bench while dealing with the instant appeal (ITTA No.95 of 2001), as prayed for by learned counsel for the parties, framed the question, as reproduced in the first paragraph, vide order dated 14-02-2015 directed the Registry to place the order along with the proceedings before the Honble the Chief Justice for appropriate orders. Accordingly, the above question has been .....

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434/-. In the instant case, we are concerned only with centering and shuttering materials. The Assessing Officer allowed depreciation to the extent of 33 1/3 % on the centering and shuttering materials. The assessee, feeling aggrieved and dissatisfied with the order of the Assessing Officer preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner (Appeals) allowed the appeal and directed the Assessing Officer to allow 100% depreciation as provided for in the proviso .....

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facts in detail, since, after expressing our opinion, we propose to send the appeals to the Court which is assigned to hear these appeals on merits and in the light of the opinion expressed by this Bench. 5. The arguments advanced by learned counsel for the parties were centered around Sections 32 and 43 of the Act. The relevant portion of Section 32 (1) (ii), as it stood at the relevant time, reads thus:- Section 32. DEPRECIATION : (1) In respect of depreciation of buildings , machinery , plant .....

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achinery or plant is first put to use by the assessee for the purposes of his business or profession: (emphasis supplied) 5.1 Section 32 deals with depreciation. For our purpose, it provides that a plant owned by the assessee and used for the purposes of his business or profession, is entitled for certain deductions subject to the provisions of Section 34 and where the actual cost of any plant does not exceed ₹ 5000/-, the actual cost thereof shall be allowed as a deduction in respect of t .....

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cost thereof where the actual cost of plant does not exceed ₹ 5,000/-, if such machinery or plant is first put to use by the assessee for the purpose of his business or profession in the previous year. Thus, to claim 100% depreciation, an asset should be a plant; the actual cost of the plant should not exceed ₹ 5000/-; it should be owned by the assessee; and it should be used for the purpose of business or profession. It is not in dispute before us that shuttering and/or centering m .....

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o, however, has carved out an exception from the main section, which precedes the proviso. If the actual cost of any plant is less than ₹ 5,000/-, as provided for in the first proviso, it is clearly admissible for 100% depreciation. The question is if the cost of any plant is more than ₹ 5,000/-, whether 100% depreciation could be allowed by splitting up of the cost of such plant on the basis of cost of every individual component/material used for the plant such as shuttering and cen .....

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portion of Section 43 of the Act reads thus:- Section 43 : Definitions of certain terms relevant to income from profits and gains of business or profession: Explanation 9.- (3) plant includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession but does not include tea bushes or livestock: 5.4 It is true that where the definition of a word has not been given, it must be construed in its popular sense if it is a word of everyday .....

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comprehending not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include. [see Commissioner of Income Tax, Andhra Pradesh Vs. Taj Mahal Hotel (1971) 82 ITR 44 (SC)] 6. To understand the controversy and to decide the question, we deem it appropriate to make a detailed reference to the first and the second judgments. In the first judgment, the Division Bench considered the question whether on the .....

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ions, to our mind, the Courts have applied durability and/or functional tests. If a thing itself is durable (in the sense which can be used and re-used as non-interdependent, interconnected a non- consumable thing) and has functional utility in the trade or business of the assessee to advance his business interest, such thing would be a plant. If it is durable, but cannot effectively stand alone without functional integration with other similar or dissimilar components or units, it would not qua .....

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ved by Lord Wilberforce (quoted with approval in Pathange Poultry Farm vs. CIT (supra) in IRC vs. Scottish & Newcastle Breweries Ltd. (1982) 55 Tax Cases 252 (HL). it is too much to stomach, that each one of all the hundreds and thousands of props or poles, sheets, plates and planks forming part of centering or shuttering material, would be of functional utility to the builder, contractor or the owner of the property in construction activity. As pointed out by the Supreme Court in Challapall .....

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n Bench in the first judgment while dealing with the definition of plant. The relevant observations read thus:- 10. Plant is described with an inclusive definition. Anything, used for the purpose of business or profession is a Plant. Whether a thing, a building, a vehicle, a contrivance or a contraption is a plaintat least in Tax jurisprudence is a vexed question. The term Plant appears in many places in Sections 28 to 41 of the Act, which deal with computation of profits and gains from business .....

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g, it is a Plant and if business activity or industrial process is carried on in a place or at a place, it is a building. Ramanatha Aiyars Advanced Law Lexicon contains about 30 definitions/descriptions of the term Plant with reference to dictionaries, precedents and statutes. The best possible way is to understand the nature of the business, and the purpose of a thing in such a business. If one single individual unit itself is sufficient to carry on any business it is a Plant. But if one single .....

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t, the Division Bench held that if a thing itself is durable, but cannot effectively stand alone without functional integration with other similar or dissimilar components or units, it would not qualify as a plant. It was further observed that a single unit of centering or shuttering material by itself - though durable may not have functional value. In this judgment, the Division Bench, among others, also referred to the judgments in CIT Vs. Sri Krishna Bottlers Pvt. Ltd.,( [(1989) 175 ITR 154 ( .....

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of the assessee and against the Revenue and while doing so made observations in paragraphs 9 to 13 as follows:- 9. In Raghavendra Constructions case (supra), recently this court has taken a different view. The two judgments referred to above and certain others were cited before it. However, the Bench expressed its inability to concur with them. 10. The judgment of this Court in Sri Krishna Bottlers Pvt. Ltd.s case (supra) was cited extensively before the Bench that heard Raghavendra Constructio .....

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in India and foreign countries were discussed at length to draw support for the conclusions. The purpose of almost each and every judgment that was cited before their Lordships was taken note of. As regards bottles and shells, their Lordships observed : The bottles containing the soft drink cannot be stock- in-trade inasmuch as the bottle by itself is not the subject of sale. The customer or the retailer returns back the bottle to the assessee after the soft drink is consumed. Likewise, the shel .....

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in Schofield v. R and H.Hall Ltd. [1974] 49 TC 538(CA), which are used to store grain and to empty the same, performing a trade function. As pointed out in Dixon v. Fitchs Garage Ltd. [1975] 50 TC 509 (Ch.D), the bottles and the contents are totally interdependent. So are the shells. The bottles and shells also satisfy the durability test for it is nobodys case that their life is too transitory or negligible to warrant an inference that they have no function to play in the assessees trade. They .....

