1. The assessee is a private limited company and derives income from mining. The assessee during the year under appeal wrote off railway siding amounting to Rs. 50,577. The assessee required a railway siding for its business. Accordingly, during the assessment years 1972-73 and 1973-74, earth cutting, levelling of land and construction of platform and shed were done. Subsequently, the Government of India decided to handle the entire export trade of iron ore through Minerals and Metals Trading Corporation of India Ltd., who were provided with railway line facility. Accordingly, the assessee did not get actual railway lines over the siding. However, the siding along with the platform and shed was used for the purposes of the business of the assessee. The ITO referring to Section 32(1)(m) of the Income-tax Act, 1961 ('the Act'), said that the section covers only depreciable items like building, plant, machinery and furniture. It comes into operation only when the depreciation is allowed on the asset discarded or demolished during the year under appeal. The assessee-company did not claim any depreciation on the above expenditure and, therefore, it could not be allowed under Section 32(1)(m).
2. The assessee came in appeal and again urged that incomplete railway siding was used for the purposes of the business of the assessee and during the year under appeal it was dismantled. Therefore, the loss written off in the books of account should be allowed under Section 32(1)(iii). The Commissioner (Appeals) did not agree with the view of the ITO that simply because no depreciation was allowed to the assessee, the assessee cannot claim relief under Section 32(1)(iii).
But he said that the land as such which was used for storage purposes could not be said to be a plant. He came to the conclusion that it is neither of the categories of assets described in Section 32(1)(m) and, hence, he confirmed the disallowance made by the ITO on a different reasoning.
3. Shri M.L. Saraf, the counsel for the assessee, referred to the situation under which the railway siding was constructed by the assessee with a raised platform and a shed. It was indicated that the railway siding was incomplete no doubt but it was a railway siding and it was used for storage and stacking for the purposes of the business of the assessee. Therefore, the railway siding is a plant for which he referred to rule 5 read with Appendix I, Part I of the Income-tax Rules, 1962 ('the Rules'). It was indicated by Shri Saraf that simply because the railway siding was incomplete, the nature of the asset would not change and it would remain as plant. The Commissioner (Appeals) has given the finding that simply because no depreciation was claimed by the assessee, the assessee may not lose the advantage of Section 32(1)(iii). Hence, the assessee's claim should have been accepted by the Commissioner (Appeals). Alternatively, Shri Saraf urged that the assessee had a rest platform with a shed. The shed was used for storage and stacking. The shed was not required and during the year under appeal it has been demolished. Hence, it was in the category of a building and even on this ground the claim of the assessee should have been accepted.
4. The departmental representative, Shri S. Dasgupta, on the other hand, urged that the assessee cannot be allowed relief under Section 32(1)(iii) unless the conditions are fulfilled. The assessee must indicate that building, plant, machinery and for furniture had been discarded, demolished or sold during the year under appeal and the relief was available after deducting the scrap value which was receivable by the assessee. The assessee has not indicated as to when the railway siding was demolished. Secondly, it had also not indicated as to what was the scrap value and thirdly, from the nature of the asset, it is clear that neither it was a plant nor it was a building.
Under the above circumstances, the Commissioner (Appeals) was justified in negativing the claim of the assessee.
5. The assessee has partly constructed a railway siding during the assessment years 1972-73 and 1973-74 for the transportation of iron ore. The iron ore business was transferred by the Government of India to Minerals and Metals Trading Corporation of India Ltd., who had their own railway siding. Under the above circumstances, the railway siding which was in progress was left by the assessee. The assessee raised the level of the land for railway lines, constructed platform and a shed for the loading of iron ore. As the railway lines were not put up on the siding, the siding was used for storage and stacking of other articles of the assessee. Therefore, from the nature it is clear that it was not a railway siding but it was only a siding. The entire amount had been written off during the year under appeal and the relief had been claimed under Section 32(1)(iii). The relief under Section 32(1)(iii) is available in respect of plant, machinery, building and furniture sold, demolished, etc., after deducting the scrap value from the depreciated value. In the instant case, no depreciation has been claimed. Therefore, the depreciated value is the cost. The assessee had not shown any scrap value which ought to have been shown or could be determined on estimate. Now the only question is that railway siding was incomplete or a siding which was used by the assessee for the purposes of storage and stacking was a plant or a building or it was neither a plant nor a building.
