Day: November 7, 2022

Capital Allowance: Is Book a Plant?
Daphne v Shaw (HMIT)

11 TC 256

England & Wales

9 November 1926

The Appellant, a solicitor, claimed a deduction under Rules 6 and 7 of the Rules applicable to Cases I and II of Schedule D regarding wear and tear and obsolescence of books forming part of his law library.

Held

that the books were not machinery or plant within the meaning of the said Rules.

BUT……

In the UK, books will, in principle, qualify as a plant unless they have such a short shelf-life that they are an ordinary trading expense.

Authority was previously found for this in the HMRC manuals: ‘Books are plant if they satisfy the two-year test’. The current capital allowances manual is silent on the matter.

In practice, HMRC allows a deduction for new additions of and supplements to technical books already owned, for replacements of versions that have become obsolete, for technical periodicals and periodical parts of law reports, as well as for the cost of binding supplements and periodicals.

It is normally just the initial cost of setting up the library in the first place that will be claimed as a plant. Even in these cases, HMRC will only insist that the cost of the books should be capitalised where the amount of expenditure involved is considerable.

Concerning employees, HMRC guidance to inspectors is that they ‘only spend time in establishing whether an allowance is due as an expenses deduction or as a capital allowance in worthwhile cases’.

It was not always the case that books could qualify as a plant.

In the case of Daphne v Shaw, Rowlatt J appears to have reached the wrong conclusion. Certainly, his view has not stood the test of time.

He ruled:
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‘I cannot bring myself to say that the books of a lawyer, whether a barrister or a solicitor or, I am sorry to say, a Judge … are “plant”. It is impossible to define what is meant by “plant and machinery”. It conjures up before the mind something clear in the outline, at any rate; it means apparatus, alive or dead, stationary or movable, to achieve the operations which a person wants to achieve in his vocation. But the books which he consults, on his shelves, and which he does not use as “implements”, really, in the direct sense of the word, at all, I cannot believe are included in it.’
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This judgment was questioned but not overruled in the Arthur Sanderson case, in which Cross J felt constrained by the Rowlatt precedent. Cross clearly had difficulty with Rowlatt’s conclusion:
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‘If a barrister has to buy a new edition of a textbook to help him to write his opinions, I cannot see as a matter of principle why the book should not be regarded as a tool of his trade just as much as the typewriter on which his opinions are typed.’
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It was not until Munby v Furlong, however, that the issue of whether books are considered as a plant was comprehensively reviewed and the earlier judgment overturned.

In the course of the judgment, Lord Denning referred to the words of Lord Donovan (in a case not reported) in which he stated:
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‘If you ask me for the ordinary meaning of the word "plant", I would not say that a horse and cart were plant, I would not call the partitions in a building separating a room "plant", but still, the cases show that they are plant for tax purposes.’
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Lord Denning sitting in the Court of Appeal, emphasised that:
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‘I do not think “plant” should be confined to things which are used physically. It seems to me that, on principle, it extends to the intellectual storehouse that a barrister or a solicitor or any other professional man has in the course of carrying on his profession. The difficulty has arisen because the Legislature when it extended this provision to professions, did not make clear the scope of the word “plant” in that context. It seems to me, in the context of a profession, the provision of “plant” should be so interpreted that a lawyer’s books – his set of law reports and his textbooks – are “plant”.’
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In the same case, Sir John Pennycuick agreed with him:
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‘[Plant] seems to me quite plainly to cover books purchased by a barrister for the purpose of his profession. Those books do indeed represent apparatus used by him for carrying on his profession, and that, to my mind, is the end of the case.’
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The normal starting point when ascertaining the meaning of the word plant is the employers’ liability case of Yarmouth v France (1887) 19 QBD 647. There, Lord Justice Lindley held that:
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‘… it includes whatever apparatus is used by a businessman for carrying on his business – not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or moveable, live or dead, which he keeps for permanent employment in his business.’
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The Munby v Furlong case overturned 50 years of precedent and established once and for all that books and potentially other assets used in a less physical way can indeed qualify as a plant.
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17
November 7, 2022
Capital Allowance: Is Lamps a Plant?
J Lyons and Co. Ltd
v
Attorney-General

Supreme Court
1994

A company tried to treat lighting in a tea shop as a plant.

