Plant includes functional protective structures, and capitalised borrowing cost can form part of asset cost for depreciation claims.

Protective fencing around refinery processing units was treated as "plant" because the definition is inclusive and covers apparatus or structures functionally necessary for carrying on the business; depreciation allowance and development rebate were therefore available. Capitalised interest on debentures and bank overdraft used to construct the refinery was also held includible in the cost of the assets for depreciation and development rebate, applying the principle that capitalised borrowing cost forms part of asset cost. Both issues were answered in favour of the assessee, confirming tax relief on the fencing and the capitalised interest component.

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Issues: (i) Whether fencing constructed around refinery processing units constituted plant for the purposes of depreciation allowance and development rebate under the Indian Income-tax Act, 1922. (ii) Whether capitalised interest on debentures and bank overdraft utilised for construction of the refinery could be added to the cost of the assets for depreciation allowance and development rebate.

Issue (i): Whether fencing constructed around refinery processing units constituted plant for the purposes of depreciation allowance and development rebate under the Indian Income-tax Act, 1922.

Analysis: The expression "plant" in section 10(5) is an inclusive definition and extends beyond machinery to apparatus used for carrying on the business. Protective fencing around the refinery processing units was obligatory under the Petroleum Rules, 1937, and the units could not be used without it. The fencing was found to be a substantial and durable structure forming part of the processing unit and was functionally necessary for the business operations.

Conclusion: The fencing constituted plant and the claim to depreciation allowance and development rebate was allowable in favour of the assessee.

Issue (ii): Whether capitalised interest on debentures and bank overdraft utilised for construction of the refinery could be added to the cost of the assets for depreciation allowance and development rebate.

Analysis: The question was governed by the principle that interest incurred on borrowed funds used for construction, when capitalised, forms part of the cost of the asset for tax depreciation purposes. The issue stood covered by the controlling legal position applied by the Court.

Conclusion: The capitalised interest was includible in the cost of the assets and the issue was answered in favour of the assessee.

Final Conclusion: Both questions were answered in favour of the assessee, confirming entitlement to depreciation allowance and development rebate on the fencing and on the capitalised interest component.

Ratio Decidendi: An item is plant if, in substance and function, it is an apparatus or structure used for carrying on the business and is necessary for the business operation, even if it is not machinery in the strict sense.

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