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e gross matter and, in fact, gross materiality is not a requirement at all for a thing to be treated as plant. For the aforesaid reasons, we agree with the decision of the Rajasthan High Court in CIT v. Jai Drinks P.Ltd. [1988] 173 ITR 100 (Raj). That case also related to bottles and shells, the assessee being a seller of soft drinks. The learned judges, after referring to the two Supreme Court Judgments referred to above, also referred to the decision of the Delhi High Court in CIT v. National .....

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structions s case(supra), another Division Bench of this Court observed as under: Applying the above principles, this court held that the bottles and shells used by soft drinks bottling industry is plant. The Division Bench nowhere observed that each bottle or each shell would also be a plant for the purpose of Section 32(1)(ii). 13. It was proceeded as though in Sri Krishna Bottlers Pvt. Ltd.s case (supra), each bottle and shell was not treated as unit qualifying for depreciation under Section .....

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me across the instances of a judgment being treated as sub silentio, if the binding precedent is taken note of. However, if the ratio emerging from a binding precedent was treated as non-existing and the judgment was rendered contrary to what was decided in the precedent, a situation may arise, where the judgment so rendered almost resembles, the one done in sub silentio. 16. It has already been demonstrated that the ratio in Sri Krishna Bottlers Pvt. Ltd.s case (supra), which is to the effect t .....

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by itself, one in conflict with the other, it has every right to choose as between the two and by doing so, it does not do any violence to the other. At the most, it may be an occasion for the superior Court to resolve the rule on ostensible conflict. Applying these principles, we prefer to follow the ratio in the judgment of this Court in Sri Krishna Bottlers Pvt. Ltd.s case (supra) than to be guided by the judgment in Raghavendra Constructions case (supra). (emphasis supplied) 7.2 The Divisio .....

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ed concrete and cement or the poles and bars that are used at the time of formation. We choose to fall in line not only with the judgment of this Court in Sri Krishna Bottlers Pvt. Ltd.s case (supra), which in turn has dorawn its conclusion based upon the judgment of the Supreme Court in Commissioner of Income Tax vs. Taj Mahal Hotel, but also the judgments rendered by the other High Courts. 8. In this backdrop, it has become imperative to make a detailed reference to the judgment in Krishna Bot .....

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deduction. For the Assessment Year 1976-77 the Company had claimed deduction under the first proviso to Section 32(1)(ii) of the Act in respect of the bottles and shells purchased and put to use during the year. During the relevant year the Company had purchased bottles to the tune of ₹ 3,25,021/- and claimed that the same should be allowed as outright deduction. The claim was, however, rejected by the Income Tax Officer. In this backdrop, the matter reached this Court. 8.1 Honble Justice .....

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ter with which the section is dealing, would attribute to it. The word plaint is to be given a very wide meaning. In its ordinary sense, it includes whatever apparatus is used by a businessman for carrying on his business but it does not include his stock-in-trade which he buys or makes for sale. It, however, includes all goods and chattels, fixed or movable, live or dead which the tradesman keeps for permanent employment in his business. (2) But the building or the setting in which the business .....

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n the trade of the businessman. (6) Gross materiality or tangibility is not necessary and, in fact, intangible things like ideas and designs contained in a book could be plaint. They fall under the category of intellectual storehouse. (7) In considering whether a structure is plaint or premises, one must look at the finished product and not at the bits and pieces as they arrive from the factory. The fact that a building or part of a building holds the plant in position does not, convert the buil .....

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ding paragraphs:- Bearing these principles in mind, we shall approach the facts of the present case. The bottles containing the soft drink cannot be stock-in- trade inasmuch as the bottle by itself is not the subject of sale. The customer or the retailer returns back the bottle to the assessee after the soft drink is consumed. Likewise, the shells which are sent to the customer or dealer also come back with the empty bottles and they cannot also be stock-in-trade. What is the function these bott .....

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t in Dixon v. Fitchs Garage Ltd. [1975] 50 Tc 509 (Ch D), the bottles and the contents are totally interdependent. So are the shells, The bottles and shells also satisfy the durability test for it is nobodys case that their life is too transitory or negligible to warrant an interference that they have no function to play in the assessees trade. They are therefore plant for the purposes of the Act. The principle that a setting in which the trade is conducted is not attracted to the facts of the c .....

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with the decision of the Rajasthan High Court in CIT V. Jai Drinks (P) Ltd. [1988] 173 ITR 100. That case also related to bottles and shells, the assessee being a seller of soft drinks. The learned judges, after referring to the two Supreme Court judgments referred to above, also referred to the decision of the Delhi High Court in CIT v. National Air Products Ltd. [1980] 126 ITR 196 and of the Calcutta High Court in CIT v. Steel Rolling Mills of Hindusthan (P.) Ltd. [1987] 164 ITR 633, wherein i .....

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ading the whole sentence. Their Lordships were of the opinion that they cannot be broken down further for considering their part of play in the business but did not express their view that in case of material which can be broken down further, whether it entails for higher depreciation. That issue did not arise for consideration in that case. 8.4 Thus, in Krishna Bottlers (supra) after considering several English judgments and also the judgments of this Court and other High Courts, laid down the .....

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from the factory. Functional test was held to be a decisive test. 8.5 It may be noticed that the question before the Division Bench in Krishna Bottlers (supra) was not as quoted in the second judgment in para.10, viz., whether each bottle that is used for serving a soft drink and the shells, in which they are arranged, qualify for 100% depreciation under Section 32 of the Act. The only question in Krishna Bottlers (supra) was, at the cost of repetition, whether on the facts and in the circumstan .....

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ench were as follows: 1. Whether on the facts and in the circumstances of the case, the ITAT is correct in law in holding that the assessee is entitled for 100% depreciation on bottles and crates treating them as plant in the business carried on by the assessee 2. Whether on the facts and in the circumstances of the case, the ITAT is correct in law in holding that the assessee company is entitled for 100% depreciation on bottles and crates in the assessees business of leasing them out on hire? 9 .....

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for the purpose of business or profession of the respondent. It further held as follows: Once such a ground applies and indeed the fact is conceded by Mr.S.R.Ashok, in view of the decision in KRISHNA BOTTLERS CASE, the further question raised by the learned counsel does not arises. There is no distinction that the purchase on which the depreciation would be allowed must be bulk purchase of a large number and that it would be disallowed if the purchase is of single items. There is no evidence tha .....