As mentioned in Yarmouth v France– the beginnings of a definition above, the earliest definition of the plant came from a case that had nothing to do with tax.

Given the significance that the term has developed for tax purposes, there is a small irony in the fact that the next stage in the development of the definition was again in a non-tax case, this time under the War Damage Act 1943.

The case in question was that of J. Lyons & Co Ltd v Attorney General.

The War Damage (Amendment) Act of 1943 gave compensation for damage to land and defined land as including buildings or plant.

In this case, the company claimed that some lamps that were destroyed by enemy action were plant and so qualified for compensation under the War Damage Act.

The lamps were not part of the building, and the question was, therefore:
- whether or not they were plant?
The facts and issues are summarised in the headnote to the case as follows:

‘A tea-shop having been damaged by enemy action in 1941, the company owning it claimed a cost-of-works payment … which included the cost of replacing electric lamps used for lighting the premises, and fittings annexed thereto, as being “plant” or “machinery” …

Held, that the electric lamps and fittings were not part of the apparatus used for carrying on the business but were part of the setting in which the business was carried on and, therefore, were not “plant”, the subject of compensation within the Act.’

As the key issue to arise is the distinction between setting on the one hand and plant on the other, it is worth looking at the judge’s reasoning.

‘In the present case, the question at issue may, I think, be put thus: Are the lamps and fitments properly to be regarded
- as part of the setting in which the business is carried on; or
- as part of the apparatus used for carrying on the business?
The lamps and their fitments are owned by a caterer and used in premises exclusively devoted to catering purposes. Still, the presence of lamps in this building is not dictated by the nature of the particular trade there carried on or by the fact that it is for trade purposes that the building is used.

Lamps are required to enable the building to be used where natural light is insufficient.

The actual lamps themselves, so far as the evidence goes, present no special feature either in construction, purpose or position, and, being supplied with electricity from public suppliers, they form no part of an electric lighting plant in or on the hereditament.

In my opinion, these lamps are not, in these circumstances, properly described as “plant” but are part of the general setting in which the business is carried on.

They would not, I think, in any catalogue of this trader’s assets, fall under the heading “machinery and plant”, and I hold that the lamps and the fitments in question are not machinery or plant for the purposes of the War Damage Act 1943.’

The key point to draw out of this ruling is probably the comment that the lamps presented ‘no special feature either in construction, purpose or position’.

Any such special feature would perhaps have swayed the opinion – the lamps would perhaps no longer have been perceived as ‘part of the general setting’ but rather as some trade-specific apparatus brought into that setting.

So, how has this apparatus-versus-setting distinction survived more than half a century of case decisions?

As with all other aspects of the definition of plant, the picture is unclear. Certainly, the principle has survived and has received judicial approval repeatedly.

For example, in the Cole Brothers case, Oliver LJ reworked the same formula when he commented as follows:

‘At risk of propounding yet a further refinement, it seems to me that the authorities, with one possible exception, demonstrate that the question (however expressed) which the court must ask itself is whether the particular subject matter under consideration either itself performs, or is a necessary or integral part of that which performs, simply and solely the function of “housing” the business or whether, as its sole function or as an additional function, it performs some other distinct business purpose.’

But the distinction is not always clear-cut. In Jarrold v Good, which concerned moveable partitions, the judge considered the reasoning of the J Lyons & Co case and questioned whether the contrast between apparatus on the one hand and setting on the other could always stand scrutiny:

‘I do not want to appear to doubt in any way the correctness of that decision on the facts of that case, but it seems to me that the setting in which a business is carried on, and the apparatus used for carrying on a business, are not always necessarily mutually exclusive.

Certain fixtures or chattels in certain trades may well represent the setting in which the business is carried on, from one point of view and the apparatus used for carrying on the business, from another point of view.

This point is, I think, the same or akin to that made by Uthwatt, J., when he mentioned that the lamps “present no special feature either in construction, purpose or position”.

In the present case, the trade is that of a shipping agent carried on in an office building in the manner set out in the Case Stated.

