1971 (8) TMI 2 - SC - Income Tax

Sanitary and pipeline fittings installed in a hotel - eligibility for development rebate as a plant - The sanitary and pipeline fittings fell within the definition of plant in section 10(5) and the assessee would be entitled to development rebate u/s 10(2)(vib)

Summary

Issues:
Interpretation of the term "plant" under section 10(2)(vib) of the Indian Income-tax Act, 1922 in the context of sanitary and pipe-line fittings installed in a hotel building.

Detailed Analysis:

The judgment involved an appeal by certificate from the Andhra Pradesh High Court regarding the interpretation of the term "plant" under section 10(2)(vib) of the Indian Income-tax Act, 1922. The respondent, a registered firm operating a hotel, claimed development rebate on expenditures for sanitary and pipe-line fittings. The Income-tax Officer disallowed the claim, which was upheld by the Appellate Assistant Commissioner and the Appellate Tribunal. The primary issue was whether these fittings constituted "plant" for the purpose of claiming development rebate.

The High Court answered the question in favor of the assessee, leading to the appeal before the Supreme Court. The main argument for the appellant was that the word "plant" should be interpreted narrowly, based on common commercial understanding, and that development rebate cannot be claimed for items integrated into the building. The appellant also highlighted the difference in depreciation rates for furniture and fittings versus plant assets.

The Supreme Court analyzed the definition of "plant" under section 10(5) of the Act, which includes various items like vehicles, books, and scientific apparatus. The Court emphasized that when the definition of a word is not provided, it should be construed in its popular sense. Referring to precedents, the Court discussed cases where assets like partitions were considered "plant" based on their essential role in the business operation.

The Court reasoned that in the context of a hotel business, sanitary fittings are essential amenities that directly contribute to attracting customers and increasing profits. The Court rejected the appellant's argument regarding depreciation rates and emphasized that the intention of the legislature was to give "plant" a broad meaning. The Court concluded that the assets in question were necessary for the hotel business and upheld the High Court's decision, dismissing the appeal with costs.

In summary, the Supreme Court affirmed that sanitary and pipe-line fittings in a hotel building can be considered "plant" under section 10(2)(vib) of the Act, entitling the assessee to claim development rebate. The judgment clarified the broad interpretation of the term "plant" in the context of business operations, emphasizing the essential role of such assets in facilitating business activities and enhancing profitability.