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o be plant if it is integrally involved in the carrying out of the profession or business and deprecation could be claimed in respect of that and accordingly dismissed the case filed by the Revenue. 9.2 In our view, the observations made by the said Division Bench that there is no distinction that the purchase on which the depreciation would be allowed must be bulk purchase of a large number and that it would be disallowed if the purchase is of single items and individual items of purchase would .....

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unsel for the parties in support of their contentions. In Commissioner of Income Tax Vs. Prem Nath Monga Bottles(P) Ltd.,( [(1977) 226 ITR 865 (Delhi)]), the Delhi High Court considered almost identical question in respect of Bottles and after referring to Krishna Bottlers (supra) answered the question in favour of the assessee and against the Revenue. In yet another judgment of the Delhi High Court in Joint Commissioner of Income Tax Vs. Anatronics General Co.(P) Ltd.,( [(2001) 247 ITR 25 (Delh .....

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locus classicus. He said (page 658): There is no definition of plant in the Act : but, in its ordinary sense, it includes whatever apparatus is used by a businessman for carrying on his business, not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed of movable, live or dead, which he keeps for permanent employment in his business. It is of relevance to note that section 43 (3) of the act defines plant by way of an inclusive definition; thereby intending to en .....

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nals conclusions are on terra firma. (emphasis supplied) 10.1 One would have to bear in mind that the word plant had not been defined in the relevant Act when the Yarmouth v. France([1887] 19 QBD 647 )was decided. But we are dealing with the case when definition of the word plant is available in the Act and, therefore, we would have to consider the question in the light of the intent of Legislature. 11. The Allahabad High Court in Harijan Evam Nirbal Varg Avas Nigam Ltd., Vs. Commissioner of Inc .....

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e. It is like any other tool with the help of which construction is done, say, Karni, Tasla, Kudel or Spade. It is not, therefore, correct to hold that shuttering material is not plant or machinery. In our opinion, with which the Karigars and masons work would be. The assessee is, therefore, entitled to depreciation on shuttering material and the same be allowed to it. Under section 43 of the Act, plant includes ships, vehicles, books, scientific apparatus and surgical equipment used for the pur .....

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the fact that articles like books and surgical equipment are expressly included in the definition of plant in section 43 (3) of the Act. It includes any article or object, fixed or movable, live or dead, used by the businessman for carrying on his business. It is not necessarily confined to an apparatus which is used for mechanical operation or processing or is employed in mechanical or industrial business. It, however, does not cover the stock-in-trade or an article which is merely a part of t .....

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erely a passive role in the accomplishment of the trading purpose. So the main test is whether a given item is such without which business cannot be carried on. The assessee being engaged, inter alia, in the activity of building construction, it can be said with certainty that without shuttering no building can be erected and, therefore, the shuttering material is an essential part for carrying on the construction work by the assessee. We, therefore, fully agree with the conclusion reached by th .....

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em was below ₹ 5000/-, the Tribunal had rightly accepted the assessees claim for 100% depreciation inconformity with the provisions of Section 32(1) (ii) of the Act. 13. The Madras High Court in Commissioner of Income Tax Vs. Alagendran Finance Limited((2003) 264 ITR 269(Madras)) dealt with the question pertaining to centering sheets and held that the assessee was entitled to 100% depreciation on centering sheets as per the proviso to Section 32(1)(ii) of the Act, because they are individu .....

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an Evam Nirbal Varg Avas Nigam Ltd(supra). 15. In Express Newspapers Ltd., Vs. Deputy Commissioner of Income Tax ( (2006) 280 ITR 452 (Madras) ), the Madras High Court while dealing with the similar question in respect of scaffolding material, relying upon, among the other, the judgment in Harijan Evam Nirbal Varg Avas Nigam Ltd(supra) took similar view. 16. The High Court of Delhi in Commissioner of Income Tax Vs. Ansal Housing Finance and Leasing Company ((2013) 354 ITR 180(Delhi)) dealt with .....

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s. Singhania Enterprises((1998) 234 ITR 822 (Madhya Pradesh) ), the Madhya Pradesh High Court, however, while dealing with a similar question pertaining to centering material directed the Tribunal to examine the case in the light of observations made in the judgment on the factual aspect to determine whether each plate of the centering material can constitute a plant or not. 18. In yet another judgment of this Court in Vinod Bhargava Vs. Commissioner of Income Tax ((2014) 367 ITR 122 (AP)) took .....

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assessees claim in that case, for depreciation under the proviso to Section 32(1)(ii) of the Act, at the rate of 100%, on electrical switch boards, distribution boards, sanitary pipeline installations, etc. in respect of certain new constructions in the existing building was rejected on the ground that the installations should be considered as an integrated unit and depreciation allowed only at 10%. Holding that it was not proper to work out separately the cost of individual items used to ascert .....

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e, distribute and make available electricity to all the rooms. To break up this expenditure in relation to the electrical system room-wise would be unreal and wholly artificial. Accordingly, considering the electricity system as an integrated whole, the expenditure incurred on it had to be treated as such and there was no scope for dissecting the electrical system into different component parts for each room and working out depreciation under the proviso to section 32(1)(ii) of the Act. Similarl .....

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anitary pipelines and fittings had to be restricted to 10 per cent. 20. In Assistant Commissioner of Income Tax Vs. Ravi Construction (MANU-GJ-1163-2014), the Gujarat High Court had an occasion to consider the question: is centering material to be viewed as block of assets for the purpose of allowing deduction in respect of depreciation under Section 32(1)(ii) of the Act? and further is depreciation allowable at 100% on the centering material as against normal rate of depreciation at 33.1/3 % fo .....

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ound that each cage was a separate plant whose value being less than ₹ 750/-. The assessees claim was, however, disallowed holding that the cages were not separate but one continuous fabricated unit in which the partitions are made for a number of birds to be enclosed in each compartment. In this backdrop, the matter reached the High Court. The Division Bench (S.B.Majmudar and T.S.Thakur, JJ) after considering several judgments of different High Courts and also English judgments observed t .....

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any article or thing, component or object to be termed plant itself so as to qualify for depreciation allowance at 100 per cent of the cost incurred on the purchase or fabrication thereof, the article or component, as the case may be, must be used by the assessee, as a self-contained unit and not as a part or attachment of a bigger unit as in the case of cages. This, however, does not mean that the article or object would cease to be plant for the purpose of depreciation, as a part of the bigge .....