Concerning that trade, as so carried on, it seems to me that these partitions are, from one point of view, the setting in which the business is carried on, but from another point of view, the apparatus used for carrying on the business.

If one considers the staff engaged in the respective rooms formed by the partitions at any given moment, the partitions, like the floor and ceiling, are the setting in which the staff carry out their duties.

But if one considers the Company’s policy of office organisation as set out in the Case Stated, then the partitions are fixtures specially designed to enable an appropriate and the varying number of employees to perform their duties in an appropriate and the varying number of sections, according to the state of the Company’s business at the time.

It seems to me to be impossible to deny to fixtures possessing this character the title of apparatus used by the Company for carrying on its business.

Once this is accepted, the partitions clearly qualify for allowances as plant, notwithstanding that, from another point of view, they may be part of the setting.’

In other words, the judge was accepting the original Yarmouth v France reasoning (as the partitions were apparatus, they would ‘clearly qualify’ as a plant) but was limiting the application of the J Lyons & Co principle of contrasting plant with the setting.

This limitation was approved in the same case in the Court of Appeal, where Donovan LJ concluded that ‘you cannot always answer the question, “Is this plant?” by asking, “Is it part of the setting or not?”’

Is the distinction between apparatus and setting of any continuing value in deciding whether or not an item qualifies as a plant?

It is tempting to conclude that the courts are saying no more than that the distinction applies except when it does not apply.

The Leeds Permanent Building Society successfully went to court to establish that certain decorative screens in their windows were plant.

The judge in that case (Leeds Permanent Building Society v Proctor) commented as follows:

‘In applying that conception of the apparatus used by a businessman for carrying on his business, it was found convenient to distinguish the setting in which a business is carried on and the apparatus with which a business is carried on, though subsequent developments have shown that there are overlapping cases where the distinction is not in itself decisive because one object may partake of both characters.

Leaving those overlapping cases to one side, that which is the setting in which the trader performs his trade is not plant; the apparatus with which he performs it is plant.’

The conclusion would appear to be that an item:
- may be apparatus, or
- it may be setting, or
- it may be both.
For an inspector to show that it is not a plant, he must demonstrate that it is only the setting.

Even this argument cannot be pushed too far, however, as counsel for Wimpy International found.

The commissioners had disallowed the cost of shop fronts as a plant as ‘their principal function is to form a necessary part of the premises’.

A Mr Aaronson had argued that this showed that the commissioners had ‘misunderstood or misapplied’ the functional test.

‘Lloyd LJ in the Court of Appeal considered that argument as follows:

The question is not, he says, whether the principal function of the shop fronts is to keep out the weather, or whatever, but whether that is their sole function.

If the shop fronts have some other business function as well, for example, by capturing the passer-by’s attention or by allowing the already captive customer to see out … then the shop fronts qualify as plant …

I cannot accept that it is correct to subject the Commissioners’ decision to this sort of linguistic analysis.’

Nevertheless, the principle would seem to remain.

It should be remembered, however, that all the cases referred to in the above paragraphs predate the 1994 legislation, which restricts the definition of a plant.

For an item to qualify as a plant, it must satisfy two tests.

The prevailing orthodoxy was that firstly, it must be shown that the item in question does not fall foul of the legislation now in CAA 2001, s. 21 and 22.

And secondly, it must be demonstrated that on the case law principles discussed above, it is properly treated as apparatus.
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14
November 7, 2022
Capital Allowance: When a setting is Plant – Moveable Partitions
Generally, an asset that is part of the setting is not a plant.

But, there have been a few instances in which assets that are a part of the setting but are not a part of the business premises have been determined to be a plant because they were also an apparatus that was used to carry out the business.

Jarrold (Inspector of Taxes)

v

John Good and Sons, Ltd

Court of Appeal

40 TC 681

Income Tax Act 1952

7 December 1962

Jarrold v John Good & Sons Ltd carried on the business of shipping agents.

To satisfy its fluctuating accommodation requirements, the Company made use of special partitioning, which allowed it to subdivide the floor space available in any way that it chose.

