Leila Seth, J.:— The question of law referred for our opinion at the instance of the assessee under s. 256(1) of the I.T Act, 1961, is as under:

“Whether the Tribunal was correct in law and, on the facts of the case, in its conclusion that the ‘building’ in question was not includible in the term ‘plant’ and is not, therefore, entitled to the allowance of development rebate?”

2. The assessee is an individual carrying on the business of manufacture of saccharine and other allied chemicals and essences under the name and style of M/s. R.C Chemical Industries. He erected a new factory at the Okhla Industrial area, comprising of various buildings. In one of these buildings he installed machinery and plant for the manufacture of saccharine and other chemicals. According to him, certain atmospheric controls, e.g, moisture, temperature and provision for filtered air, were required for the manufacture of saccharine. As such, he had constructed a building with particular specifications and standards to install the machinery and plant. For the assessment year 1969–70, the corresponding previous year ending on 31st December, 1968, he claimed development rebate not only on the value of the machinery and plant but also on the value of the building in which the machinery was installed. The ITO disallowed the claim of development rebate with regard to this building, holding that a building was not includible in the definition of plant and machinery.

3. On appeal to the AAC, the view of the ITO was confirmed. The AAC relied on the definition of the word “plant” as given in s. 43(3) of the 1961 Act and not on the dictionary meaning.

4. On further appeal to the Tribunal, it was contended by the assessee that it was incorrect to restrict the definition of “plant” to the items set out in s. 43(3) especially as it was an inclusive definition.

5. The Tribunal, after comparing the provisions of ss. 32 and 33 of the 1961 Act, which pertain to depreciation and development rebate respectively, noted that it was apparent that development rebate was allowable only in respect of machinery or plant whereas depreciation was allowable in respect of a building as well. As such it decided this matter against the assessee.

6. Before us, Mr. M.L Khanna, appearing for the assessee, contended that in this case the building fulfilled the functions of a plant. He submitted that the portion of the building in which the machinery was installed was not merely a construction for housing, or the protection of, the machinery, but that the machinery was not workable and the manufacture not possible without it. In the circumstances, he contended that the building was an integral part of the plant and machinery. He also submitted that certain portions of the building had to be built with fire bricks and lined with asbestos sheets as also made air tight to conserve the necessary temperature and preserve the filtered air in order to avoid pollution, so that the saccharine could be manufactured properly. He relied on the decision of the House of Lords in IRC v. Barclay, Curie & Co. Ltd., [1970] 76 ITR 62 as also certain other decisions of the Allahabad and Bombay High Courts in CIT v. Kanodia Cold Storage, [1975] 100 ITR 155 (All) and CIT v. Caltex Oil Refining (I) Ltd., [1976] 102 ITR 260 (Bom).

7. The case of Barclay, Curie & Co. Ltd. is completely distinguishable on facts. In that case the company had built a dry dock for the use of its trade as ship builders and repairers. The expenditure incurred comprised of excavating a specifically shaped new basin, having access to the river Clyde and the cost of lining the excavation with concrete and installing valves, pumps, electricity generators and other machinery needed for the operation of the dock. The House of Lords held that the dock was a plant for the purposes of the trade of the company. The court observed that the function of a dry dock was similar to a hydraulic tank, which was used for taking ships out of their element, exposing them and then returning them. The dock acted like a large vice for holding ships in position while they were repaired or cleaned. The volume of water was varied at will in the hydraulic chamber to raise and lower a ship with the use of the valves and pumps. This could not be done without the valves and pumps nor without the remainder of the dock. The valves, pumps, electricity generator as also the concrete structure were an integral part of the functioning of the dock as an entity, the one being useless without the other. In view of these facts and circumstances, they opined that the concrete structure fulfilled the function of a plant in the trader's operation. While coming to this conclusion Lord Reid observed that the dry dock was different from a factory building which housed the machinery. The dock was not a “mere setting or premises in which ships were repaired”. In fact, it was the “means by which the operation was performed”, and not a “mere shelter or home”.

8. In Kanodia Cold Storage's case, [1975] 100 ITR 155 (All), the Allahabad High Court held that where a building with insulated walls was used as a freezing chamber, it was a part of the air-conditioning plant of the cold storage of the assessee and thus entitled to special depreciation on its written down value. The court observed that in common parlance the word “plant” included within its ambit buildings and equipment used for manufacturing purposes. Since the definition of “plant” in s. 43(3) was inclusive, something which could be normally included could not be excluded. However, the finding that the particular building was a part of the air-conditioning plant of the cold storage was based on the inspection and observation of the members of the Tribunal that it was impossible for the cold storage plant to function without the freezing chamber with the special cork insulated walls.

9. In Caltex Oil Refining (I) Ltd.'s case, [1976] 102 ITR 260, the Bombay High Court held that in view of the Petroleum Rules, 1937, it was obligatory to surround an installation, where refining or blending of petrol was carried on, by a wall or fence and the processing unit could not be put to use without it. As such, it held that the fencing was part of the processing unit and would fall within the expression “plant” and be entitled to development rebate. The nature of the asset was such that the contradistinction between a building and a plant such as arises in the present case, did not arise there.

10. In Addl. CIT v. Madras Cements Ltd., [1977] 110 ITR 281, the Madras High Court has held that the special reinforced concrete foundation for the purpose of locating or installing the rotary kiln in the factory would come within the scope of the expression “plant” and be entitled to the development rebate. This was because it was found by the Tribunal that the special foundation was essential to keep the machines from going out of alignment, plumb, etc., causing unbalanced rotational and torsional oscillations and vibrations; thus the machinery foundation in combination with the machinery had to be construed as the mechanical contrivance.