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in respect of a diesel oil engine fitted to a motor vehicle in replacement of the existing engine? While dealing with this question, the Supreme Court extensively quoted and considered the provisions contained in all clauses of Section 10(2) of the 1922 Act. The Supreme Court also considered the word machinery used in all the clauses of Section 10(2) and observed that if a machine is machinery for purposes of giving an allowance in respect of insurance or for repairs or in respect of normal dep .....

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his scheme, it was urged before the Supreme Court that the word machinery must be given a restricted meaning in paragraph two of Clause (vi) and Clause (via), and the meaning suggested is that it must be a self contained unit capable of being put to use in the business, profession or vocation for the benefit of which it was installed. While dealing with this contention, the Supreme Court observed as follows:- First, we do not think that there is anything in the scheme of the second paragraph of .....

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ond paragraph of clause (vi), and the ground would be that the engine is not new and not that because it is second hand it is not machinery. Similarly, if it is purchased but not installed, the ground of refusal would be that it has not been installed and not that because it has not been installed it has ceased to be machinery. Suppose a new machinery is purchased but not installed, it would not qualify for extra depreciation on the ground that it has not been installed and not because it has ce .....

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Corporation of Calcutta Vs.Chairman, Cossipore and Chitpore Municipality ([(1922) I.L.R.49 Cal.190 (P.C)] ) and reproduced the definition of machinery in the judgment. The Privy Council in that case hazarded the definition of machinery to mean, some mechanical contrivances which, by themselves or in combination with one or more other mechanical contrivances, by the combined movement and inter- dependent operation of their respective parts generate power, or evoke, modify, apply or direct natura .....

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red by the Act satisfied. If we look at the point of time of purchase and installation, what was purchased and installed was machinery. Ultimately, the majority judges in this case (Mir Mohammad Ali) answered the question in the affirmative. 23. In Taj Mahal (supra) the Supreme Court considered the question whether sanitary and pipeline fittings in a building , which is run as a hotel would fall within the meaning of the word plant in Section 10 (2) (vi-b) of the 1922 Act. Section 10(5) of the 1 .....

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and convenience. To have sanitary fittings etc. in a bath-room is one of the essential amenities or conveniences which are normally provided in any good hotel, in the present times. If tine partitions in Jarrolds case (supra) could be treated as having been used for the purpose of the business of the trader, it is incomprehensible how sanitary fittings can be said to have no connection with the business of the hotelier. He can reasonably expect to get more custom and earn larger profit by charg .....

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y understood the meaning of the term plant in a wide sense. (See Commissioner of Income-tax, U.P. v. Indian Turpentine and Rosin Co. Ltd.). MANU/UP/0144/1969 : [1970] 75 ITR 533 (All)] 23.1 Then the Supreme Court observed that the High Court was right in not accepting the reasoning of the Tribunal based on the rates relating to depreciation under Section 10(2)(vi) and the assessee having claimed that the sanitary and pipe-line fittings fell within the meaning of furniture and fittings in Rule 8( .....

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gment in J.Lyons and Company Limited Vs. Attorney General ( [(1944) (1) Ch.281] ) was relied upon by the Revenue and while dealing with the submission based on these judgments, the Supreme Court observed that it is distinguishable and it hardly supports the contention of the Revenue. In that case, it was held that electric lamps and fittings in a tea shop were not part of the apparatus used for carrying on the business but were part of the setting in which the business was carried on and, theref .....

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d on 31-01-1968 and 03-01-1969 respectively of structures for use in trade were in whole or part expenditure on the provisions of machinery or plant within the meaning of Sections 18 & 19 of the Capital Allowances Act, 1968. Templeman, J speaking for the Bench after considering the observations made in Yarmouth (supra) as to what is plant, proceeded to consider the judgment in Commissioners of Inland Revenue Vs. Guthrie([1952 S.C 402]). That case concerned a motor car and the question was wh .....

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and pipeline fittings in a building which is run as a hotel would fall within the meaning of the word plant, distinguished the case J.Lyons and Company Limited (supra) and held that electric lamps and fittings in a tea shop were not part of the apparatus used for carrying on the business and they were the part of setting in which the business was carried on and, therefore, were not plant. Thus, the functional test assumes importance. One can use the car for his business and not spare parts. Eve .....

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be treated as plant. 25. The Bombay High Court in Commissioner of Income Tax, Bombay Vs. Tata Hydro Electric Power Supply Company Limited ([(1980) 122 ITR 288])considered the question whether on the facts and in the circumstances of the case, it was rightly held that the assessee was entitled to development rebate on the expenditure incurred by the assessee for the Assessment Year 1962-63 and 1963-64 on anchoring Walawhan Dam and cement grouting of Shirawata Dam. The question was answered in the .....

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tedly true that by incurring this expenditure no independent asset has come into existence but in order to entitle an assessee to claim development rebate creation of an independent asset is not essential. If by incurring this expenditure the existing dams have been so strengthened as to prolong their lives for a sufficiently long duration, then by incurring this expenditure a new plant can be said to have been installed so as to entitle the assessee to claim development rebate. Instead of demol .....

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by adopting the Coyne method of anchoring the two dams the new plant can be said to have been installed within the meaning of s.33 of the Act, and the Tribunal was right in allowing the claim of the assessee for development rebate. 25.1 Then the Bombay High Court referred to the judgment of the Gujarat High Court in CIT Vs. Elecon Engineering Company Limited ([ (1974) 96 ITR 672 ]) wherein it was held that the drawings and patterns, which constitute know-how and are fundamental to the assessees .....

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a plant. To support we would like to state that a Car is a plant or engine of the vehicle is a machinery but in any case spare parts of the car or of the machinery cannot be treated as a plant because the same cannot be used in the business/profession of the assessee independently. Similarly, every single component/unit forming a shuttering or centering cannot be used independently in the business of construction. In other words, unless every component/unit of shuttering is combined with one or .....

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art or attachment of a bigger unit. In a given case a component/article being used as a shuttering/centering material could be treated as plant, but it cannot be treated as a plant if it is part of shuttering, which is a plant in itself. In other words, a component/article being used for shuttering, which is a plant in itself, would not qualify for depreciation under proviso to Section 32 (1) (ii) of the Act as a part or extension of the bigger plant of which it becomes a part and it would not b .....

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ering could also be treated as plant. At the out set, in our opinion, as observed earlier, shuttering-which is a supporting structure, used to shape and support the concrete until it attains strength, is a plant within the meaning of section 43 of the Act. The question, however, is whether every unit/component (thing) used for forming shuttering or centering could be treated as plant. The words centering or shuttering are not defined in any enactment or elsewhere, and therefore, it would be nece .....

