IT SHOULD BE CLASSIFIED UNDER PLANT AND MACHINERY
PLANT
=========================================================
n The primary meaning of the word ‘plant’ is machinery, apparatus, fixtures, etc., employed in carrying on a business or trade or a mechanical or other industrial business. The primary meaning of the word ‘plant’, therefore, has connection with mechanical or industrial business or manufacture of finished goods from raw products - Jayasingrao Piraji Rao Ghatge v. CIT [1962] 46 ITR 1160 (Bom.).
n The word ‘plant’ should be given the same popular meaning as ‘machinery’. If the plant in combination with other appliances in the business effectuate and perpetuate the trade or commerce in question, then such induction or introduction of such plant should be deemed to be such that they are placed in a position for service or use in the business - Sundaram Motors ( P.) Ltd. v. CIT [1969] 71 ITR 587 (Mad.).
n The word ‘plant’, in its ordinary meaning, is a word of wide import and in the context of section 32 it must be broadly construed. It includes any article or object, fixed or movable, live or dead, used by a businessman for carrying on his business. It is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business. It would not, however, cover the stock-in-trade, that is, goods brought or made for sale by a businessman. It would also not include an article which is merely a part of the premises in which the business is carried on as distinguished from a part of the plant with which the business is carried on. An article to qualify as plant must furthermore have some degree of durability and that which is quickly consumed or worn out in the course of a few operations or within a short time cannot properly be called ‘plant’. But an article should not be anytheless plant because it is small in size or cheap in value or a large quantity thereof is consumed while being employed in carrying on business. In the ultimate analysis the inquiry which must be made is as to what operation the apparatus performs in the assessee’s business. The relevant test to be applied is: Does it fulfil the function of plant in the assessee’s trading activity ? Is it the tool of the taxpayer’s trade? If it is, then it is plant, no matter that it is not very long lasting or does not contain working parts such as a machine does and plays a merely passive role in the accomplishment of the trading purpose -CIT v. Elecon Engg. Co. Ltd. [1974] 96 ITR 672 (Guj.) [Approved by Supreme Court in 166 ITR 66].
n In common parlance the word ‘plant’ includes within its ambit buildings and equipments used for manufacturing purposes - CIT v. Kanodia Cold Storage [1975] 100 ITR 155 (All.).
n The expression ‘plant’ has to be construed in the context of particular kind of trade or manufacture carried on by the assessee and if in the context it could be taken as ‘plant’ as understood in the popular sense, it would be eligible for the allowance of depreciation and development rebate - Addl. CIT v. Madras Cements Ltd. [1977] 110 ITR 281 (Mad.).
n The word ‘plant’ is one of the words used in fiscal legislation of which no statutory definition is provided, so that it is left to the court to interpret it, having regard to the context in which it occurs. Admittedly, it is not a term of art. The natural or dictionary meaning has been extended from case to case as a result whereof the meaning of the word gradually diverges from its natural or dictionary meaning. There is no fixed definition of plant; nor are there any exhaustive rules for application to any particular set of circumstances. What is properly to be regarded as ‘plant’ can only be answered in the context of the particular industry concerned, since most of the cases are illustrations rather than authorities - Tribeni Tissues Ltd. v. CIT [1991] 190 ITR 487 (Cal.).
n The word ‘plant’ is too broad for delimitation of its import. Any structure which is used in the business either as the seat of the business or the location where the business is carried on can be said to be plant in the sense that it is one of the means of carrying on the business - S.P. Jaiswal Estates (P.) Ltd. v. CIT [1994] 75 Taxman 298/209 ITR 307 (Cal.).
n The Act has defined ‘plant’ in an inclusive manner and the Courts have held that, conceptually speaking, anything that is a tool of the trade is plant. For example, in the case of a lawyer, law books are the tools of his trade and it is for this purpose that books are included in the inclusive definition of the term ‘plant’. But one thing is clear, that the term ‘tool of trade’ signifies close and direct connection between the tool and the assessee’s trade, that is to say, a plant must be employed directly in the manufacture or production of goods, etc.
