1984 (4) TMI 66 - AT - Income Tax

Tribunal reclassifies wall book cabinets as plant, upholds furniture classification for office tables

The Tribunal partly allowed the appeal by quashing the Commissioner's order that classified wall book cabinets as furniture, restoring the original ... Business Expenditure Issues Involved:1. Jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961.2. Classification of wall book cabinets as plant or furniture for depreciation purposes under section 32(1)(ii) of the Income-tax Act, 1961.3. Depreciation rate applicable to office tables and smoke glass.Issue-wise Detailed Analysis:1. Jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961:The appellant did not wish to contest the jurisdiction of the learned Commissioner to invoke provisions of section 263. Therefore, this issue was not addressed in the appeal.2. Classification of Wall Book Cabinets as Plant or Furniture:The primary issue in this appeal was whether the wall book cabinets should be classified as plant or furniture under section 32(1)(ii) of the Income-tax Act, 1961. The Income Tax Officer (ITO) had allowed the assessee's claim for deduction of the actual cost of wall book cabinets, treating them as plant. The Commissioner, however, revised this assessment, treating the wall book cabinets as furniture and thereby restricting the depreciation to 10%.The Commissioner relied on the decisions of the Gujarat High Court in CIT v. Elecon Engg. Co. Ltd. [1974] 96 ITR 672 and the Supreme Court in CIT v. Taj Mahal Hotel [1971] 82 ITR 44, concluding that the wall book cabinets did not qualify as plant. He also referred to the dictionary meaning of 'furniture' and the functional use of the wall book cabinets, asserting that they should be treated as furniture.The assessee, represented by Shri Patel, argued that the functional use of the book cabinets served the purpose of a plant and not furniture. Patel emphasized that the definition of 'plant' under section 43(3) of the Act is inclusive and broad, encompassing items like books, which are tools of the assessee's profession. Therefore, the wall book cabinets, used for arranging books essential for the assessee's legal practice, should be classified as plant. He cited several cases, including Elecon Engg. Co. Ltd., to support the argument that the functional use of an item determines whether it qualifies as plant.The Tribunal agreed with the assessee's argument, noting that the functional test should be applied. The Tribunal highlighted that the books are tools of the assessee's trade, and the wall book cabinets, used exclusively for arranging these books, serve the same function. The Tribunal referenced various cases, including CIT v. Kanodia Cold Storage [1975] 100 ITR 155 and CIT v. Bank of India Ltd. [1979] 118 ITR 809, where functional use was a key determinant in classifying items as plant. Consequently, the Tribunal held that the wall book cabinets should be treated as plant and quashed the Commissioner's order, restoring the ITO's original assessment.3. Depreciation Rate Applicable to Office Tables and Smoke Glass:The assessee did not contest the disallowance regarding office tables valued at Rs. 1,190 and smoke glass valued at Rs. 272. Therefore, the Tribunal did not address this issue in detail. The Commissioner's decision to treat these items as furniture and restrict the depreciation rate was not challenged and remained unchanged.Conclusion:The appeal was partly allowed. The Tribunal quashed the Commissioner's order regarding the classification of wall book cabinets, restoring the ITO's original assessment that treated them as plant. The decision regarding office tables and smoke glass remained unchallenged and thus unchanged.