1968 (12) TMI 99 - HC - Income Tax

Summary

Issues:
1. Whether expenditure on acquiring or producing designs for wallpaper and furnishing fabrics qualifies as capital expenditure for investment allowances.
2. Whether the designs themselves can be considered as "plant."
3. Whether the cost of acquiring designs can be considered as expenditure on the provision of patterned blocks, screens, and rollers.

Analysis:
1. The case revolves around determining if the expenditure incurred by the taxpayers on acquiring or producing designs for wallpaper and fabrics qualifies as capital expenditure for investment allowances under the Finance Act, 1954. The Crown concedes that the expenditure can be classified as capital expenditure, leaving the question of whether it was for the provision of new machinery or plant.

2. The judgment delves into the definition of "plant" and whether designs themselves can be categorized as such. The court refers to past cases and interpretations, ultimately deciding that designs, being the tools of the trade for the styling committee, do not fall under the definition of "plant." Despite recognizing the argument for an expanded interpretation, the court adheres to the existing understanding.

3. The court addresses the argument regarding whether the cost of acquiring designs can be considered as expenditure on providing patterned blocks, screens, and rollers. While acknowledging the Crown's perspective, the court emphasizes the statutory requirement of isolating the provision of patterned blocks and the associated costs. It concludes that some fraction of the total design costs should be allowed, rejecting the notion that none of the design costs should be included in the expenditure.

In conclusion, the court dismisses the appeal, upholding that a portion of the design costs should be allowed as part of the expenditure. The judgment provides a detailed analysis of the expenditure in question, the classification of designs as "plant," and the correlation between acquiring designs and the provision of patterned blocks, screens, and rollers.