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it is placed for construction purposes, it becomes necessary to provide some temporary structure. A complete study of formwork or shuttering can be divided into several sub- heads, such as, requirements of formwork; economy in formwork; materials and sizes for forms; types of formwork and removal of formwork. The materials used for shuttering/formwork, most commonly used, are timber, plywood, steel and aluminum. For erecting temporary structure, apart from timber, plywood, steel sheets and alum .....

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open side of stair. 27.2 In construction activity, the vertical formwork is usually called shuttering, whereas horizontal formwork is called centering. The components or units (things) put to use for shuttering and centering are similar or common. Generally, there are two main types of shuttering, namely steel and wooden plank/plywood shuttering. Apart from steel and wood, plastics and biboglass are also used in formwork. Thus, the shuttering could be classified as a structure, erected temporari .....

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tically, so as to retain its shape; and iii) it should permit removal of various parts in desired sequences without damage to the concrete. Steel sheets and/or timber/wood planks can also be used as shuttering material. They can be fabricated in large number in any desired modular shapes and sizes. Steel forms are used in large number of projects and in situation where large numbers of reuse of the shuttering is possible. Steel forms are stronger, durable and have longer life than the timber for .....

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ced both horizontally and vertically so as to retain its shape. In short, the shuttering sheets can be used with the support of one or more other units/components such as poles, braces, yokes, ledgers, bevel strip boalts, ribbons, etc.. The shuttering materials would not mean a single unit or component, which can be put to use and make it functional. No single unit or component of the shuttering/centering materials can be used and make function and that it has to be used only with the support of .....

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a glance at the definition of the word plant, as defined under Section 43 of the Act. The word plant is described with an inclusive definition. It includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of business or profession but does not include tea bushes or live stock. The word plant in its ordinary meaning is a word of wide import and it must be broadly construed having regard to the fact that articles like books and surgical instruments are exp .....

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alling it a plant. The relevant test to be applied is whether it fulfils the function of plant in the assessees business/trading activity? Is it a tool of the assessees business/trade? If it is, then it is plant, no matter that it is not very long lasting or does not contain working parts such as a machine does and plays a merely passive role in the accomplishment of the trading purposes. In other words, the test would be does the article fulfill the function of a plant in the assessees trading .....

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ay is to understand the nature of the business and the purpose of such article/unit/component in such a business. It is also necessary to find out whether any single article/unit/component can be put to use as shuttering material and if the answer is in the negative, in our opinion, a single article/unit/component cannot be treated as a plant or it would not fall within the meaning of the word plant as defined under Section 43(3) of the Act. The test is if one single article/unit/component itsel .....

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ied, no individual article/unit/component could be considered as a plant. Merely because these articles are durable, they cannot effectively stand alone without functional integration with other similar or dissimilar article/unit/component so as to qualify as plant. Functional utility of each article/unit/component of the shuttering material to a Builder or Contractor in construction activity is the relevant test so as to consider it a plant and as observed earlier none of the article/unit/compo .....

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test for the use. None of the articles/items mentioned in the definition or even for that matter a bottle is dependent on any other article or they need not be put to use with other similar or dissimilar items/articles so as to make it functional. Having so observed, in our opinion, the judgment of Krishna Bottlers (supra) would not come in our way to hold that shuttering materials though is a plant every individual article/unit/component of the shuttering materials cannot be treated as plant. T .....

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not be made functional and no cement concrete can be laid in the process of construction activity. 31. We also need to understand what does apparatus means. The Judicial Dictionary by Justice L.P.Singh and Justice P.K.Majumdar, third edition, reprint 2012 with reference to a judgment of Kerala High Court in K.N.Achuthan Pillai v. Union of India ([AIR 1988 Kerala 140] ) described the word apparatus to include a telephone receiver. It further states if any extension is taken from such a receiver, .....

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in Words and Phrases by Justice M.L.Singhal with reference to a Commissioner of Customs v. C-Net communication(I) Pvt.Ltd., [2007 (11) JT 329] stated the word apparatus would mean the compound instrument or chain of series of instruments designed to carry out specific function or for a particular use. 31.3 The Chambers Dictionary, 10th Edition, described the word apparatus to mean things prepared or provided, material; a set of instruments, tools, natural organs, etc; a machine or piece of equip .....

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interpretative process of enquiry. One has to determine whether each item of heterogeneous material comes under the definition of Plant mentioned in Sec.32 (1) or not. Then, if it is a plant one has to go to proviso to see whether any item of such Plant utilized by the assessee for the purpose of his business or profession falls therein. In this case the centering and shuttering material is a homogenous qualitative material, though it is divisible. In such a case, one should not allow the asses .....

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than the prescribed value, as the apparent consideration stated in the agreement exceeded the value prescribed for applicability of provision of pre-emptive purchase. It was held that the subject-matter of transfer and its apparent consideration has to be decided by taking realistic view and not in technical manner. The judgments of Madras, Karnataka, Delhi and Calcutta High Court were overruled and the view taken by Bombay High Court in Jodhram Daulatram Arora v. M.B.Kodnani ((1996) 221 ITR 368 .....

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e of no avail for interpreting the section. Thus, it is clear that where the actual cost of any plant does not exceed ₹ 5000/-, the assessee is entitled to claim 100% depreciation. Merely because cost of every single item is less than ₹ 5000/-, if we hold that every single item used for shuttering can be treated as plant perhaps that will create a very strange situation. For instance, a Car is a plant within the meaning of Section 43 of the Act, however the owner of the Car is not en .....

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in a given case, perhaps the Contractor may be able to claim 100% depreciation but cannot claim that every single unit/article/component used for shuttering is costing less than ₹ 5000/- and is, therefore, entitled to claim 100% depreciation. In the circumstances, the question referred to must be answered in the negative. JUDGMENT (Per Honble Sri Justice M. S. Ramachandra Rao) : 34. I have seen the opinion of the Honble the Acting Chief Justice for himself and my brother Justice A.Ramalin .....

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Act,1961 (for short the Act). It was not disputed by the Revenue that if the said proviso is not attracted, the assessee would still be entitled to claim 33 1/3 % depreciation on the centering and shuttering equipment under Sec.32(1) of the Act. 36. By order dt.31.3.1994, the Dy. Commissioner of Income Tax held that the assessee cannot claim 100% depreciation on centering and shuttering equipment and he is entitled to only 33 1/3 % depreciation thereon. He held that, unlike in the case of certai .....

