Functional plant retains depreciation status even when fixed to a building, including sanitary fittings and electrical installations.

Sanitary and pipe fittings fixed to a hotel building were treated as plant for depreciation because they functioned as business equipment and did not lose that character merely by being attached to the structure. Electrical installations were also held to be plant, since their fixation to the building did not convert them into part of the building where the statute distinguishes between building and plant. The Tribunal's allowance of depreciation on both items was therefore upheld, and the ratio is that functionally plant items remain plant despite annexation to a building.

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Issues: (i) Whether sanitary and pipe fittings fixed to a hotel building constituted "plant" for the purpose of depreciation; (ii) Whether electrical installations in a hotel building were to be treated as "plant" rather than part of the building for depreciation.

Issue (i): Whether sanitary and pipe fittings fixed to a hotel building constituted "plant" for the purpose of depreciation.

Analysis: The applicable depreciation scheme under section 32 distinguishes between building, machinery and plant. Sanitary and pipe fittings, by their nature and function, are not part of the building structure merely because they are fixed to it. They remain equipment used for the conduct of the business and do not lose their character as plant by being installed in a hotel building.

Conclusion: The sanitary and pipe fittings were rightly treated as plant and were eligible for depreciation as plant.

Issue (ii): Whether electrical installations in a hotel building were to be treated as "plant" rather than part of the building for depreciation.

Analysis: Electrical installations are functionally distinct from the building and are capable of being used in a variety of settings to serve business purposes. Once regarded as plant, their fixation to the hotel building does not convert them into part of the building for depreciation purposes, as the Act maintains a clear distinction between building and plant.

Conclusion: The electrical installations were correctly treated as plant and not as part of the building.

Final Conclusion: The substantial questions were answered against the Revenue and in favour of the assessee, and the Tribunal's view allowing depreciation on the disputed installations was upheld.

Ratio Decidendi: Items that are functionally plant do not cease to be plant for depreciation merely because they are fixed to a building; the statutory distinction between building and plant must be maintained.

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