1981 (5) TMI 18 - HC - Income Tax

Manufacturing building not 'plant' for tax rebate despite controls

The court held that the building in question, used for manufacturing saccharine, did not qualify as 'plant' under section 33 of the Income Tax Act, 1961. ... Developement Rebate, Plant Issues Involved:1. Whether the building in question qualifies as 'plant' for the purpose of claiming development rebate u/s 33 of the I.T. Act, 1961.Summary:Issue 1: Definition and Scope of 'Plant'The primary issue was whether the building used for manufacturing saccharine qualifies as 'plant' and is thus eligible for development rebate u/s 33 of the I.T. Act, 1961. The assessee argued that the building, constructed with specific atmospheric controls, was integral to the manufacturing process and should be considered part of the plant. The ITO, AAC, and Tribunal all rejected this claim, holding that a building does not fall within the definition of 'plant' as per s. 43(3) of the Act.Issue 2: Judicial Precedents and Functional TestThe court examined various judicial precedents to determine the scope of 'plant.' It referred to cases like IRC v. Barclay, Curle & Co. Ltd., CIT v. Kanodia Cold Storage, and CIT v. Caltex Oil Refining (I) Ltd., among others. These cases highlighted that the definition of 'plant' is inclusive and should be given a wide meaning. However, the functional test must be applied to ascertain whether a building or structure fulfills the function of a plant or merely serves as a setting for business operations.Issue 3: Application of Principles to the Present CaseApplying the principles derived from the precedents, the court concluded that the building in question did not qualify as 'plant.' It was deemed a mere setting where the manufacturing of saccharine was carried on, rather than an integral part of the manufacturing process. The court noted that other companies manufactured saccharine in normal buildings without special temperature controls, indicating that the specific features of the building were not essential for the manufacturing process.Conclusion:The court held that the building in question did not come within the expression 'plant' and thus was not entitled to the development rebate. The question was answered in favor of the revenue, and the revenue was entitled to costs.