Functional equipment test: factory air-conditioning qualified as plant because it was essential to manufacturing operations.

An air-conditioning system installed in a factory was treated as plant for investment allowance because its function was essential to manufacturing. The equipment prevented dust from interfering with the production of hearing aids and was therefore inextricably linked with the manufacturing process. Applying the functional, commercial and common parlance tests, the tribunal held that equipment serving a direct operational role in business may qualify as plant rather than a mere office appliance or building fixture. The assessee was entitled to investment allowance on this basis.

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Issues: Whether the air-conditioning system installed in the assessee's factory was eligible for investment allowance as plant or machinery.

Analysis: The decisive consideration was the nature and function of the equipment and its nexus with the manufacturing activity. The air-conditioning system was found to be essential for the manufacture of hearing aids, as it prevented dust particles from affecting production and was therefore inextricably linked with the manufacturing process. The relevant judicial tests treated air-conditioners as plant where they serve a functional role in business operations and are not merely office appliances. Applying the functional, commercial, and common parlance tests, the equipment was held to fall within the concept of plant.

Conclusion: The air-conditioning system qualified as plant for the purpose of investment allowance, and the assessee succeeded on this issue.

Ratio Decidendi: Equipment that is functionally integral to the manufacturing process and is not merely a building fixture or office appliance may be treated as plant for tax allowance purposes.

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