TMI Blog1994 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... rebate. Reliance is placed in support of this contention on the functional test applied by the courts from time to time for determining whether a particular asset constituted plant or not. According to learned counsel, keeping in view the nature of the activities of the industrial undertaking of the assessee, these items have to be treated as plant. So far as the second question is concerned, the submission of learned counsel is that the assessee is at liberty to reclassify items originally classified by him as "furniture and fixtures" as "plant and machinery" and to claim development rebate thereon. According to him, the authorities below were not justified in holding that the items of furniture and fixtures did not constitute plant and machinery. In the instant case, according to counsel, applying the functional test, the furniture and fixtures in question have to be treated as plant and machinery. Before we express our opinion on the above submissions, it may be expedient to briefly set out the material facts of the case as are relevant for determination of the controversy arising before us. The assessee is an Indian company engaged in the manufacture of equipment for generati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he items in question could be classified only as part of the factory building and not "plant". The Tribunal accordingly directed the Income-tax Officer to allow depreciation on these items as forming part of the factory building. The Tribunal also upheld the order of the Income-tax Officer and the Appellate Assistant Commissioner rejecting the claim of the assessee for development rebate in respect of items of furniture which were reclassified by it as plant and machinery and held that these items were furniture items and could not be classified as plant and machinery. Hence, this reference under section 256(1) of the Act at the instance of the assessee. We have carefully perused the order of the Tribunal in the light of the facts set out above and considered the reasoning of the Tribunal in support of its conclusions. We have also given our careful consideration to the submission of counsel for the assessee, as also of counsel for the Revenue who supports the order of the Tribunal. The expression "plant" has been defined in clause (3) of section 43 of the Act to include "ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged on behalf of the assessee that judging from the functional test, the "approach channel" constructed by dredging the sea can be treated as "plant". The above contention was rejected by this court. While doing so, this court also cautioned against indiscriminate application of this test in the following words (at page 267) : " In our opinion, the functional test has to be applied rationally. Too liberal an application of this test may bring in everything including the roads within the factory, which have already been held by the Supreme Court to be 'building', within the expression 'plant'. On such liberal interpretation, even the 'factory building' itself may have to be held to be a 'plant' because, without it, the 'plant' cannot be operated in the open. But that is not so. Structures which fall within the expression 'building' or pathways like roads, etc., required for providing approach to the factory have been held to be buildings or roads and not 'plant'.... " Reference may also be made at this stage to the decisions of the House of Lords in Cole Bros. Ltd. v. Phillips [1982] 55 TC 188 ; IRC v. Scottish and New Castle Breweries Ltd. [1982] 55 TC 252 and the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case, Wimpy International Ltd., owned and operated fast food restaurants (Wimpy Bars) serving a standard range of food items to be selected by the customers at the counter with no table service. Similarly, another assessee, Associated Restaurants Ltd., owned and operated Pizzaland restaurants serving quick inexpensive meals with pizza main courses, starter courses and sweets. They were licensed to sell liquor and offered table services. These companies expended money on improving and modernising their restaurants, e.g., shop fronts, floor and wall tiles, suspended ceilings, raised floors, light fittings, wall finishes, fire doors and fire proofing and other decorative items. In their assessments to corporation tax, they claimed that this expenditure qualified for capital allowance under section 41 of the Finance Act, 1971, as plant used in the carrying on of their respective trades. The Special Commissioners disallowed the claims in respect of shop fronts, floors and wall tiles, wall finishes and the other non-decorative items, which, they held, were part of the "setting" or premises in which the trades were carried on, but allowed those in respect of certain decorative items, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that there are a large number of items numbering 74, which include even stools, cycles, storage racks, wooden top workman tables, etc. Keeping in view their nature and function, all these were classified by the assessee itself as "furniture and fixtures". This classification was, however, later changed to "plant" and development rebate was claimed in respect thereof. The reclassification was not accepted by the taxing authorities including the Tribunal as they were of the opinion that the items in question did not qualify to be termed as "plant". The assessee is aggrieved by the above finding. According to him, all those items constitute "plant". We have considered the submission of the assessee. We, however, find it difficult to accept the same for two reasons. First, the character of an item is essentially a question of fact in regard to which the finding of the Tribunal is final unless it is held to be perverse. Second, even if some of the items were used in carrying on the business, they were used more as a part of the premises or place upon which the business was carried on. They more appropriately satisfy the "premises test". Hence, these items cannot qualify as "plant" ..... X X X X Extracts X X X X X X X X Extracts X X X X
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