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might be used in whole lots, at other times a few of these materials or even a single one could be put to use. He also held that depreciation can be allowed on centering and shuttering equipment/materials, not on entire amount of ₹ 13,19,434/ claimed by assessee, but only on ₹ 11,46,124/. 37. The assessee filed an appeal to the Commissioner of Income Tax. By order dt.25.11.1994, the Commissioner partly allowed the appeal of the assessee and following his earlier order dt.2.8.1994 in .....

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elying upon its order dt.13.11.1998 in ITA.No.435/HYD/1997 in the case of M/s.Raghavendra Constructions, Visakhapatnam vs. ACIT, Circle-II, Visakhapatnam in which, on similar facts, it had allowed depreciation at 100% on shuttering and centering materials. 39. This is questioned by the Revenue in the present appeal. 40. This appeal was admitted in 2001 to consider the following substantial questions of law : (A) Whether on the facts and in the circumstances of the case, the Appellate Tribunal wa .....

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before a Division Bench of this Court, the said Division Bench had opined that there was a conflict between two Division Bench judgments of this court, the first, in Commissioner of Income Tax v. Raghavendra Constructions(AIR 1972 SC 168 ) and the second, in The Commissioner of Income Tax v. Live Well Home Finance (P) Ltd ( (1887) (19) Q.B. 647 ) and the matter was required to be decided by a larger Bench. 42. The Honble Chief Justice then constituted this Full Bench to consider the following q .....

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ciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of Section 34, be allowed. (i) Omitted by TL (Amend Misc. Provisions) Act, 1986, w.e.f.01.04.88; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Provided that where the actual cost of any machinery or plant does not exceed five thousand rupees, t .....

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of certain terms relevant to income from profits and gains of business or profession : In Sec.28 to 41 and in this section, unless the context otherwise requires- (3) Plant includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession but does not include tea bushes or live stock; III. DICTIONARY MEANING OF SHUTERING/CENTRING 46. The Concise Oxford Dictionary (9th Edition) defines centering as a temporary frame used to support an .....

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Newspapers Ltd. v. Dy. Commissioner of Income Tax ((1969) 71 ITR 587 (Mad)), by the Allahabad High Court in Harijan Evam Nirbal Varg Avas Nigam Ltd. v. C.I.T.( ), by the High Court of Punjab and Haryana in C.I.T. v. Akal Construction and Engineering Company( ), by the Rajasthan High Court in C.I.T. v. Mohta Construction Company( ), by the Delhi High Court in C.I.T. v. Ansal Housing Finance and Leasing Company Ltd( )., by the Madhya Pradesh High Court in C.I.T. vs. Singhania Enterprises( ), and b .....

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wooden chairs and anything which can be used to support a suspended wall, reinforced cement concrete stand, an arch, a sunshade, a cantilever cement structure as support when such structures are being built with cement concrete; the purpose of shuttering is only till the setting of the cement concrete or cement material and the moment the cement concrete achieves the required setting, the shuttering material is removed and used or re-used in other constructions. It held that in the very nature .....

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re-used as non-interdependent, interconnected a non-consumable thing) and has functional utility in the trade or business of the assessee to advance his business interest, such a thing would be a plant; if it is durable, but cannot effectively stand alone without functional integration with other similar or dissimilar components or unit, it would not qualify as a plant. It held that a single unit of centering or shuttering material by itself though durable may not have functional value; similar .....

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THE OPPOSITE VIEW IN M/S LIVE WELL HOME FINANCE (P) LTD 49. On the other hand, in Live Well Home Finance (P) Ltd. (30 supra) another Division Bench disagreed with the above view in Raghavendra Constructions (29 supra). It held that in the context of availing the benefit under Section 32(1)(ii) of the Act, identification of a unit of plant becomes essential and though the Act and the precedents on the subject are silent about this, the safest way is to identify the irreducible minimum of the pla .....

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m for the shuttering material is the individual plates, for providing support to the reinforced concrete and cement or the poles and bars that are used at the time of formation. VII. THE RIVAL CONTENTIONS 50. While the Revenue contends that this view in Live Well Home Finance (P) Ltd. (30 supra) is not the correct view and that the view in Raghavendra Constructions (29 supra) is the correct view, the assessee contends to the contra. 51. The contention of the Revenue is that it was not the intent .....

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In fact, neither before the assessing officer, the Commissioner of Income Tax or before the Income Tax Appellate Tribunal, was it the plea of the Revenue that shuttering/centering material is not entitled to be treated as a plant at all. 53. Its contention is that since each of the centring/shuttering material cannot be used on stand alone basis, the assessee cannot claim 100% depreciation. According to it, the Division Bench in Raghavendra Constructions (29 supra) has rightly applied stand alon .....

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the term plant is intended to be extensive. 55. First in 1972, the Supreme Court while construing the said definition in CIT, A.P. v. Tajmahal Hotel, Secunderabad( ) held that sanitary and pipeline fittings in a building which is run as a hotel fall within the word plant in Section 10 (2) (vi-b) of the Income Tax Act, 1922 (which is in pari materia with Section 43 (3) of the Income Tax Act, 1961) for grant of depreciation allowance and observed : 9. Now it is well settled that where the definit .....

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wide. The word includes is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. When it is so used these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include. 10. The meaning of plant as given in Yarmouth v. France( ) was accepted as correct. According to that .....

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have rightly understood the meaning of the term plant in a wide sense. (See Commissioner of Income-tax, U.P. v. Indian Turpentine and Rosin Co. Ltd.) MANU/UP/0144/1969 : [1970] 751 ITR 533 (All). 56. In the year 1986, in Scientific Engineering House P. Ltd. v CIT, A.P.( ), the Supreme Court considered Section 43 (3) of the Act and declared that technical know-how in the shape of drawings, designs, charts, plans, processing data and other literature falls within the definition of plant and is th .....

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plant in the assessees trading activity ? Is it a tool of his trade with which he carries on his business ? If the answer is in the affirmative, it will be a plant. IX. THE SUPREME COURT DEALING WITH THE WORD MACHINERY HELD SOME MECHANICAL CONTRIVANCES EITHER BY THEMSELVES OR IN COMBINATION WITH ONE OR MORE OTHER MECHANICAL CONTRIVANCES COULD BE MACHINERY 57. Coming to the point in issue in this case , in Commissioner of Income Tax v Mir Mohd Ali( ), the Supreme Court was considering the claim .....