The partitions were secured by screws to the structure of the building only at the floor and ceiling, and it was a relatively simple operation to move them from one position to another. It was common ground that the partitioning did not form part of the structure of the building.

On appeal against an assessment to Income Tax under Schedule D for the year 1960-61, the Company claimed that certain expenditure incurred in connection with the installation of the partitioning represented capital expenditure on the provision of plant, and therefore qualified for initial and annual allowances under Chapter II, Part X, Income Tax Act, 1952.

The Crown contended that the partitions were not a plant since they were merely the setting in which the Company’s business was carried on, that they were not apparatus used in carrying out the actual operations of the business and that they were not subject to wear and tear.

The General Commissioners decided that the partitioning was “plant” and that the Company was entitled to the allowances.

Held, that the Commissioners’ decision was correct, moveable partitions were held to be plant.

The partitions were essentially fixed but could be moved by the business during the course of the trade to expand offices or create new areas as required.

In actuality, the partitions were seldom moved.

Still, the Commissioners found that as a matter of commercial necessity, the partitions had to possess mobility and flexibility for the day-to-day running of the business.

The partitions were part of the setting but were not part of the premises in which the trade was carried on, They were apparatus with which the company carried on its business”.

The courts made an important distinction that apparatus such as movable partitions are not excluded from being a plant despite being part of the “setting”.

Another case where items which were part of the setting in which the trade was carried on were held to be a plant is the case of Leeds Permanent Building Society v Proctor (Inspector of Taxes) [1982]..

.

Demountable Screens, using similar tests as Jarrold v John Good, were also held as a plant in this case.

Leeds Permanent Building Society v Proctor

The John Good case does not mean that all moveable partitions are plant.

If you get a claim that moveable partitions are plant, you should check to see if they need to possess mobility as a matter of commercial necessity before you accept the claim. It is also worth checking whether they have, in fact, ever been moved.

In Leeds Permanent Building Society v Proctor, the society claimed that decorative screens used for window displays were plant.

The capital allowance claim was refused, and the society appealed.

The Inspector won at the Commissioners, so the society appealed to the High Court, where it won.

The Commissioners found that the purpose of the screens was to attract the attention of passersby and so bring business to society.

In the Commissioner’s view, the screens formed part of the “setting” of the business and did not perform any business function.

For the Crown, it was argued that the function of the screens to attract customers was insufficient to stamp them as a plant.

That had been the ship’s function in issue in Benson v. Yard Arm Club Ltd. and it was held in that case that the ship was not a plant of the restaurant business.

It was further argued for the Crown that items used to make the setting of a business more attractive do not satisfy the functional test to qualify as plant unless the provision of an attractive setting is itself found to be part of the trade processes or the item or form of the attraction is dictated by the nature of the trade processes.

That argument was based on a principle drawn by reconciling several authorities on the meaning of the word “plant”.

The High Court held that the window screens were part of the shop furniture with which the trade of the society was carried on in the branch office concerned.

The screens in question were of a decorative nature, and all contained the Society’s name in a prominent position.

The screens were not capable of use without considerable modification for any business but that of the Leeds Permanent Building Society, and indeed some were of such a character that they were really only of use in the particular branch.

Each was readily removable, and they were never left at a branch office which was vacated by the Society.

It was argued for the Society that they performed a business function, namely attracting custom to the branch offices. In this, it was submitted, they were indistinguishable from the fascia boards and projecting signs used to proclaim the identity of the Society’s offices. Those signs had been treated as “plant” by the Commissioners.

Held, appeal allowed.

The determination of the Commissioners was not consistent with the facts they found.

There is nothing in those facts which shows that the screens were part of the setting. Nor were they part of or inseparably annexed to the structure of the branch.

On the facts found, the screens were part of the furniture with which the Society trade was carried on in a branch office.

They served to attract the public’s attention to bring business to Society. Accordingly, the Commissioners erred in law.

Unlike the ship, in Benson’s case, the screens, in this case, were an adjunct to the carrying on of the business rather than the premises of the business.

