TMI Blog1978 (7) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... ---- 6,23,649 2,79,978 ---------------- ---------------- The view of the ITO was that safe deposit lockers were at best a special type of cupboard and could not be considered as plant for purposes of development rebate, or depreciation. As far as electrical installations were concerned, he observed that they were in the nature of fittings and so disallowed the development rebate as claimed. It appears that the ITO had allowed development rebate on these two items for the assessment year 1962-63 for which the assessment was already completed. He reopened the same and cancelled the development rebate which had been given by him. The assessee then appealed to the AAC. It was contended that safe deposit lockers were the plant of the assessee. The AAC, however, rejected such contention and refused the claim for allowance of development rebate made by the assessee. With regard to the assessee's claim for development rebate on electrical installations the assessee relied upon Entry No. III(iii), E(3)(c) of Part I of Appendix 1 of the I.T. Rules and argued that according to the rules electric wiring was plant and machinery. This contention was also not accepted by the AAC and he reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, principally concerned in this reference with question No. 2 which pertains to disallowance of development rebate on electrical installations which question stands referred to us at the instance of the assessee. Learned counsel for the assessee first drew our attention to the relevant statutory provision. The assessee had claimed development rebate under s. 33 of the I.T. Act, 1961. Sub-s. (1) of s. 33 grants development rebate at varying rates in respect of ships, machinery and plants provided certain conditions are satisfied. The fact that the electrical installations were owned by the assessee was not disputed, but the matter in dispute is whether such installations can be said to constitute machinery or plant. We were then referred to s. 32 of the I.T. Act, 1961, which provides for the allowance by way of depreciation of buildings, machinery, plant or furniture owned by the assessee. Finally, we were referred to the definition of the word " plant " to be found in s. 43(3). This section provides that in ss. 28 to 41, unless the context otherwise requires, the word " plant " would include ships, vehicles, books, scientific apparatus and surgical equipment used for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10(2). In its view, if such development rebate was granted, there would be no straining of any language. According to the court, these items in combination with other appliances in the business effectuated and perpetuated the trade or commerce in question. We were then referred to CIT v. Indian Turpentine and Rosin Co. Ltd. [1970] 75 ITR 533 (All), in which the assessee was allowed development rebate on a total expenditure of Rs. 1,11,407 made for the purposes of changing over its electric installations from D.C. system to A.C. system. The Tribunal had described the change-over as involving new installations of poles, cables, conductors and switchboards for distribution to various feeders. The Division Bench of the Allahabad High Court observed that the definition of " plant " in s. 10(5) (of the I.T. Act, 1922) was very wide and there would be no difficulty in treating poles, cables, conductors and switchboards for distribution of electricity as plant within the meaning of s. 10(2)(vib) of the Act. It is true that, in the above case, the High Court was directly concerned with allowing development rebate on cables which were installed, but this was part of a complete change-ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The word ' include ' is also susceptible of other constructions which it is unnecessary to go into." The Supreme Court thereafter considered a number of English decisions and observed that in its judgment the more apposite decision was that of the Court of Appeal in Jarrold (Inspector of Taxes) v. John Good Sons Ltd. [1963] 1 WLR 214, 223. In the said case, it was held that movable partitions put up for the purposes of sub-division of floor space into a number of rooms of various sizes were " plant " as they were used for the carrying out of the company's trade or business. The Supreme Court then considered the nature of the business of the assessee and it was satisfied that the assets in question were required by the nature of the hotel business which the assessee was carrying on. It concluded by observing that they were not merely a part of the setting in which hotel business was being carried on. In its view, therefore, the fittings constituted plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant " by Lindley L.J. in Yarmouth v. France [1887] 19 QBD 647 at p. 658 (QB), which has been quoted with approval by, Lord Reid in Hinton (Inspector of Taxes) v. Maden and Ireland Ltd. [1960] 39 ITR 357 at 372 (HL). This definition is as under: " 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 chattles, fixed or movable, live or dead, which he keeps for permanent employment in his business. " The Division Bench expressed its complete agreement with the meaning given by Lindley L.J. in Yarmouth v. France [1887] 19 QBD 647 at 658. It is this test then which we will have to apply and consider, viz., whether the installation could be regarded as something, call it apparatus or fixtures or fittings or whatever you like, used by the assessee for carrying on its business. It is undoubtedly not the assessee's stock-in-trade. At the same time the qualification on the above definition of Lindley L.J. put in the case of J. Lyons Co. Ltd. v. Attorney-General [1944] Ch 281 (Ch D) must also be borne in mind. Plant may include whatever apparatus or inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l electrical installations for the purpose of banking business or that banking business is one which requires any special electrical installations. If that be so, then it would appear to us that it will be difficult to regard these electrical installations as a plant with which the assessee's business is carried on and they would appear merely to be a part of the premises in which the business is, carried on or, to use the words in J. Lyons case [ 1944] Ch 281 (Ch D), a part of the setting in which the business is carried on. There remains for consideration only one more argument which was based on the provisions of the Schedule to the I.T. Rules, in force at the relevant time, which provided for the rates at which depreciation was admissible. As stated earlier, under s. 32, depreciation is permissible on buildings, machinery, plant or furniture. In Part I of Appendix I to the I.T. Rules, 1962, in force for the relevant years, machinery and plant were provided for in Entry Ill. The Schedule provided for various specific items of machinery and plant and then we have Entry III (iii) for special rates to be applied to other machinery and plant. In Division ' e ' of this residuary pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and machinery on which development rebate is available for one assessee need not be plant and machinery for another assessee. For example, certain types of fixtures may constitute plant and machinery used in an assessee's business if the assessee's business is a hotel, but such fixtures and fittings would not amount to plant and machinery of another assessee whose business may be totally different, e.g., an ordinary commercial office. In the latter case, it may merely be a part of the building or setting in which the business is carried on and not the apparatus with which the business is carried on. The answer to be given to the question would depend upon the facts of each case. On such facts as are available to us, it would appear to us that these electric installations in the case of the assessee, cannot be regarded as apparatus or appliances or fittings with which the assessee was carrying on its business and if that be so, the assessee would not be entitled to claim development rebate thereon, on the basis of these being its plant and machinery with which it carries on business. In the result, the decision of the Tribunal disallowing development rebate to the assessee on e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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