The Courts have also made a significant distinction between tools of trade and the setting in which the trade is conducted. If a particular item can properly be called a tool of trade, then it is plant, if, on the contrary, a particular item, even though called plant in popular parlance, will not be plant if it is just a part of the setting in which the trade is conducted.
For example, an air-conditioner installed in the office premises of an assessee cannot be called a plant so as to be eligible to investment allowance and additional depreciation. If, on the contrary, and air-conditioner is indispensable for the manufacture of, say, medicines, then the air-conditioner becomes the tool of the assessee’s trade and can properly be regarded as plant for purposes of investment allowance and additional depreciation - CIT v. Technico Enterprise (P.) Ltd. [1994] 206 ITR 36/73 Taxman 204 (Cal.).
n In the four expressions used under section 32, the word ‘plant’ can be of the widest import, though it has different shades of meaning.
In the Concise Oxford Dictionary, different shades of meaning have been assigned to the word ‘plant’. One meaning falls in the realm of botanical expression pertaining to vegetation ; as a noun it has been defined to mean a small organism of this kind as distinguished from a shrub or tree. Amongst other meanings which have been assigned to it, in one sense it means ‘machinery, fixtures, etc., used in industrial process’, in another sense it means ‘a factory itself’.
In Webster’s Third New International Dictionary, the meaning of the word ‘plant’ has been stated to be ‘land’, ‘building’, ‘machinery’, ‘apparatus’, fixtures employed in carrying on a trade or mechanical or other industrial business. It has also been stated to mean ‘a factory’, ‘work of a particular product for example an automobile plant or an ice-cream plant’ and yet greater import has been given to mean the ‘total facilities available for production or the service in a particular country or place’. In another shade it has been defined to mean ‘ a piece of equipment or a set of machine/parts functioning together for the performance of a particular operation.
In Words and Phrases Legally Defined (Butterworth), it is stated that in the context of an Act which deals with what goes on in factories, ‘plant’ is an ordinary English word in common usage whose meaning is well understood. To quote the Shorter Oxford English Dictionary it means ‘the fixtures, implements and apparatus used in carrying on any industrial process’.
In Stroud’s Judicial Dictionary, it has been stated that ‘plant’ and ‘machinery’ are two quite different things. It has been stated that speaking generally machinery includes everything which by its action produces or assists in production; and that ‘plant’ might be regarded as that without which production could not go on . . . and included such things as brewer’s pipes, vats, and the like ; and reference was made to opinion of Kekewich J., Brooke, In re 64 L.J. Ch. 27.
Reading the dictionary meaning of ‘machinery’, as given in the Concise Oxford Dictionary, it means an apparatus using or applying mechanical power having several parts each with the definite function and together performing certain kinds of work and that an instrument transmits or directs a force on apparatus, machines collectively known as machinery. The components of a machine or a mechanism of machine also conveys the same meaning.
Stroud’s Judicial Dictionary, while giving meaning to ‘machinery’ reads ; ‘Machinery’ implies the application of mechanical means to the attainment of some particular end by the help of natural forces ; ‘operative machinery’ means machinery with the potentiality of operating or doing work.
According to the plain dictionary meaning in its widest connotation in the context of trade or business, the expression ‘plant’ may sometimes means the factory itself as one composite unit including all buildings, machinery and apparatus therein which are required for the purposes of the factory. Obviously, the term ‘plant’ has not been used under section 32 of the Act or for that matter under the Rules framed thereunder in that wide meaning. The very fact that four different terms have been used, namely, building, machinery, plant and furniture, the term ‘plant’ has been used in a narrow sense to mean that it includes whatever apparatus is used by a person carrying on his business which is not his stock-in-trade which he buys or makes or sells and which may not fall in the category of the building, machinery or the furniture as such - CIT v. Kiran Crimpers [1997] 225 ITR 84/94 Taxman 502 (Guj.).
CAclubindia