What this Means

Hence, the determination of what would constitute a ‘plant’ or ‘setting’ would very much depend on the nature of taxpayer’s business.

the Decided cases, such as the movable partitions in the John Good case, the window screens in the Leeds Permanent case and decor items in the Scottish and Newcastle case, illustrated that an item, which could be properly described as being part of the setting, could also be plant depending on the functions performed by the items in question and the nature of taxpayers’ business.
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15
November 7, 2022
Capital Allowance: Is Ceilings a Plant?
Normally suspended ceilings and acoustic tiles are not plant.

In Hampton v Fortes Autogrill Ltd, the company claimed capital allowances on false ceilings in a restaurant.

The claim was rejected.

The ceilings’ only function was to conceal service pipes, wiring etc.

They were not apparatus with which the company carried on its trade of running a restaurant.

A suspended ceiling is a plant if it forms an integral part of a heating and ventilation system. For example, it may form the fourth side of a duct or channel through which stale air is extracted for treatment or treated air is discharged.

ICI of Australia v CIR

Another case that involved a ceiling was an Australian case – ICI of Australia v CIR 1ATR450.

Federal Commissioner of Taxation

v.

ICI Australia Ltd.

127 CLR 529

16 December 1971

The company installed special sound-absorbing ceilings in its office buildings in Sydney and Melbourne.

The electrical wiring in question forms part of the reticulation system for conveying electric current throughout the buildings.

The wires are carried loose in trays fitted below the ceilings. ICI relies on the fact that the wiring was designed in elaborate detail to provide the necessary amount of power for the equipment intended to be used on each floor: the nature of the office machines intended to be used control the nature and the extent of the wiring.

Counsel for ICI challenged the statement made by Kitto J. (1970) 120 CLR, that the wiring and associated electrical installations had “no relevance to the activities of the appellant beyond the relevance they would have to any occupier’s activities“.

It was submitted that they had a special relevance, being designed and installed in such a way as to meet ICI’s particular requirements, having regard to the income-earning activities proposed to be carried on within the various parts of the buildings.

The acoustic ceiling panels were metal panels fitted into a framework fixed below the structural ceiling.

The main purpose of the panels was to absorb sound and reduce the level of noise in the offices, although no doubt they served an aesthetic purpose as well.

The ceilings were removable. The Courts found that they were not plant.

Gibbs J.: delivered the following written judgment:-

Although fixtures may be “plant or articles”, in my opinion, they will not fall within that expression if their only function is to form part of the general setting in which the taxpayer produces assessable income.

In the present case, the installations were no more than parts of the buildings where ICI carried on some of its activities.

The buildings of which they formed a part were office buildings which could not in themselves be regarded as “in the nature of a tool of the taxpayer company’s trade” and were in no way comparable to the Dyehouse, the subject of the decision in Wangaratta Woollen Mills Ltd. v. Federal Commissioner of Taxation (1969) or the dry dock considered in Inland Revenue Commissioners v. Barclay, Curle &Co. Ltd. (1969).

In my opinion, the decision of Kitto J. in Imperial Chemical Industries of Australia and New Zealand Ltd. v. Federal Commissioner of Taxation (1970) was correct. In conformity with that decision, my brother Walsh was right in holding that ICI’s installations were not “plant or articles” used to generate assessable income.

I would dismiss the appeal.

What this Means

Suspended Ceilings and Acoustic Tiles were part of the premises in which the company carried on its trade.
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15
November 7, 2022
Capital Allowance: Are Sanitary and Pipeline Fittings a Plant?
C.I.T. Andhra Pradesh (the appellant)

v

M/S Taj Mahal Hotel, Secunderabad

12 August 1971

The respondent, who is the assessee, is a registered company running a hotel in Secunderabad with branches at Sultan Bazar and King Kothi in Hyderabad.

During the previous year ending 30th September 1959, relating to the assessment year 1960-61, the assessee incurred an expenditure of Rs. 57,154/- in installing sanitary fittings and of Rs. 1,370/- for pipe-line fittings.

The assessee claimed a development rebate on these two items at the rate of 25% under S. 10(2)(vi-b) of the Act amounting in the aggregate to Rs. 14,629/-.

The Income Tax Officer disallowed the claim.

On appeal, the Appellate Assistant Commissioner upheld the disallowance.

An appeal was taken to the Appellate Tribunal.