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om rejected his claims for further depreciation. The Tribunal held that he is not entitled to extra depreciation under clause 10 (2) (vi) or 10 (2) (via) on the ground that even if an engine is important for running a motor, it is after all part of an equipment and cannot itself be machinery for claiming extra depreciation as envisaged in those sub sections. It referred the matter to the High Court which held in favour of the assessee. While dealing with the question whether a new diesel engine .....

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ordinary language prima- facie, means some mechanical contrivances which, by themselves or in combination with one or more other mechanical contrivances, by the combined movement and inter dependent operation of their respective parts generate power, or evoke, modify, apply, or direct natural forces with the object in each case of effecting so definite and specific a result. (emphasis supplied) It upheld the contention of the assessee and affirmed the decision of the Madras High Court that the .....

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ras High Court held that the word plant also should be given the same popular meaning as machinery and held: if a plant in combination with other appliances in the business effectuate and perpetuate the trade or commerce in question, then such induction or introduction of such plant to be deemed to be such that they are placed in a position for service or use in business. It held that the assessees by introduction of apparatus or appliances such as electric fans, bicycles, motorcycles, office ca .....

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the statutory provision, each apparatus conforming to the definition of machinery or plant, as the case may be, has to be taken individually for the purpose of considering the computation of depreciation and not the organization or the unit as a whole by treating each and every apparatus necessary for the function of the factory as forming an integral part of the factory vide CIT v. Kiran Crimpers ((1997) 225 ITR 84 (Guj)). In Cripps v. Judge( ), scaffolding has been held to be a plant. XI. THE .....

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t to use during the year. The Income Tax Officer deducted the claim for outright deduction on the ground that bottles cannot be treated as plant on which depreciation can be claimed; bottle and cool drinks therein put together form stock-in-trade and cannot be separated from the drink for the purpose of sale and that the assessee, having manufactured the cool drinks supplied them along with the bottles. On appeal, the Commissioner accepted the assessees claim that the bottles constitute plant an .....

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ciples can be gathered; (1) "Plant" in section 43(3) of the Act is to be construed in the popular sense, namely, in the sense in which people conversant with the subject-matter with which the section is dealing, would attribute to it. The word "plant" is to be given a "very wide" meaning. In its ordinary sense, it includes whatever "apparatus" is used by a businessman for carrying on his business but it does not include his stock-in-trade which he buys or .....

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nction in the carrying on of the business, it cannot be said that it is not plant. It may have a passive operation and if it has, it is prima facie a plant unless there was good reason to exclude it from that category. It must be a "tool in the trade" of the businessman. (6) Gross materiality or tangibility is not necessary and, in fact, intangible things like ideas and designs contained in a book could be "plant". They fall under the category of "intellectual storehouse .....

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nal test is a decisive test. 32. Bearing these principles in mind, we shall approach the facts of the present case. The bottles containing the soft drink cannot be stock-in-trade inasmuch as the bottle by itself is not the subject of sale. The customer or the retailer returns back the bottle to the assessee after the soft drink is consumed. Likewise, the shells which are sent to the customer or dealer also come back with the empty bottles and they cannot also be stock-in-trade. What is the funct .....

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unction. As pointed out in Dixon v. Fitch's Garage Ltd. [1975] 50 TC 509 , the bottles and the contents are "totally interdependent." So are the shells. The bottles and shells also satisfy the durability test for it is nobody's case that their life is too transitory or negligible to warrant an inference that they have no function to play in the assessee's trade. They are therefore "plant" for the purposes of the Act. 33. The principle that a "setting" in .....

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at all for a thing to be treated as plant. ( emphasis supplied) In CIT V. Anand Theatres ( [2000 (5) SCC 393]) , the Supreme Court approved this decision and observed that this Court had exhaustively considered the decisions. 61. In C.I.T. v. Margadarsi Chit Fund (P) Ltd.( ), the Revenue had specifically raised the contention that even if for the purpose of business of the assessee (who purchased bottles for the purpose of leasing them), bottles are treated as plant within the meaning of Sec.32 .....

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ttles in respect of which depreciation was claimed were not subject of bulk purchase. Even apart from it, a bulk purchase is merely individualized purchase made collectively and we do not find any distinction in the provisions of Section 32 (1) or the proviso of a distinction possible to be drawn in the manner suggested. The only test is whether the article in respect of which depreciation is claimed is plant for the purpose of the business or profession. Individual items of purchase would also .....

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in Sri Krishna Bottlers (P) Ltd. (47 supra), the Division Bench had categorically held that each bottle and each shell is an entity by itself. Further, going deeply into the facts of that case, the issue in Sri Krishna Bottlers (P) Ltd. (47 supra) was not about whether a group of bottles are a plant but in fact, whether each bottle was a plant. Therefore, it is clear that by oversight the Bench in Raghavendra Constructions (29 supra) overlooked this passage and the facts in the judgment in Sri .....

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h decided Raghavendra Constructions (29 supra) could not have taken a view different from that in Margadarsi Chit Fund (P) Ltd (49 supra) and only a larger bench could have over ruled it. Therefore, in my opinion, the decision in Raghavendra Constructions (29 supra) can be said to be per in curiam. 64. In Live Well Home Finance (P) Ltd. (30 supra) , the Division Bench held that as between the two Division Bench decisions in Raghavendra Constructions (29 supra) and in Sri Krishna Bottlers (P) Ltd .....

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ord plant. Thus Mir Mohd Ali (42 supra) had accepted in principle that an apparatus by itself or in combination with other , if used in the business of an assessee, would qualify as plant. Raghavendra Constructions (29 supra) therefore runs counter to the judgment in Mir Mohd Ali (42 supra) in so far as it took the view that only if an apparatus fulfils the stand alone use test, it is a plant and it would not be a plant if it is used in combination with others. XII. WHETHER A SINGLE PIECE OF SHU .....

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it is not disputed by the Revenue that if the said proviso is not attracted, the assessee would still be entitled to claim 33 1/3 % on the centering and shuttering equipment under Sec.32(1) of the Act. 68. Once it is accepted that for claiming depreciation under Sec.32(1), centring and shuttering material would constitute a plant, it is difficult to agree with the Revenues plea that for purpose of 1st proviso to Sec.32 (1), each piece of the centring and shuttering material will not be a plant .....

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from the judgment of the Privy Council in Corporation of Calcutta (43 supra): The word machinery, when used in ordinary language prima-facie, means some mechanical contrivances which, by themselves or in combination with one or more other mechanical contrivances, by the combined movement and inter dependent operation of their respective parts generate power, or evoke, modify, apply, or direct natural forces with the object in each case of effecting so definite and specific a result. (emphasis su .....