6. The definition of plant under Section 43(3) of the Act is not very exhaustive and the word 'plant' in its ordinary meaning is a word of wide import. It has been considered by the Courts on different occasions and the Supreme Court in CIT v. Taj Mahal Hotel [1971] 82 ITR 44 considered the meaning of 'plant' and in that connection it observed: Now it is well settled that where the definition of a word has not been given, it must bs construed in its popular sense if it is a word of every day use. Popular sense means 'that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it . . .' (p. 47)) 7. The above decision generalises the meaning of the word 'plant' in the following words: (i) that the word 'plant' must be given a wide meaning having regard to the fact that articles like books and surgical instruments are expressly included in the definition of 'plant'.
(ii) that its meaning is not confined only to an apparatus used in mechanical or industrial business or manufacture of finished goods from raw material; and (iii) that the definition of 'plant', as given in Yarmouth v. France [1887] 19 QBD 647 and as expounded in Jarrold (Inspector of Taxes) v. John Good & Sons Ltd. [1963] 40 TC 681, furnished the true apposite test for judging whether a given article is plant.
The Gujarat High Court after considering the various decisions considered this matter in CIT v. Elecon Engg. Co. Ltd. [1974] 96 ITR 672 and observed as follows: The word 'plant' in its ordinary meaning is a word of wide import and it must be broadly construed having regard to the fact that articles like books and surgical instruments are expressly included in the definition of plant in Section 43(3) of the Act. It includes any article or object, fixed or movable, live or dead, used by a businessman for carrying on his business. It is not necessarily confined to an apparatus which is used for mechnical operations or processes or is employed in mechanical or industrial business. It would not, however, cover, the stock-in-trade, that is, goods bought or made for sale by a businessman. It would also not include an article which is merely a part of the premises in which the business is carried on. An article to qualify as 'plant' must furthermore have some degree of durability and that which is quickly consumed or worn out in the course of a few operations or within a short time cannot properly be called plant. But an article would not be anytheless plant because it is small in size or cheap in value or a large quantity thereof is consumed while being employed in carrying on business. In the ultimate analysis the inquiry which must be made is as to what operation the apparatus performs in the asses-see's business. The relevant test to be applied is: does it fulfil the function of plant in the assessee's trading activity Is it the tool of the taxpayer's trade If it is, then it is plant, no matter that it is not very long-lasting or does not contain working parts such as a machine does and plays a merely passive role in the accomplishment of the trading purpose. (p. 672) 8. The railway siding primarily, which is an asset and on which the depreciation is available to the assessee, is for the purposes of loading and unloading and storage. The assessee in the absence of railway lines has used the siding for storage and stacking of goods.
Therefore, the siding had been used partially for the object for which the railway siding is used. The incomplete railway siding or a complete siding is an asset which has been used by the assessee for the purpose of its business. If the various definitions given by the Courts and enumerated by the learned author Sampath Iyengar of Law of Income-tax, 7th edition, Vol. 2, at pages 1255 to 1259, are taken into consideration, the railway siding incomplete was an asset of the assessee.
9. The argument of the assessee also sounds well that simply because the asset was incomplete, it would not change its character and it would remain the same asset. If the railway siding is a plant, it would not lose its character and it would remain a plant even though it was only a siding. In this connection, the observation of the same author at page 1250 in connection with machinery is relevant. The author has observed that machinery need not be a self-contained unit: it may but be a part of a bigger machine, or it may even be one that is used in conjunction with one or more machines before it can commence to operate. Nor would 'machinery' cease to be machinery merely because it has been installed as part of a manufacturing or industrial plant. It would continue to be machinery even after it has been made an integral part of a plant. Therefore, the siding constructed by the assessee during the assessment years 1972-73 and 1973-74 was a plant which has been dismantled during the year under appeal on which the assessee was eligible for relief under Section 32(1)(iii). However, the relief sought by the assessee would diminish by the scrap value of the asset.
10. Even the alternative argument of the assessee has got force. If the railway siding was incomplete or siding was not plant within the meaning of Section 32(1)(iii) the siding may be taken as a building.
The siding had a raised platform, a shed on the part of it and a high levelled land.
This complete unit was used by the assessee for storage and stacking.
The said platform and shed was dismantled during the year under appeal.
Under the above circumstances, if the siding was not a railway siding, it was in the nature of a building which was used for the purposes of the business of the assessee. Under the above circumstances, the assessee was even eligible for relief under Section 32(1)(iii), as a building. However, the relief sought by the assessee would be diminished by the estimated cost of the scrap.
11. The objection taken by the departmental representative as to when it was dismantled, is npt in dispute and it is clear from the order of the ITO as well as the letter of the assessee dated 3-7-1981, which was addressed to the ITO, that it was demolished during the year under appeal. The other two objections of the departmental representative had been discussed earlier. The ITO, therefore, is directed to allow relief to the assessee as indicated above.