The Tribunal rejected the appeal holding that the definition of “plant” must necessarily be the same, whether it was for claiming depreciation under s. 10(2)(vi) or for development rebate under S. 10(2)(vi-b).

Accordingly, it was held that the sanitary and pipeline fittings did not fall within the meaning of the word “plant”.

High Court

On being moved under s. 66(1) of the Act, the following question was referred for the opinion of the High Court:-
- Whether the sanitary fittings and pipelines installed in the King Kothi branch of the Hotel constituted ‘plant’ within the meaning of sec. 10(5) of the Indian Income Tax Act; and
- Whether the assessee is entitled to a development rebate in respect thereof under sec.10(2) of the Act.”
The High Court answered the question in the affirmative and favoured the assessee.

The only question that was argued before the High Court and which has been debated before us is whether sanitary and pipeline fittings in a building which is run as a hotel would fall within the meaning of the word “plant“ in section 10(2)(vi-b) of the Act.

Section 10(1) of the Act provides that tax shall be payable by an assessee in respect of the profits and gains of any business profession or vocation.

Sub-section (2) gives the allowances which have to be made in the computation of such profits and gains. Clause (vi) of that sub-section relates to the depreciation in respect of “such buildings, machinery, plant or furniture being the property of the assessee”.

Clause (vi-b) of S. 10(2) is as follows:-
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"(vi-b) in respect of a new ship acquired or new machinery or plant installed after the 31st day of March 1954, which is wholly used for the purposes of that business carried on by the assessee, a sum by way of development rebate in respect of the year of acquisition of the ship or of the installation of the machinery or plant, equivalent to...........
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Section 10(5) provides inter alia that in sub-section (2), ” plant” includes “vehicles, books, scientific apparatus and surgical equipment purchased for the purpose of the business, profession or vocation”.

The main argument of the learned counsel for the Commissioner of Income Tax, who is the appellant, is that the word “plant” should not have been given a wide meaning and should have been interpreted according to the common understanding in commercial circles among persons who deal in plant and machinery.

It is asserted that the development rebate cannot be claimed in respect of the items which have become a part of the building itself.

It has also been pointed out that the assessee, while claiming depreciation allowance, has included the assets in question under the head “furniture and fittings”, the rate claimed to be 9% which was duly allowed by the Income Tax Officer.

This rate of 9% was applicable under Rule 8 only to furniture and fittings used in hotels etc.

If the assets were to be treated as plant, only the general rate of 7% would be applicable.

The definition of “plant” must necessarily, therefore, be the same whether it be for claiming depreciation under s. 10(2)(vi) or for development rebate under s. 10(2)(vi-b).

It has also been suggested that the primary meaning of the word “plant” has a connection with mechanical or industrial business or the manufacture of finished goods from raw goods and that sanitary and pipeline fittings could not possibly satisfy those conditions.

Now it is well settled that where the definition of a word has not been given, it must be construed in its popular sense if it is a word of everyday use. Popular Sense means “that sense which people conversant, with the subject matter with which the statute is dealing, would attribute to it“.

In the present case, s. 10(5) enlarges the definition of the word “plant” by including in it the words which have already been mentioned before.

The fact that even books have been included shows that the meaning intended to be given to “plant” is wide. The word “includes” is often used in interpretation clauses to enlarge the meaning of the words or phrases occurring in the body of the statute.

When it is so used, these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include.

The word “include” is also susceptible to other constructions which it is unnecessary to go into.

The case, J. Lyons and Company Limited v. Attorney General, relied upon by the learned counsel for the appellant, apart from being distinguishable, hardly supports the appellant’s contention.

In that case, it was I held that electric lamps and fittings in a tea shop were not part of the apparatus used for carrying on the business but were part of the setting in which the business was carried on and, therefore, were not “plant”, within the meaning of certain provisions of the War Damage Act, 1943.

It was observed on page 286, “if these articles are plant, it can only be by reason that they are found on premises exclusively devoted to trade purposes. Trade plant alone need be considered“.

The meaning of “plant” as given in Yarmouth v. France was accepted as correct.

