Design expenditure and plant allowance: designs were not plant, but their cost counted toward patterned manufacturing equipment.

Designs used for wallpaper and furnishing fabrics were treated as business tools, but not as plant because an extension of plant beyond a physical object would require higher judicial authority. By contrast, expenditure on acquiring or producing those designs was held, on a commercial and realistic construction, to be attributable to the provision of patterned blocks, screens and rollers used in manufacturing. Even where many designs were never transferred to finished apparatus, the design cost formed part of the expenditure on providing the patterned plant. The taxpayers therefore retained entitlement to the investment allowance in respect of that design expenditure.

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Issues: (i) whether the designs acquired or produced for wallpaper and furnishing fabrics were themselves plant; (ii) whether the cost of acquiring or producing the designs was expenditure on the provision of new machinery or plant, namely patterned blocks, screens and rollers.

Issue (i): whether the designs acquired or produced for wallpaper and furnishing fabrics were themselves plant.

Analysis: The statutory meaning of plant was considered in the light of the ordinary conception of apparatus used in carrying on a business. Although the designs were business tools in a practical sense, the Court treated them as not falling within plant because any extension of plant beyond a purely physical object would require authoritative expansion by a higher court.

Conclusion: The designs were not plant.

Issue (ii): whether the cost of acquiring or producing the designs was expenditure on the provision of new machinery or plant, namely patterned blocks, screens and rollers.

Analysis: The section required the expenditure on the provision of the patterned blocks, screens or rollers to be identified commercially and realistically. The Court held that it could not be right to exclude the design cost altogether, because the designs formed part of the expenditure incurred in providing the patterned plant used in the manufacturing process, even though many designs were never ultimately transferred to blocks, screens or rollers.

Conclusion: The design expenditure was attributable to the provision of patterned blocks, screens and rollers and qualified for the allowance.

Final Conclusion: The appeal failed and the taxpayers retained entitlement to the investment allowance in respect of the design expenditure as part of the provision of the patterned manufacturing plant.

Ratio Decidendi: Expenditure incurred in obtaining designs may, on a commercial construction of the allowance provision, be treated as expenditure on the provision of plant where the designs are an integral step in creating the patterned apparatus used in the trade, even if the designs themselves are not plant.

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