SIEMENS INDIA LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under section 256(1) of the Income -tax Act, 1961, made at the instance of the assessee, the Income -tax Appellate Tribunal, Bombay Bench 'C', Bombay, has referred the following questions of law to this court for opinion: ' (1) Whether items of tube -well, plumbing, drainage, cable laying and installation work constitute plant and machinery and as such entitled to development rebate? (2) Whether items consisting of furniture and fixtures, which were later on reclassified as plant and machinery, were entitled to development rebate? '

(2.) SO far as the first question is concerned, the submission of learned counsel for the assessee is that boring of a tube -well, plumbing, drainage, cable laying and installation work, etc., constitute plant and machinery and as such they are entitled to development rebate. Reliance is placed is support of this contention on the functional test applied by the courts from time to time for determining whether a particular asset constituted plant or not. According to learned counsel, keeping in view the nature of the activities of the industrial undertaking of the assessee, these items have to be treated as plant. So far as the second question is concerned, the submission of learned counsel is that the assessee is at liberty to reclassify items originally classified by him as 'furniture and fixtures' as 'plant and machinery' and to claim development rebate thereon. According to him, the authorities below were not justified in holding that the items of furniture and fixtures did not constitute plant and machinery. In the instant case, according to counsel, applying the functional test, the furniture and fixtures in question have to be treated as plant and machinery.

(3.) THE assessee had also set up a switchgear works on a plot of land purchased by it at Chakala Road. The various switchgear components were required to be electroplated with silver plating, nickel plating and zinc plating. The plating process was carried out in the electroplating shop known as galvanic shop. An expenditure of Rs. 1,76,115.50 was incurred on plumbing, drainage, cable laying and installation work in connection with the setting up of the electroplating plant/paint shop. The plumbing and drainage was required to take out the effluents like corrosive chemicals from the electroplating shop. The assessee claimed development rebate on tube -well (Rs. 3,798) and plumbing, drainage, cable laying and installation work, etc. (Rs. 1,76,115), but the lower authorities did not allow the same on the ground that these items could not be treated as plant and machinery.