TMI Blog1984 (11) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... iness. Our business is of construction of movable partitions, fences, removable fittings and installations and of hiring them out on contracted considerations. These are done for the Government departments, schools, colleges, mela authorities, conferences, etc. " 3. On 30-11-1976, the assessee entered into an agreement with officer-in-charge, Kumbh Mela, 1977, representing the Government of Uttar Pradesh. The preamble of this agreement is relevant and is reproduced below : " Whereas the various Government departments working for the Kumbh Mela, 1977, require the supply of tentage, furniture, GC sheets constructions, barricadings and of other miscellaneous articles on hire. And whereas the contractor has agreed to execute, upon and subject to the conditions, hereunder stipulated (hereinafter called the said conditions) and supply on hire of tentage, furniture, GC sheets constructions, barricadings and supply of other miscellaneous articles to the various Government departments working for the Kumbh Mela, Allahabad. Now these present witnesseth that in consideration of the payment to be made by the various hiring Government departments at the rates given in Schedules 'A'---tent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was only that of hiring, which did not involve any industrial process, he held that GC sheets could not be treated as 'plant'. In his opinion, they were in the nature of fittings entitled to depreciation at the rate of 10 per cent laid down in the relevant rules. He, accordingly, allowed the depreciation of Rs. 1,07,780 being 10 per cent of Rs. 10,77,807 only. 5. The assessee made an alternative claim before the ITO that even if the entire cost was not allowed as depreciation, still the GC sheets were eligible for investment allowance as 'plant'. The ITO observed that he had already given a finding that the GC sheets did not come within the meaning of 'plant'. He further observed that the investment allowance was available only on machinery or plant in any 'industrial undertaking'. According to him, 'industrial undertaking' was one which was engaged in manufacture or production of an article or thing. He gave a finding that the assessee was not engaged in any industrial undertaking and, therefore, it was not entitled to any investment allowance on its GC sheets. 6. The assessee appealed to the Commissioner (Appeals). The first submission before the latter was that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Elecon Engg. Co. Ltd. [1974] 96 ITR 672. 7A. The Commissioner (Appeals) then examined the use to which the sheets were put as per the agreement dated 30-11-1976, referred to above, and found that they were mainly for the purpose of erecting buildings. He, thus, gave a finding that even the GC sheets were nothing but 'building' material which became converted into 'buildings', the moment the labour was expended on them and they were erected. He also observed that cost of these 'buildings' should rightly be taken as the cost of the material, i.e., GC sheets and the cost of labour and overheads. Since these structures or buildings were purely of temporary nature, the Commissioner (Appeals) held that they were entitled to depreciation at the rate of 100 per cent. He, thus, allowed a further relief of Rs. 9,70,026 (Rs. 10,77,807--Rs. 1,07,781). 8. The above findings of the Commissioner (Appeals) have not satisfied either the assessee or the department. The department has taken the following ground in its appeal : " The learned Commissioner (Appeals) erred in allowing 100 per cent depreciation on the cost of galvanized corrugated sheets treating them as 'plant'. " In the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above inclusive definition came up for the consideration of the Supreme Court in the case of Taj Mahal Hotel in the following words : " Now it is well settled 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 use. Popular sense means 'that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it'. In the present case, section 10(5) enlarges the definition of the word 'plant' by including in it the words which have already been mentioned before. The very fact that even books have been included shows that the meaning intended to be given to 'plant' is 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. The word 'include' is also susceptible of other constructions which it is unnecessary to go into. " 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. It is true that they are numerous, small and cheap. But one trader may have to use a few large articles while another may have to use a large number of small articles, and I see no good ground for distinguishing between them as regards investment allowance. The one point is the durability of these articles. When Lindley L.J. used the phrase 'permanent employment in the business' he was using it in contrast to stock-in-trade which comes and goes, and I do not think that he meant that only very long lasting articles should be regarded as plant. But the word does, I think, connote some degree of durability and I would find it difficult to include articles which are quickly consumed or worn out in the course of a few operations. There may well be many borderline cases, but these articles have an average life of three years, and if their cost can fairly be called capital expenditure I cannot refuse to them the description of 'plant' unless the Act discloses some special reason for doing so. The word 'investment' may indicate a rather longer duration than what might be sufficient in other cases, but it seems to me that machinery could not be disqualified for investment allowance beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case. It was held by our High Court that in order to find out if a building or structure or part thereof constituted 'plant', the functional test must be applied. It must be seen whether the subject-matter involved, i.e., the building or structure or part thereof, constituted an apparatus or a tool of the taxpayer or whether it was merely a space where the taxpayer carried on his business. If the building or structure or part thereof was something by means of which the business activities were carried on, it would amount to a plant but where the structure played no part in the carrying on of those activities, but merely constituted a place within which they were carried on, it could not be regarded as a plant. 12. There is no doubt that GC sheets are used by the assessee for carrying on its business. It fulfils the function of a plant in the assessee's trading activities. It is, in fact, in the nature of a tool to the assessee. It was admitted before us that its durability varied between two and a half years to four years. In this connection, we have already referred to the agreement, dated 30-11-1976, to point out that in case of loss, the Government was bound to pay five t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since depreciation was to be allowed under section 32 only on articles of permanent nature, the sheets could not be treated as plant. His final submission was that a sheet, by itself, was not self-contained, which was another ingredient of a plant. In this connection, he also referred to the decision of the Allahabad High Court in CIT v. Indian Turpentine Rosin Co. Ltd. [1970] 75 ITR 533. 15. In our opinion, there is no merit in either of the above contentions. We have already pointed out above that in the agreement, dated 30-11-1976, hire charges of each sheet were separately shown at the rate of Rs. 8 per sheet on supply of 6 ft. high tin sheets and Rs. 15 per sheet on 10 ft. high tin sheets. This goes to show that the assessee was free to use any single sheet itself in its business. We do not think that merely because for convenience sake, the purchase and sale of the sheets was by weight, they could be denied the benefit of plant nor the plea of non-application of section 41(2) can guide us in deciding the nature of an asset for the purpose of section 32. We are also unable to understand the argument of the learned departmental representative that merely because section 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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