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Issues involved: Determination of whether a massive reinforced concrete structure designed to take up loads constitutes 'plant' u/s 43(3) of the Income-tax Act for the assessment years 1976-77 and 1977-78.
Summary: The case involved a limited company engaged in manufacturing grinding media balls and ingots, where a claim for depreciation on plant and machinery was initially disallowed by the Income-tax Officer. However, the Commissioner of Income-tax (Appeals) observed that the building for the plant and machinery could be considered as 'plant'. The structures were specially designed to handle heavy loads necessary for the manufacturing processes. The Income-tax Appellate Tribunal confirmed the order of the Commissioner, emphasizing that the structures made the plant operative. The court referred to the principles laid down by the Delhi High Court regarding the definition of 'plant' under section 43(3), emphasizing that the term has a wide and inclusive meaning. It was highlighted that a building or structure could be considered 'plant' if it is essential for the business activities and impossible for the equipment to function without it. The functional test of whether a structure is used for carrying on the business activities or merely as a space was crucial in determining its classification as 'plant'. The court also considered precedents from the Madras High Court and the Allahabad High Court, which supported a broad interpretation of 'plant' based on the specific trade or manufacture carried out by the assessee. It was noted that not all buildings automatically qualify as 'plant', and a functional test must be applied in each case to determine the classification. Ultimately, the court held that the reinforced concrete structure designed to support the cranes and make the plant operative fell within the definition of 'plant' u/s 43(3) of the Income-tax Act. However, any additional structures beyond what was necessary for the plant's operation were not considered 'plant'. The reference was answered in favor of the assessee, concluding that the structure in question constituted 'plant' for the purpose of depreciation and investment allowance.
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