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ith centring material that the benefit of the proviso to Section 32 (1) (ii) of the Act is not confined only to units in bulk; that it does not refer to the number of units, but refers to the value of individual units; and if the individual unit is regarded as plant and if it is valued below ₹ 5,000/-, it would qualify for 100% depreciation. It held that there is no question of how many units are normally used for the business and the test is as to whether one centering sheet can be identi .....

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ce each shuttering costs less than ₹ 5,000/-, it is entitled for 100% depreciation. 73. The Delhi High Court in Ansal Housing Finance and Leasing Co. Ltd. (36 supra) has held that 100% depreciation can be claimed in respect of parts of scaffolding and shuttering and followed its earlier decision dt.16.08.2010 in ITR No.241 / 1992 and also the decisions in Mohta Construction Co. (35 supra) and Alagendran Finance Ltd. (31 supra). XIII. THE STAND ALONE USE TEST IS NOT THE ONLY TEST FOR A CONT .....

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larly, in Scientific Engineering House P. Ltd. (41 supra) the Supreme Court has reiterated this and further held that in order to qualify as a plant an article is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business, but it must have some degree of durability. It approved the functional test laid down in IRC v. Barclay, Curle and Co. Ltd ([(1970) 76 ITR 62 (HL)]). wherein Lord Guest held that in order to .....

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umentation service would constitute a book and would fall within the definition of plant. 76. The Supreme Court has no where indicated in both the above decisions, that to qualify as plant, the article in question used by the businessman for carrying on his business should be capable of being put to use only on a stand alone basis. Thus the view taken in Raghavendra Construction (29 supra) goes beyond the test laid down by the Supreme Court and super-adds a new requirement that the article in qu .....

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s referred to above should be understood as referring to functional test as function of the article in question qua the business of the assessee. They do not refer to the function of the article as such whether it is used by itself or in combination with others. Since the Bench in Raghavendra Construction (29 supra) , instead of looking at the function of the shuttering/centering material qua the business of the assessee, had looked at the function of the shuttering/centering material en bloc or .....

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do not lose their individuality merely because they are used in combination with other similar or dissimilar units in the construction activity of the assessee. They can be and are normally dis-assembled after their use in combination and revert back to their individual status. Since they are durable and have a function in the assessees business, merely because they are not capable of being used individually on a stand alone basis and have to be used in combination with other units thereof, they .....

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were plant qualifying for capital allowances in Chapter I of Part III of the Finance Act, 1971. The appeal was dismissed and was upheld by a single Judge of the High Court but the tax payer succeeded before the Court of Appeal. The Court of Appeal declared that in the context of a profession, the provision of plant should be so interpreted that a lawyers books his set of law reports and his text books are plant. It held that the word plant had acquired special meaning and in the interests of fai .....

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re an apposite example to our case would be law books in an Advocates office which though each individually may not by themselves contribute to the Advocates performance in a legal profession, yet collectively, without losing their individuality, make a very important contribution in his career and have rightly been held to be a plant. 82. Therefore, I hold that it is possible for the assessee to claim depreciation on individual items thereof under the proviso to Section 32 (1) (ii) of the Act a .....

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tion that the purchase on which depreciation would be allowed must be a bulk purchase of a large number and it would be disallowed if the purchase is of single items; and that individual items of purchase would also be plant if it is integrally involved in the carrying out of the profession or business and depreciation could be claimed in respect of that. 85. I also agree with the view in Alagendran Finance Ltd. (31 supra) insofar as it was held therein that a single sheet of centering or scaffo .....

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is a tool of the assessees trade with which he carries on business. 86. No doubt, in Pathange Poultry Farm v. Commissioner of Income-Tax ([(1994) 210 ITR 668 (Karnataka)] ), a Division Bench of the Karnataka High Court, while dealing with a case of an assessee engaged in poultry business who claimed 100% depreciation on the cost of individual cages (which were then fabricated in such a manner to form a bigger unit) disallowed such a claim. But, the basis of such disallowance was that once the sm .....

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uttering material by itself, though durable, may not have functional value; that it must also effectively stand alone without functional integration with other similar or dissimilar components or units, in order to qualify as a plant. 87. In my opinion, the Division Bench in Raghavendra Constructions (29 supra) appears to have overlooked the fact that unlike in the case of individual cages which have been fabricated into one bigger unit and thereafter lose their individuality, individual compone .....

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his business is to be taken individually and independent of each other [for considering a claim of depreciation under first proviso to Sec.32(1)], though one may be necessary for the functioning of the other, has one exception. 89. As explained in Kiran Crimpers (45 supra) by the Gujarat High Court (which was followed in Express Newspapers (32 supra)), this principle would not apply if it is an integral part of another asset as such. Once an apparatus becomes an integral part of another asset as .....

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dentity as a machine independent of the machine in which it is fitted. 90. However as held by me in para 79 supra individual components of shuttering/centering material do not lose their individuality merely because they are used in combination with other similar or dissimilar units in the construction activity of the assessee. They can be and are normally dis-assembled after their use in combination and revert back to their individual status. They are then reused in different combinations. Unli .....

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s, cables, conductors and switch boards used by a Company engaged in manufacturing and selling rosin and turpentine to change over power from D.C to A.C, have been held to be a plant. The court held: The Tribunal described the change over from D.C. system to A.C. system thus : "This involved new installations of poles, cables, conductors, switchboards for distribution to various feeders." 8. In Commissioner of Income Tax v. Mir Mohammad Ali, the Supreme Court explained that the express .....

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The word "plant" as used in Sub-section (2) of Section 10 of the Act has been defined in Sub-section (5) of Section 10 : "Plant includes vehicles, books, scientific apparatus and surgical equipment purchased for the purposes of the business, profession or vocation." 10. The definition of plant contained in Sub- section (5) of Section 10 is very wide. The term "plant" includes such articles as books and scientific apparatus. There should, therefore, be no difficulty .....

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tors and switch-boards constituted "machinery or plant" within the meaning of Clause (vi), there is no reason why they should not constitute "machinery or plant" within the meaning of Clause (vib) of Section 10(2) of the Act. Even if there is some difficulty in looking upon poles, cables, conductors and switch- boards as machinery, there is no difficulty in accepting the assessee's case that these articles constitute a plant within the meaning of Clause (vib) of Section 1 .....

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