Internal factory telephone system treated as plant, making investment allowance admissible under the income tax rules.

An internal telephone installation in a factory was treated as plant, not as an office appliance, because it was essential for efficient factory working and coordination of manufacturing activity. Applying the meaning of "plant" under the Income-tax Act and following the view that an internal telephone system integral to production operations answers that description, the allowance available for such plant was considered under section 32A. The earlier approach treating a similar system as plant for development rebate under section 33 was taken as directly relevant. Investment allowance under section 32A was therefore admissible.

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Issues: Whether an internal telephone installation in the factory constitutes plant and not an office appliance, so as to qualify for investment allowance under section 32A of the Income-tax Act, 1961.

Analysis: The internal telephone system was found to be essential for efficient working of the factory and for coordinating the manufacturing activity. It was held not to be an office appliance. Applying the meaning of plant in section 43 of the Income-tax Act, 1961 and following the principle that an internal telephone system integral to manufacturing operations answers the description of plant, the allowance available for such plant was examined with reference to section 32A. The earlier view treating a similar system as plant for development rebate under section 33 was regarded as directly applicable.

Conclusion: The internal telephone system was held to be plant used in the industrial undertaking and investment allowance under section 32A was admissible.

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