V.K. Singhal, J. - (1.) THE Income-tax Appellate Tribunal has referred the following question of law arising out of its order dated August 24, 1983, under Section 256(1) of the Income-tax Act in respect of the assessment years 1976-77 and 1977-78 : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the massive reinforced concrete structure, especially designed to take up loads, constituted 'plant' within the meaning of Section 43(3) of the Income-tax Act, 1961." ?
(2.) THE assessee is a limited company and is a manufacturer of grinding media balls and ingots. A claim for depreciation initially was made on the plant and machinery installed. THE Income-tax Officer held that the building for the plant and machinery is not plant and, therefore, the depreciation and investment allowance was disallowed. In appeal before the Commissioner of Income-tax (Appeals), it was observed that the building in the present case could be covered within the meaning of the word "plant". THE main stress before the Commissioner of Income-tax (Appeals) was that the factory structures which have been constructed for production of heavy steel ingots, grinding media, manganese steel, etc., have basically heavy steel structures with deep wide RCC foundation forming integral parts of the plant. THE structures are extraordinarily heavy and specially designed to take up heavy dynamic live and static loads of cranes which handle hefty ladles with hot molten liquid metal, high density scrap for charging scrap furnaces and handling hot and cold silica, without which furnace mixers, molding machine, etc., cannot function. A certificate to this effect was submitted by a chartered engineer. When this matter was taken up before the Income-tax Appellate Tribunal by the Revenue it was observed that the structures which have been raised make the plant operative and the order of the Commissioner of Income-tax (Appeals) was confirmed. The Delhi High Court in R.C. Chemical Industries v. CIT [1982] 134 ITR 330 has laid down the following principles (at page 336) : "(1) The definition of 'plant' in Section 43(3) should be given a wide meaning as it is an inclusive definition ; (2) All buildings are not 'plant' despite the dictionary meaning which includes buildings ; but a building or structure is not per se to be excluded from the ambit of the expression 'plant' ; (3) If the concrete construction or building is used as the premises or setting in which the business is carried on in contradistinction to the fulfilling of the function of plant, the building or construction or part thereof is not considered plant. The true test is whether it is the means of 'carrying on the business' or the location for so doing ; (4) In order for a building or concrete structure to qualify for inclusion in the term 'plant', it must be established that it is impossible for the equipment to function without the particular type of structure ; and (5) The particular apparatus or item must be used for carrying on the assessee's business and must not be his stock-in-trade. The matter has to be considered in the context of the particular business of the assessee, e.g., books are a lawyer's plant but a bookseller's stock-in-trade." Under Section 43(3), "plant" has been defined as under : "'Plant' includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession." From the above definition of "plant" it would be seen that it is not exhaustive and is illustrative and has a wide meaning. It could be the apparatus of a businessman by which he is carrying on the business which may be termed as plant. The apparatus need not be used by mechanical operation or by any other process. For the purpose of a building, it has to be seen whether it can be said to be an apparatus in which the business is being carried on. There may be heavy structures on which the machinery is installed with which the activities of a manufacturing concern are carried on. That structure could be covered within the term "plant". If the building or structure or part thereof is such by which the business activities are carried on then it would amount to plant but where the structure plays no part in carrying on the business activities and is used as a space for carrying on the business, it will fall within the category of a building then it cannot be called plant. There may be a situation where part of the construction of the building is such which is specially designed and meant for carrying on the mechanical process and part of it is used as a space for various activities like research, office or the like and in that case the part construction would not be treated as a plant. The functional test is whether a structure is used for carrying on the business and hence a tool of the trade or whether it is only the place of business in which the business is carried on. Cold storage, silos, well are such of the items which have been interpreted to fall within the term "plant". Learned counsel for the assessee has placed reliance on the decision of the Madras High Court in the case of Addl. CIT v. Madras Cements Ltd. [1977] 110 ITR 281, wherein it was observed that the expression "plant" has to be construed in the context of the particular kind of trade or manufacture carried on by the assessee and if in the context it could be taken as "plant" as understood in the popular sense it would be eligible for the allowance of depreciation and development rebate.
(3.) RELIANCE has also been placed on the decision of the Allahabad High Court in the case of CIT v. U. P. Hotel Restaurant Ltd. [1980] 123 ITR 626, wherein the conference hall was held falling within the purview of Section 32(1)(v) as a new building. On the basis of the meaning which is being given to the plant under Section 43(3) and in accordance with the popular meaning it could not be said that all buildings are plant. It will depend on the facts of each case and a functional test has to be applied whether it is used for carrying on the business or is merely a location or space falling within the category of building simpliciter. If the building has been constructed in such a manner that it was not possible to carry on the business then it will be considered to be "plant", It has also to be seen that the words "plant", "machinery" and "building" have separately been used and, therefore, if an item falls within the category of "building", it will not be considered to be plant and vice versa. The assessee initially filed a return of loss of Rs. 16,36,298 which was revised and a loss of Rs. 17,92,573 was claimed on account of claiming initial depreciation on plant and machinery and building and extra shift allowance on building. This revised return was not accepted as the same was submitted in the proceedings for assessment to be made on the directions of the Commissioner under Section 263 of the Income-tax Act, 1961. ;