TMI Blog1994 (7) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... n the business of running a poultry farm. It has, for that purpose, raised sheds and installed cages in the same for housing birds. During the period relevant to the assessment year 1981-82, the assessee added some new sheds to the existing ones and purchased 9,000 cages at the rate of Rs. 15 per cage for installation in these sheds. In the income-tax return filed by the assessee for the relevant year, it claimed 100 per cent. depreciation on the cost of the cages purchased on the ground that each cage was a separate plant whose value being less than Rs. 750, the same qualified for 100 per cent. depreciation under section 32 of the Income-tax Act. The assessee's claim was disallowed by the Income-tax Officer on the ground that the so-called cages were not separate but one continuous fabricated unit in which partitions are made for a number of birds to be enclosed in each compartment. The Income-tax Officer held that the cages purchased by the assessee did not have a separate existence apart from the bigger unit which consisted of hundreds of such cages and that the cost of each such unit being more than Rs. 750 only ten per cent. depreciation was allowable on the cost of the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inition as given in section 43(3) of the Income-tax Act was inclusive and not exhaustive in nature. He submitted that each cage purchased by the assessee was a plant within the meaning of section 32 of the Income-tax Act, regardless of the smallness of its size or the price thereof. According to learned counsel, once it was found that the cages purchased by the assessee were capable of use as independent units for a business similar to the one being carried on by the assessee, it was immaterial whether the assessee had utilised them as separate units or as part of a bigger unit as held by the Tribunal and the income-tax authorities below. The arrangement of the smaller cages in a row and the alterations made in the same to make bigger compartments to house the birds therein, was, according to learned counsel, a matter of convenience, for the assessee and not a compulsion. The units could have been used by the assessee, argued learned counsel, even individually, and the very fact that the same have been amalgamated or fabricated into one single bigger unit, with bigger compartments did not make any difference for the purposes of allowing depreciation on the cost incurred by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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." A plain reading of the definition provided by section 43 would show that the meaning given to the term " plant " is not exhaustive in character. The definition is only inclusive in nature, leaving wide open the scope for items other than those mentioned in sub-section (3) of section 43, to be treated as plant, subject, of course, to the condition that the same is used by the assessee for the purpose of his business or profession. The other significant feature of the definition is the wide amplitude which the meaning given to the term "plant" enjoys. The definition embraces within its fold subjects and matters so diverse as a ship sailing on the high seas on the one hand, a book used whether by a lawyer or an architect on the other and a surgeon's scalpel on the third. It is obvious that there is absolutely no generic affinity between the items chosen for inclusion in the definition provided by the Legislature to the term "plant". The diversity of the subjects chosen and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and annual allowance under the relevant statutory provisions. Ormerod L. J., who delivered the leading judgment, referred with approval to the definition given in Yarmouth's case [1887] 19 QBD 647 to the word "plant" and observed thus : " The dividing line between what is 'plant' and what is not is a narrow one, and the facts of this particular case come near to that dividing line. But, in my judgment, in the circumstances of this case-and I think each case does depend largely on its own circumstances-the partitions should be regarded as something more than a mere setting for the carrying out of the trade ; in other words as coming within the definition of 'plant' as contained in section 279. " In CIT v. Taj Mahal Hotel [1971] 82 ITR 44, the Supreme Court while approving the definition given in Yarmouth's case [1887] 19 QBD 647 and the view expressed in Jarrold's case [1962] 40 TC 681 (CA), held that sanitary and pipeline fittings installed in a hotel fell within the definition of the term "plant" under the Act. The Supreme Court observed thus : " It cannot be denied that the business of a hotelier is carried on by adapting a building or premises in a suitable way to be us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essential part in getting large vessels into a position where work on the outside of the hull can begin, and that it is wrong to regard either the concrete or any other part of the dock as a mere setting or part of the premises in which this operation takes place. The whole dock is, I think, the means by which, or plant with which, the operation is performed. " Then came Scientific Engineering House P. Ltd. v. CIT [1986] 157 ITR 86, in which the Supreme Court was considering whether drawings, designs, plans, processing data, etc., could be treated as "books" so as to constitute plant within the meaning of sections 32 and 43 in order to qualify for depreciation allowance under the Act. The court while approving the view taken in CIT v. Elecon Engineering Co. Ltd. [1974] 96 ITR 672, by the Gujarat High Court held that, in the assessee's trading activity of manufacturing theodolites and microscopes the documents in question had a vital function to perform, as it was only with the aid of these complete and upto date sets of documents that the assessee was able to commence its manufacturing activity. The fact that the documents did not themselves perform any mechanical operation or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use in the trade? It is easy, without excessive imagination, to devise perplexing cases. A false ceiling designed to hide unsightly pipes is not plant, though the pipes themselves may be (Hampton v. Fortes Autogrill Ltd. [1979] 53 TC 691 ; [1980] STC 80) is a tapestry hung on an unsightly wall any different from a painted mural? And does it make a difference whether there was a damp patch underneath? What limit can be placed on attractions, interior or exterior, designed to make premises more pleasing to the eye or other senses? There is no universal formula which can solve these puzzles. In the end each case must be resolved, in my opinion, by considering carefully the nature of the particular trade being carried on, and the relation of the expenditure to the promotion of the trade. I do not think that the courts should shrink, as a backstop, from asking whether it can really be supposed that Parliament desired to encourage a particular expenditure out of, in effect, taxpayers' money, and perhaps ultimately, in extreme cases, to say that this is too much to stomach." What then is the true test to be applied? Is it the possibility of the thing or the article in question being cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be plant in themselves to qualify for the depreciation allowance. In other words, for 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 before us. 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 bigger unit. All that it would mean is that while it may qualify for depreciation as a part or extension of the bigger plant of which it becomes a part, it would not be entitled to be termed plant in itself to qualify for the allowance in its own right. This is precisely what has happened inthe present case. The income-tax authorities and the Tribunal have allowed depreciation on the cost of the cages, but not at 100 per cent. for they did not treat, and in our opinion rightly so, the purchase of 9,000 small cages by the assessee to be tantamount to setting up 9,000 separate plants as was being canvassed on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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