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TMI Blog1985 (10) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain stock noted in the stock register was non-existent and it claimed a deduction in respect thereof under section 32(1)(iii) of the Act. This claim was rejected by the authorities below. The assessee claimed development rebate as well as depreciation allowance in respect of expenditure incurred by it for laying an approach road to its Kanjari unit on the premise that it was a "plant" within the meaning of clause (3) of section 43 of the Act. According to that clause, "plant" includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession. The assessee contended that in view of the inclusive definition, the expression " plant " is of wide amplitude and the expenditure incurred by the assessee for laying of approach roads to the Kanjari unit would fall within the meaning of that expression and the assessee was entitled to both depreciation under section 32 and development rebate under section 33 of the Act. This question was not debated before the Income-tax Officer but it was raised for the first time before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, following the decision of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference under section 256(1) of the Act. In view of the above facts and questions considered by the authorities below, the Tribunal has referred the following questions for our opinion :. Relevant for the assessment year 1966-67 " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to deduction for items wrongly capitalised in the earlier years under section 32(1)(iii) of the Income-tax Act, 1961 ? " Relevant for the assessment years 1966-67 and 1967-68 " (2) Whether, on the facts and in the circumstances of the case, and keeping in view the terms of the grant-in-aid given by the Government of Gujarat, the Tribunal was right in holding that the assessee was not entitled to take into account the amount of such grant-in-aid in computing the capital employed for purposes of deduction under section 84 of the Income-tax Act? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that debts and liabilities should be deducted under rule 19(3) while computing the capital employed for the purpose of deduction under section 84 of the Income-tax Act ? Releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that case also, the assessee-society claimed that the entire amount of grant-in-aid given by the State Government and utilised for the purchase of certain machinery for baby food unit and cheese unit of the assessee-society must be added to the other capital employed by the society for the purpose of relief under section 84 (now section 80J) read with rule 19 of the Rules. In that case, this court held that the assessee was not entitled to take into account the amount of the grant-in-aid given by the Government in the computation of capital employed by the assessee in the purchase of machinery for baby food unit and cheese unit. In view of this decision, questions Nos. (2) and (4) must be answered in the affirmative, that is, in favour of the Revenue and against the assessee. Similarly, so far as question No. (7) is concerned, it also stands covered by the aforesaid decision wherein the assessee's claim that half of the profits relating to baby food unit and cheese unit of the society should be included in the capital employed under rule 19(5) of the Rules was upheld following the decision of this court in CIT v. Elecon Engineering Co. Ltd. [1976] 104 ITR 510. We must, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial facts emerged, namely, (i) in each case, the word " plant " was construed after having regard to its context and circumstances of the case ; and (ii) that in none of the cases the court was concerned with the interpretation of the word " plant " occurring in a statute wherein it was defined. According to the learned judges, plant 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 the mechanical or industrial business. It would not cover the stock-in-trade or an article which is merely a part of the premises in which the business is carried on. In order to qualify as plant, the article must have some degree of durability and is not capable of being consumed or worn out quickly in the course of a few operations or within a short time. In the ultimate analysis, the test evolved for application was, does it (apparatus) fulfil the function of a 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 do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding. The last question which we are required to consider is, whether the Tribunal was right in holding that the assessee was not entitled to deduction under section 32(1)(iii) of the Act. Section 32(1) provides for depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business. Clause (iii) thereof with which we are concerned provides that in the case of any building, machinery, plant or furniture which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof : provided that such deficiency is actually written off in the books of the assessee. The assessee would be entitled to depreciation allowance under this clause if the building, machinery, plant or furniture is sold, discarded, demolished or destroyed in the previous year. In the present case, from the facts which we have stated earlier, it becomes obvious that physical verification of the stock was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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