1. The assessee is a co-operative milk producers' union which runs a dairy in the town of Anand. It receives assistance by way of grant-in-aid from the State Government, the Central Government, as well as certain international agencies. For the assessment year 1966-67 it claimed a loss of Rs. 11,32,333 under section 32(1)(iii) of the Income-tax Act, 1961 (hereinafter called "the Act"), out of which Rs. 1,11,931 pertained too non-existing stock. It appears that the assessee had not taken an inventory of the stock for almost eighteen years immediately preceding the resolution dated September 24, 1966. That resolution shows that an inventory was taken in September, 1965, for the first time after eighteen years and it was found that certain stock noted in the stock register was non-existent and it claimed a deduction in respect thereof under section 32(1)(iii) of the Act. This claim was rejected by the authorities below.

2. The assessee claimed development rebate as well as depreciation allowance in respect of expenditure incurred by it for laying an approach road to its Kanjari unit on the premise that it was a "plant" within the meaning of clause(3) of section 43 of the Act. According to that clause, "plant" includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purpose of the business or profession. The assessee contended that in view of the inclusive definition, the expression "plant" is of wide amplitude and the expenditure incurred by the assessee for playing of approach roads to the Kanjari unit would fall within the meaning of that expression and the assessee was entitled to both depreciation under section 32 and development rebate under section 33 of the Act. This question was not debated before the Income-tax Officer but it was raised for the first time before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, following the decision of this court in CIT v. Elecon Engineering Co. Ltd. ([1974] 96 ITR 672), held in favour of the assessee. The Revenue feeling aggrieved by the view expressed by the Appellate Assistant Commissioner in this behalf carried the matter in appeal to the Tribunal. It was submitted before the Tribunal that injcase of Elecon Engineering Co. Ltd. ([1974] 96 ITR 672), this court had pointed out that "plant" will not include an article which is merely a part of the premises in which the assessee carries on his business as distinguished from an article with which the business is carried on. The Tribunal, however, pointed out that in case of McGaw Ravindra Laboratories (India) Ltd. ([1981] 132 ITR 401 (Guj)), it had taken the view that roads fell within the meaning of "plant" relying on this court's decision in Elecon Engineering Company's case ([1974] 96 ITR 672) and therefore, it confirmed the decision of the Appellate Assistant Commissioner.

3. In the relevant assessment years, the assessee also received grant-in-aid from the Government of Gujarat which was utilised for the purchase of equipment for baby food unit, cheese unit and second baby food unit. The Income-tax Officer did not allow any relief under section 84 (now section 80J) but the Appellate Assistant Commissioner held that as per the Tribunal's decision in the earlier year, the assessee was entitled to the relief. At the same time, he held that the aid given by the State Government could not be taken into account in the computation of capital to be worked out for calculating the relief under the said provision. The assessee approached the Tribunal as it felt aggrieved by this part of the Appellate Assistant Commissioner's order but the Tribunal, following its decision in earlier years, concurred with the view expressed by the Appellate Assistant Commissioner.

4. Certain other facts in regard to the computation of capital were also raised before the Tribunal. Whether debts and liabilities are required to be considered while computing the capital for the purposes of section 84 (now section 80J) was also one of the matters raised before the Tribunal. The tribunal followed the consistent view taken by its Ahmedabad Benches, namely, that while working out the capital for relief under section 84 (now section 80J), deduction should be made for debts and liabilities.

5. Both the assessee as well as the Revenue demanded reference under section 256(1) of the Act. In view of the above facts and questions considered by the authorities below, the Tribunal has referred the following question for our opinion :

6. Relevant for the assessment year 1966-67 :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to deduction for items wrongly capitalised in the earlier years under section 32(1)(iii) of the Income-tax Act, 1961 ?"

7. Relevant for the assessment years 1966-67 and 1967-68 :

"(2) Whether, on the facts and in the circumstances of the case, and keeping in view the terms of the grant-in-aid given by the government of Gujarat, the Tribunal was right in holding that the assessee was not entitled to take into account the amount of such grant-in-aid in computing the capital employed for purposes of deduction under section 84 of the Income-tax Act ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that debts and liabilities should be deducted under rule 19(3) while computing the capital employed for the purpose of deduction under section 84 of the Income-tax Act ?"

