Karnataka High Court
Chief Commissioner (Admn.) And Others vs Visveswarayya Iron And Steel Ltd. on 27 September, 1991
Equivalent citations: [1993]199ITR98(KAR), [1993]199ITR98(KARN)
Author: N. Venkatachala
Bench: N. Venkatachala
JUDGMENT
K. Shivashankar Bhat J.
1. The question referred to us under the provisions of the Income-tax Act, 1961 ("the Act" for short), is as follows :
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in treating the railway sidings and locomotives as plant for the purpose of investment allowance ?"
2. The question pertains to the assessment year 1978-79. The assessee is an industrial company carrying on the business of manufacturing iron and steel. It provided locomotives and railway sidings at the place of its manufacturing activity, obviously to facilitate the loading and unloading in the course of transporting out of or into the factory of the assessee the requisite articles. Investment on this way claimed as an investment allowance under section 32A(b) of the Act. The claim of the assessee was upheld by the Appellate Tribunal; consequently, the Revenue has sought this reference.
3. As per section 32A, an assessee is entitled to investment allowance, inter alia, in respect of machinery or plant specified in sub-section (2). Sub-section (2) thus specifies the machinery or plant, etc., in respect of which investment allowance may be claimed. We are concerned here with sub-clause (b) (ii) of sub-section (2) of section 32A, the relevant portion of which says that the plant specified in sub-section (1) is any plant installed for the purposes of business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Ninth Schedule. Item 1 of the Ninth Schedule specifies "Iron and steel (metal)". Therefore, any plant installed for the purposes of business of manufacturing or producing iron and steel is eligible to the benefit of sub-section (1) of section 32A. The question, therefore, is whether the locomotives and railway sidings in question belonging to the assessee is plant for the purpose of section 32A.
4. Almost a similar question arose, though under the Indian Income-tax Rules, 1922, in Kalinga Tubes Ltd. v. CIT [1974] 96 ITR 20. The Orissa High Court held in the said decision that the assessee was entitled to the development rebate on railway sidings which were erected for the purpose of business of the assessee. It was held that this was covered by the heading "Machinery and plant" under rule 8. In CIT v. Electronics Research Industries Pvt. Ltd. [1991] 192 ITR 20, a Bench of this court considered whether an internal telephone system is plant and upheld the claim of the assessee therein. At page 24, the court observed thus :
".... the concept of plant cannot be limited to the actual installation of machinery which produces goods by itself. Anything which is used for the purpose of business including any installation which facilitates the production or increases the efficiency of the business will be plant. It is in this context that the Act includes certain varieties of plant and machinery for the benefit of allowance as is clear from the second proviso to section 32A(1)."
5. The concept of plant is quite wide and whatever is normally used as an instrument or as a means or is incidental to the activity of the assessee has been considered as a plant.
6. In fact, in Scientific Engineering House P. Ltd. v. CIT (1986) 157 ITR 86, the Supreme Court has given a very wide meaning to the term "plant". At page 96, the Supreme Court formulated the test thus :
"In other words, the test would be : Does the article fulfil the function of a plant in the assessee's trading activity ? Is it a tool of his trade with which he carries on his business ? If the answer is in the affirmative, it will be a plant."
7. Having regard to the principles stated in the aforesaid decisions, we have no hesitation in upholding the view taken by the Appellate Tribunal. Consequently, the question referred to us in answered in the affirmative and against the Revenue.