11. In CIT v. Warner Hindustan Ltd., [1979] 117 ITR 15 and [1979] 117 ITR 68, the Andhra Pradesh High Court has held that a well dug by a pharmaceutical concern for the purpose of carrying on its business is a plant.

12. In CIT v. Taj Mahal Hotel, [1971] 82 ITR 44, the Supreme Court held that the sanitary fittings and pipelines fitted in a hotel were plant in the case of a hotelier, as their use helped him to carry on his business more profitably. In coming to this conclusion it had adverted to the decision of the Court of Appeal in Jarrold (Inspector of Taxes) v. John Good & Sons Ltd., [1963] 1 WLR 214, where partitions which were movable and used as room dividers were held to be plant. By illustration, there was a suggestion therein that heating and water softening installations and air-conditioning unit would certainly be considered a plant. The Supreme Court observed that the very fact that the definition of plant in the I.T Act was an inclusive definition and included articles like books was clearly indicative of the intention of the Legislature to give it a wider meaning. After referring to the definition of “plant” in Webster's Third New International Dictionary as “land, buildings, machinery, apparatus and fixtures employed in carrying on trade………….”, it observed (p. 49 of 82 ITR):

“It is, however, unnecessary to dwell more on the dictionary meaning because, looking to the provisions of the 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.”

13. The Gujarat High Court in CIT v. Elecon Engineering Co. Ltd., [1974] 96 ITR 672 and in CIT v. S.L.M Maneklal Industries Ltd., [1977] 107 ITR 133, has held drawings and patterns and workshop drawings as coming within the definition of “plant”.

14. This court in Commissioner Of Income Tax…Applicant v. M/S. National Air Products Limited…/Assessee, [1980] 126 ITR 196, also dealt with the meaning of the expression “plant”. It held that gas cylinders were plant of a company which was carrying on the business of manufacturing gas plant. It was observed therein (p. 199):

“The meaning of ‘plant’ as given in Yarmouth v. France, [1887] 19 QBD 647 (QB), has been unanimously endorsed by all the subsequent decisions. Lindley L.J explained that in its ordinary sense the word includes whatever apparatus is used by a businessman for carrying on his business other than the stock-in-trade which he buys or makes for sale and that it includes all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business.”

15. However, in CIT v. Kanodia Warehousing Corporation, [1980] 121 ITR 996, the Allahabad High Court held on the facts that the warehouses constructed for storing potatoes on behalf of its customers for the purpose of grading and sending to a cold storage was not a plant. It observed that in order to find out if a building or structure or part thereof constitutes plant, the functional test must be applied.

16. Section 32 of the 1961 Act provides for depreciation. It specifically refers to “building, machinery, plant or furniture”. Section 33 provides for development rebate in respect of “new ship or new machinery or plant”. It refers to installation of machinery or plant. “Plant” has been defined in s. 43(3) for purposes of ss. 28 to 41, unless the context otherwise requires, as:

“‘Plant’ includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession.”

17. On a cursory reading of these provisions, it would appear that by not mentioning “buildings” in the definition of “plant” all buildings were to be excluded therefrom, especially as buildings are not normally installed but built. However, as has been noticed by the Supreme Court, the definition of “plant” is an inclusive definition and of wide amplitude. As such, where a building or concrete structure performs the function of a plant and is an integral part of it, it can come within the expression “plant”.

18. From a perusal of the above decisions and the provisions of the 1961 Act, certain principles emerge:

1. The definition of “plant” in section 43(3) should be given a wide meaning as it is an inclusive definition.

2. All buildings are not “plant” despite the dictionary meaning which includes buildings; but a building or structure is not per se to be excluded from the ambit of the expression “plant”.

3. If the concrete construction or building is used as the premises or setting in which the business is carried on in contradistinction to the fulfilling of the function of a plant, the building or construction or part thereof is not considered a plant. The true test is whether it is the means of “carrying on the business” or the location for so doing.

4. In order, for a building or concrete structure, to qualify for inclusion in the term “plant”, it must be established that it is impossible for the equipment to function without the particular type of structure.

5. The particular apparatus or item must be used for carrying on the assessee's business and must not be his stock-in-trade. The matter has to be considered in the context of the particular business of the assessee, e.g, books are a lawyer's plant but a bookseller's stock-in-trade.

19. Applying these principles to the facts and circumstances of the present case, it would appear to us that the building in question does not come within the expression “plant”. It is a mere setting, albeit a convenient one, where the business of manufacturing saccharine is carried on. It has not been established that the manufacture of saccharine was not possible without the particular features said to have been incorporated in the building, nor is there any finding to this effect. A building free from atmospheric vagaries might have certain advantages as compared with a normal construction, but in the facts of the present case, remained the space or shelter where the business of manufacturing saccharine was carried on as opposed to the means.

20. Counsel conceded, when pressed, that there were other companies and concerns which were carrying on the business of manufacture of saccharine in normal buildings which had not been constructed to incorporate special temperature controls. As such, it is clear that the machinery or equipment for the manufacture of saccharine could function without this type of building.

21. It appears to us that the mere fact that the manufacture of saccharine would be better carried on in this type of building would not convert the building from “the setting” to “the means” for carrying on the business. For, if this was the test, then every air-conditioned factory building would qualify to be included in the expression “plant”, as there is no doubt that in a hot country like ours, it would result in better performance by the workers. The correct query in the present context appears to be whether the particular features incorporated in the building in question were essential to the manufacturing process and the functioning of the equipment, making it an integral part of the plant. The answer being in the negative, it is apparent that the building in question remained the “location” and was not converted into the “means” for carrying on the business.

22. In the result, the question referred to us is answered in favour of the revenue and in the affirmative. The revenue will be entitled to costs. Counsel's fee Rs. 350.