According to that meaning, “plant” includes whatever apparatus or instruments are used by a businessman in carrying on his business.

In our judgment, the more apposite decision is that of the Court of Appeal in Jarrold (Inspector of Taxes) v. John Good & Sons Ltd.

There the nature of the assessee’s business required that its office accommodation should be capable of sub-division into several rooms varying in size etc., according to the requirements from time to time of the agencies which it carried on.

The office accommodation consisted of a large open floor space in which partitions could be erected so as to subdivide the floor space into several rooms of any size.

Certain partitions were made, which were screwed to the floor and ceiling only and could be easily moved if it was desired to alter the size of the number of rooms.

The question was whether these partitions were plant within sections 279 and 280 of the English Income Tax Act 1952 to entitle the company to allowances under those sections.

There the material words in the statute were “where the person carrying on a trade in any year of assessment has incurred expenditure on the provision of machinery or plant for the purposes of the trade.”

It was held that the partitions were “plant” as they were used in the carrying out of the company’s trade or business.

Donovan, L.J. held that the partitions were used to enable the trader to cope with the vicissitudes of (1) [1944] (1) Ch. 28 1. (2) [1887] (19) Q. B. 647. (3) [1963] (1) W.L.R. 214.

The business as it increased and diminished and relied on the finding of the commissioners that the flexibility of accommodation that the partitions provided was a commercial necessity for the company.

Further illustrations were given of assets which would fall within the meaning of “plant”.

“The heating installation of a building may be passive in the sense that it involves no moving machinery, but few would deny it the name of plant“.

The same thing could, no doubt, be said of many air conditioning and water-softening installations.

It cannot be denied that the hotelier business is carried on by adapting a building or premises in a suitable way to be used as a residential hotel where visitors come and stay and where there is an arrangement for meals and other amenities provided for their comfort and convenience.

To have sanitary fittings etc., in a bathroom is one of the essential amenities or conveniences which are normally provided in any good hotel in the present times.

If the partitions in Jarrold’s case (supra) could be treated as having been used for the purpose of the trader’s business, it is incomprehensible how sanitary fittings can be said to have no connection with the business of the hotelier.

He can reasonably expect to get more custom and earn a larger profit by charging higher rates for the use of rooms if the bathrooms have sanitary fittings and similar amenities.

We are unable to see how the sanitary fittings in the bathrooms in a hotel will not be “plant” within s.10(2)(vi-b) read with Section 10(5) when it is quite clear that the Legislature intended to give it a wide meaning and that is why articles like books and surgical instruments were expressly included in the definition of “plant”.

In decided cases, the High Courts have rightly understood the meaning of the term “Plant” in a wide sense. (See Commissioner of Income Tax, U.P. v. Indian Turpentine and Rosin Co. Ltd.).

If the dictionary meaning of the word “plant” were to be taken into consideration on the principle that the literal construction of a statute must be adhered to unless the context renders it plain that such a construction cannot be put on the words in question-this is what is stated in Webster’s Third New International Dictionary:- (1) [1970] (75) I.T.R. 533.

17 4 “Land, buildings, machinery, apparatus and fixtures employed in carrying on trade or other industrial business……

It is, however, unnecessary to dwell more on the dictionary meaning because, looking at the provisions of the Act, we are satisfied that the assets in question were required by the nature of the hotel business which the assessee was carrying on.

They were not merely a part of the setting where the hotel business was being carried on.

The High Court was right in not accepting the reasoning of the Tribunal based on the rates relating to depreciation under s.10(2)(vi), and the assessee has claimed that the sanitary and pipeline fittings fell within the meaning of “furniture and fittings’ in Rule 8(2) of the Rules.

It has been rightly observed that the Rules were meant only to carry out the Act’s provisions, and they could not take away what was conferred by the Act or whittle down its effect.

If the assessee had claimed a higher depreciation allowance, that would not detract from the meaning of the word plant in clause (vi-b) of S. 10(2). As a result, this appeal fails, and it is dismissed with costs.
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In other circumstances Sanitary and Pipeline Fittings might be part of the premises or setting and not ‘plant’ in common law. It is necessary to come to a judgement on the facts of the case.
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November 7, 2022