New Machinery Or Plant - Definition / Legal Terminology - Income Tax

For the purposes of section 32AB(2) of the Income tax Act 1961 New Machinery Or Plant includes machinery or plant which before its installation by the assessee was used outside India by any other person, if the following conditions are fulfilled, namely:- (a) such machinery or plant was not, at any time previous to the date of such installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee; In Stroud s Judicial Dictionary , Fourth Edition VI. 4, at page 2036, a distinction between plant and machinery has been drawn as under : Plant and machinery are two quite different things (per Kekewich J., Re Brooke 64 LJ Ch 27). On a contract for the sale of a freehold brewery which provided that its fixed plant and machinery should be paid for by valuation, Kekewich J., held 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 that therefore a chimney shaft, which was built just outside the boiler-house but formed no part of it, a double-boarded partition, forming a malt and grain store, and staging, erected by placing joists on the stout bearers built into the walls, were not to be included in the valuation (Re Nutley and Finn, [1894] WN 64). CIT VERSUS LAKE PALACE HOTELS AND MOTELS PRIVATE LIMITED - 1995 (11) TMI 9 - RAJASTHAN HIGH COURT Whether a building that was used as a hotel or a cinema theatre could be given depreciation on the basis that it was a plant ? Anand Theatres- 2000 (5) TMI 4 - SUPREME COURT The word plant is given inclusive meaning under section 43(3) which nowhere includes buildings. The rules prescribing the rates of depreciation specifically provide grant of depreciation on buildings, furniture and fittings machinery and plant and ships. Machinery and plant include cinematograph films and other items and the building is further given a meaning to include roads, bridges, culverts, wells and tube-wells. (2) In the case of Taj Mahal Hotel - 1971 (8) TMI 2 - SUPREME COURT , this court has observed that the business of a hotelier is carried on by adapting building or premises in suitable way, meaning thereby building for a hotel is not apparatus or adjunct for running of a hotel. The court did not proceed to hold that a building in which the hotel was run was itself a plant, otherwise the court would not have gone into the question whether the sanitary fittings used in bath room was plant. (3) For a building used for a hotel, specific provision is made granting additional depreciation under section 32(1)(v) of the Act. (4) Barclay, Curle and Co. s case 1969 (1) TMI 69 - HOUSE OF LORDS , decided by the House of Lords pertains to a dry dock yard which itself was functioning as a plant that is to say, structure for the plant was constructed so that dry dock can operate. It operated as an essential part in the operations which took place in getting a ship into the dock, holding it securely and then returning it to the river. The dock as a complete unit contained a large amount of equipment without which the dry dock could not perform its function. (5) Even in England, courts have repeatedly held that the meaning of the word plant given in various decisions is artificial and imprecise in application, that is to use the words of Lord Buckley, it is now beyond doubt that the word plant is used in the relevant section in an artificial and largely judge-made sense. Lord Wilberforce commented by stating that no ordinary man, literate or semi-literate, would think that a horse, a swimming pool, movable partitions, or even a dry-dock was plant. (6) For the hotel building and hospital in the case of Carr v. Sayer 65 TC 15 (Ch. D.), it has been observed that a hotel building remains a building even when constructed to a luxury specification and similarly a hospital building for infectious diseases which might require a special layout and other features also remains a premises and is not plant. It is to be added that all these decisions are based upon the interpretation of the phrase machinery or plant under section 41 of the Finance Act, 1971 , which was applicable and there appears no such distinction for grant of allowance on different heads as provided under section 32 of the Income-tax Act. (7) To differentiate a building for grant of additional depreciation by holding it to be a plant in one case where the building is specially designed and constructed with some special features to attract the customers and a building not so constructed but used for the same purpose, namely, as a hotel or theatre would be unreasonable. used as a cinema along with its fittings and fixtures and wherein cinema business was carried on constituted a plant. Karnataka Power Corporation - 2000 (7) TMI 72 - SUPREME COURT To differentiate a building for grant of additional depreciation by holding it to be a plant in one case where a building is specially designed and constructed with some special features to attract the customers and the building not so constructed but used for the same purpose, namely, as a hotel or theatre would be unreasonable. This observation is, in our view, limited to buildings that are used for the purposes of hotels or cinema theatres and will not always apply otherwise. The question, basically, is a question of fact, and where it is found as a fact that a building has been so planned and constructed as to serve an assessee s special technical requirements, it will qualify to be treated as a plant for the purposes of investment allowance. Expression plant or machinery in Section 17(5)(d) of the CGST Act The case of Anand Theatres is by a Bench of two Hon ble Judges. Thus, the decision of a larger Bench in the case of Karnataka Power Corporation limits the applicability of the decision in the case of Anand Theatres to hotels or cinema theatres. Therefore, the decision in the case of Anand Theatres cannot be applied while considering the question of whether a mall or warehouse or a building other than a hotel or a cinema theatre can be said to be a plant . This Court has laid down the functionality test. This Court held that whether a building is a plant is a question of fact. This Court held that if it is found on facts that a building has been so planned and constructed as to serve an assessee s special technical requirements, it will qualify to be treated as a plant for the purposes of investment allowance. The word plant used in a bracketed portion of Section 17(5)(d) cannot be given the restricted meaning provided in the definition of plant and machinery , which excludes land, buildings or any other civil structures. Therefore, in a given case, a building can also be treated as a plant, which is excluded from the purview of the exception carved out by Section 17(5)(d) as it will be covered by the expression plant or machinery . We have discussed the provisions of the CGST Act earlier. To give a plain interpretation to clause (d) of Section 17(5), the word plant will have to be interpreted by taking recourse to the functionality test. M/S SAFARI RETREATS PRIVATE LTD. ORS. - 2024 (10) TMI 286 - SUPREME COURT