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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