Full Judgment Text
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PETITIONER:
C.I.T. ANDHRA PRADESH
Vs.
RESPONDENT:
M/S TAJ MAHAL HOTEL, SECUNDERABAD
DATE OF JUDGMENT12/08/1971
BENCH:
GROVER, A.N.
BENCH:
GROVER, A.N.
CITATION:
1972 AIR 168 1971 SCC (3) 550
CITATOR INFO :
R 1981 SC1274 (10)
R 1985 SC 679 (32)
RF 1986 SC 338 (7,11)
RF 1987 SC1023 (31)
RF 1988 SC1087 (8)
R 1989 SC 335 (9)
F 1989 SC 622 (4)
RF 1991 SC 686 (16)
RF 1991 SC 999 (14)
F 1992 SC 129 (7)
F 1992 SC1782 (10)
ACT:
Income-tax Act (11 of 1922) s. 10(2) (vi) and (vi-b)-
’Plant’, meaning of.
HEADNOTE:
During the assessment year 1960-61, the assessee, a
registered firm running hotels, incurred expenditure in
installing sanitary and pipeline fittings in its hotels. On
the question whether such fittings in a building run as a
hotel fell within the meaning of the word ’plant’ in s.
10(2)(vi-b) of the Income-tax Act, 1922, and the assessee
was therefore entitled to development rebate under that sub-
section, the High Court, in reference, answered in favour of
the assessee.
Dismissing the appeal to this Court,
HELD: (1) Apart from the dictionary or literal meaning
of the word ’plant’, the context of the provisions of the
Act shows that sanitary and pipe line fittings are ’plant’
under s. 10(2)(vi-b) read with s. 10(5). [173H; 174A-B]
In computing the profits and gains of a business under s.
10(1) o the Act allowances by way of depreciation in respect
of ’plant’ under s. 10(2)(vi) and by way of development
rebate in respect of ’plant’ under s. 10(2)(vi-b) have to
be made. Under s. 10(5), ’plant’ includes vehicles, books,
scientific apparatus and surgical equipment purchased for
the purpose of the,-business profession or vocation. Where
a word is not defined in a statute, it must be construed in
its popular sense, that is, that sense which people
conversant with the subject-matter with which the statute is
dealing, would attribute to it. The word ’includes’ is
generally used to enlarge the meaning of words or phrases
used in the statute so that, words and phrases may be
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construed as comprehending not only such things as they
signify according to their nature and import, but also these
things which the interpretation clause declares that they
shall include. The fact that even books have been included
in ’plant’ shows that the meaning given to ’plant’ is wide.
It should cover sanitary and pipe-line fittings. [170E-H;
171E-H, 173F]
To have such fittings in a bath room is one of the essential
amenities or conveniences which are normally provided in any
good hotel, and the hotelier can reasonably expect to get
more custom and earn a larger profit by charging higher
rates. Therefore, the fittings in the present case, were
not merely a part of the setting in which the hotel business
was being carried on, but were required for the purpose of
the hotel business. [173C-G]
C.I.T., U.P. v. Indian Turpentine and Rosin Co. Ltd., (1
970) 75 I.T.R. 533, approved.
Jarrold (Inspector of Taxes) v. John Good & Sons Ltd.,
(1963) 1 W.L.R. 214, applied.
169
J. Lyons Co. Ltd. v. Attorney General, [1944] 1 Ch. 281
and Yar mouth v. France, [1887] 19 Q.B. 647, referred to.
(2) The fact that the assessee while claiming depreciation
allowance had included the fittings in question under the
head ’furniture and fittings’ and claimed higher
depreciation allowance than what would be applicable to
’plant’, would not detract from the meaning of the word
’plant’ in s. 10(2)(vi-b). [174C-E]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1369 of 1968.
Appeal from the judgment and order dated August 1, 1967 of
the Andhra Pradesh High Court in Case Referred No. 68 of
1964.
S. T. Desai, J. Ramanurthi, R. N. Sachthey and B. D.
Sharma, for the appellant.
M. Natesan and K. Jayaram, for the respondent.
The Judgment of the Court was delivered by
Grover, J.--This is an appeal by certificate from the
judgment of the Andhra Pradesh High Court in a case referred
under s. 66(1) of the Income Tax Act, 1922 (hereinafter
referred to as the Act).
The respondent who is the assessee is a registered firm
running a hotel at 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 development
rebate on these two items at the rate of 25 per cent 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 pipe-line fittings did not
fall within the meaning of the word "plant". On being moved
under s. 66(1) of
170
the Act, the following question was referred for the opinion
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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 develop-
ment rebate in respect thereof under sec.
10(2) of the Act
The High Court answered the question in the affirmative and
in favour of the assessee.
The only question that was argued before the High Court and
which has been debated before us is whether sanitary and
pipe-line 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 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 asses
see".
Clause (vi-b) of S. 10(2) is as follows:-
"(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...........
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".
171
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 being 9 per cent
which was duly allowed by the Income Tax Officer. This rate
of 9 per cent 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 per cent 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 connection with
mechanical or industrial business or manufacture of finis
hed goods from raw goods and that sanitary and pipe-
line 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 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".
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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 very 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 in order 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 of
other constructions which it is unnecessary to go into.
172
The case-J. Lyons and Company Limited v. Attorney General
(1) relied upon by the learned counsel for the appellant
apart from being distinguishable hardly supports the
contention of the appellant. 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 at 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 Yar
mouth v. France (2) 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. (3) There the nature of the
assessee’s business required that its office accommodation
should be capable’ of sub-division into a number of 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 a number of 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 number of the rooms. The question was
whether these partitions were plant within sections 279 and
280 of the English Income Tax Act 1952, so as 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.
173
the business as it increased and diminished and relied on
the finding of the commissioners that the flexibility of
accommodation which 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
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doubt be said of many air conditioning and water softening
installations".
It cannot be denied that the business of hotelier 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 arrangement for meals and other amenities
are provided for their comfort and convenience. To have
sanitary fittings etc. in a bath-room 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 business of the
trader, it is incomprehensible how sanitary fittings can be
said to have no connection with the business of the hotlier.
He can reasonably expect to get more custom, and earn larger
profit by charging higher rates for the use of rooms if the
bath-rooms have sanitary fittings and similar amenities. We
are unable to see how the sanitary fittings in the bath-
rooms 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
intention of the Legislature was 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.). (1)
If the dictionary meaning of the word "plant" were to be
taken into consideration on the principle that the literal
construction of a statue 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 to the provisions of 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 in which
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 having claimed that the
sanitary and pipe-line 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 for the
purpose of carrying out the provisions of the Act and they
could not take away what was conferred by the Act or whittle
down its effect. If the assessee had claimed higher
depreciation allowance that would not detract from the
meaning of the word plant in clause (vi-b) of S. 10(2).
In the result, this appeal fails and it is dismissed with
costs.
V.P.S. Appeal Dismissed.
175