TMI Blog1995 (10) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of training centre and further even though it was specifically brought out before the Tribunal in regard to training centre assets that some items worth Rs. 21,430 would fall under the head 'Office appliances' on which development rebate was not admissible ? 3. Whether, relief under section 80J is required to be calculated on the basis of the assets as on the first day of accounting year without taking into account the increase in the capital during the year ? 4. Whether, while computing the capital employed for grant of relief under section 80J liabilities and debts are not required to be deducted ?" Question No. 1 relates to the computation of relief to the assessee under section 80J of the Income-tax Act, 1961, as the provision stood in the relevant assessment year. The assessee had, in fact, during the previous year acquired machinery worth Rs. 8,22,913, but that had not been installed until the close of the year. For the purpose of computing capital employed to calculate allowable deduction under section 80J, the Assessing Officer did not include the aforesaid sum on the ground that the same has not been used during the previous year for the business of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant or furniture owned by the assessee and used for the purposes of business or profession of the assessee during the previous year. Under section 33, the assessee can claim development rebate which is in addition to depreciation in respect of new ship, new machinery or plant other than office appliances or road transport vehicles which is wholly used for the purposes of the business carried on by the assessee. Sub-section (6) of section 33 prohibits allowance of development rebate in respect of machinery or plant installed after March 31, 1965, in any office premises or any residential accommodation including any accommodation in the nature of a guest house. Sub-section (6), therefore, makes it clear that even if a particular article or thing may constitute a new machinery or plant and is not an office appliance, yet the same would not be considered for the purpose of allowing development rebate. The condition is that such new machinery and plant installed in office premises or any residential accommodation will be taken out from the purview of eligibility for rebate. It is in the light of the aforesaid provisions the claims in respect of the aforesaid items are to be considered f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ads. As roads are required to be held as part of the building, culverts are also required to be held as part of the building. Accordingly, it must be held that the roads and culverts are part of the building. For the same reasoning, compound wall of the factory of the premises must also be held to be an integral part of the factory premises and is building. However, the question does not end here. In order to claim benefit of development rebate, the assessee contends that the factory premises themselves must be held to be plant and cannot be treated as building simpliciter. After having carefully considered this contention of learned counsel for the assessee, we are unable to accept the same. As we have noticed above, a building is something different from plant and machinery. It is apparent from the difference in the language used in section 32 and section 33. Without laying down that in no case a building can be considered as plant, it can generally be stated that a building ordinarily cannot be construed as plant. In this connection, it may be pointed out that in CIT v. Coromandel Fertilisers Ltd. [1985] 156 ITR 283 (AP), the question related to the fact as to whether roads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in respect of development rebate. We fail to understand how pumps are not items of machinery. Obviously, the Assessing Officer had committed a mistake in dealing with the development rebate on the cost of pumps newly installed during the previous year under section 33. So far as drainage pipes which are installed for the purpose of discharging the effluents of the plant are concerned, in the ordinary sense and keeping in view the object of section 33, the effluent discharge system for discharge of effluent which has come in existence as a result of the operation of the plant must be deemed to be part of the plant. Without discharge of effluent, the process of functioning of the plant would not be complete. Use of drainage pipes and pumps in a drainage system installed for the purpose of discharge of effluents of a plant cannot be equated with ordinary sanitary pipes and fittings installed in a building for the purpose of use of the building. We are, therefore, of the opinion that as discharge of effluents is an integral part of the operation of the plant, the pumps and drainage pipes are necessary adjuncts of plant itself and therefore plant within the meaning of section 33 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous with the object of the statute to effectuate the legislative intention. In this connection, it may be noticed that while the object of section 32 in providing for depreciation is to spread over the capital cost incurred on the acquisition of capital assets for the business over a period of years and to arrive at the real profits from operating the business, the object of providing development rebate in addition to depreciation is not to meet the cost incurred for the purpose of business but to make available the funds for future use for the purpose of development of the business and such fund is not to be used for the purpose of distribution of profits by way of dividend or remittance outside India for creation of any assets outside India. The allowance of development rebate is made only once in respect of the new machinery and a fixed percentage as prescribed in the Act from time to time is allowed as a deduction from the profits of that year. A fixed percentage of the said actual allowance has to be transferred to a reserve fund to be utilised by the assessee during the period of eight years next following for the purpose of business of the undertaking. Therefore, while inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not decide the applicability of those wide dictionary meanings to the provisions of section 33. In the present case also, no question had been raised before the authorities under the Act and as it does not arise from the order of the Tribunal whether the factory building itself can be "plant", in the facts and circumstances of the present case, we are not delving into that question though learned counsel for the assessee made an attempt to argue that for the purpose of section 33, the factory premises itself is a plant. Regarding medical equipment, the claim has been denied on the ground that the equipment is for hospital as labour welfare. It is not the case that it is not machinery or plant. As we have noticed, from the point of considering any plant and machinery used for the purpose of business, it is not necessary that the machinery or plant must have been installed in the factory premises itself. What has been prohibited is that any machinery or plant if installed in the office premises or residential accommodation, the same is not to be considered for development rebate. It is also not the case that the medical equipment are office appliances. Obviously, that could not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Merely because the assessee on account of its vast size and operation and the large number of the employees to be trained has opened a training centre with machinery and prototypes in a workshop instead of keeping all these assets in its own factory. " It is an admitted case that the assets at the training centre are otherwise machinery and plant and the only ground on which the allowance of development rebate in respect of these assets was disallowed could be under sub-section (6) of section 33. In our opinion, a workshop cannot be considered an office building. An office building is one where administrative functions in relation to the factory are discharged. But a workshop is kept for maintenance and repairs of the plant and also being used for training the workers. The machinery and plant kept in the workshop cannot be considered to be an office building and, therefore, the Tribunal has rightly come to the conclusion that development rebate cannot be denied only because the plant and machinery has been installed on the workshop. As an ancillary to this question, it was argued before the Tribunal which has not been made part of the question in that the same part of the assets ..... 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