Law: Income Tax Act, 1961

Section: 32,43

Law: Income Tax Rules, 1962

Section: 5

(a) Income-tax--Depreciation---Plant---Rate of depreciation---Meaning of "plant"--­Electrical fittings and installations of call bell, indicators, etc., would not constitute plant---Entitled to depreciation at the rate of 10 per cent.---Indian Income Tax Act; 1961, Ss. 32 & 43---Indian Income Tax Rules, 1962. R.5. It is clear from a plain reading of the first proviso to section 32(l)(ii) of the Income Tax Act, 1961, that where the actual, cost of any machinery or plant does not exceed Rs.750, the actual cost is allowable as a deduction, in the accounting year in which the machinery or plant is installed or put to use by the assessee for the purposes of his business. In other words, in respect of minor items of machinery and plant each costing not more than Rs.750, depreciation is allowed at the rate of 100 per cent. in the very first year: This proviso, however, applies only to plant and machinery and not to furniture and. fittings. On furniture and fittings, the assessee will be entitled to depreciation at the rate prescribed by rule 5 read with Part I of Appendix I to the Income-tax Rules, 1962, which is ten per cent. "Plant" as such has not been defined in the Act. Section 43(3) of the Act merely contains, an inclusive definition which says that plant shall include ships, vehicles; books; scientific apparatus; and surgical equipment used for the purposes of the business or profession. Obviously it is an inclusive, definition. Its intention is to enlarge the meaning of the depression "plant" occurring in the Act to include not only such items. as are commonly known as "plant" but also those 'which 'are enumerated therein: To decide whether a particular 'item is plant or not one of the ;tests applied is the "common parlance or trade or commercial parlance" test. Another test that is often applied for that purpose is the "functional rest". In common parlance electrical fittings,. etc., are never regarded as "plant". They are ordinary described and referred to as "fitting's". Even applying the dictionary meaning, these items cannot be regarded as "plant" ' Held, accordingly, that electrical fittings and other apparatus like call bell, indicators, etc.,…

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