8. Relevant for the assessment year 1968-69 :

"(4) Whether, on the facts and in the circumstances of the case and keeping in view the terms of the grant-in-aid given by the Government of Gujarat, the Tribunal was right in holding that the assessee was not entitled to take into account the amount of such grant-in-aid in computing the capital employed for purposes of deduction under section 80J of the Income-tax Act ?

(5) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that debts and liabilities should be deducted under rule 19A(3) while computing the capital employed for the purposes of deduction under section 80J of the Income-tax Act, 1961 ?"

9. Relevant for the assessment year 1966-67 only :

"(6) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled was entitled not only to depreciation but also to development rebate on the cost of approach road of Rs. 1,15,520 ?

(7) Whether the Tribunal was justified in law in holding that half of the profits of the year relating to baby food unit and cheese unit was liable to be included in the computation of capital employed in those undertakings to compute the capital for purposes of relief under section 84 off the Income-tax Act, 1961, read with rule 19 of the Income-tax Rules ?"

10. Relevant for the assessment year 1968-69 :

"(8) Whether the Tribunal was right in law in holding that the assessee was entitled not only to depreciation but also to development rebate on the expenditure on road of Rs. 73,398 ?"

11. It will appear from the above that questions Nos.(1) to (5) were referred at the instance of the assessee while question Nos.(6) to (8) were referred at the instance of the revenue.

12. Out of the questions which have been referred to us for our decision, only questions Nos. (1), (6) and (8) are not covered by earlier decisions binding on us. We will first deal with the question which, in our opinion stand covered by earlier decision. Questions Nos. (2) and (4) relate to the grant-in-aid being taken into account for the computation of capital for the purpose of deduction under section 84 (now section 80J) of the Act. The question arising for decision stands covered by the decision of this court in the case of the assessee itself in CIT v. Kaira District Co-op. Milk Producers' Union Ltd. ([1979] 116 ITR 319). In that case also, the assessee-society claimed that the entire amount of grant-in-aid given by the State Government and utilised for the purchase of certain machinery for baby food unit and cheese unit of the assessee-society must be added to the other capital employed by the society for the purpose of relief under section 84 (now section 80J) read with rule 19 of the Rules. In that case this court held that assessee was not entitled to take into account the amount of the grant-in-aid given by the Government in the computation of capital employed by the assessee in the purchase of machinery for baby food unit and cheese unit. In view of this decision, question Nos. (2) and (4) must be answered in the affirmative, that is, in favour of the Revenue and against the assessee.

13. Similarly, so far as question No. (7) is concerned, it also standsjcovered by the aforesaid decision wherein the assessee's claim that half of the profits relating to baby food unit and cheese unit of the society should be included in the capital employed under rule 19(5) of the Rules was upheld following the decision of this court in CIT v. Elecon Engineering Co. Ltd. ([1976] 104 ITR 510). We must, therefore, answer question No. (7) in the affirmative, that is, in favour of the assessee and against the Revenue.

14. Questions Nos. (3) and (5) bear on the Tribunal's decision that debts and liabilities should be deducted under rule 19(3) (now rule 19A(3)) of the Rules while computing the capital employed for the purpose of deduction under section 84 (now section 80J) of the Act. The Supreme Court in Lohia Machines Ltd. v. Union of India ([1985] 152 ITR 308), while upholding the validity of rule 19A(3) that the debts and liabilities had to be deducted while computing the capital employed for the purpose of deduction under section 80J of the Act. In view of this decision, questions Nos. (3) and (5) must be answered in the affirmative, that is, in favour of the Revenue and against the assessee.

15. We now proceed to consider questions Nos. (6) and (8) which are identical. The Tribunal took the view that the assessee was entitled both to depreciation allowance as well as development rebate under sections 32 and 33 of the Act respectively as the approach roads to Kanjari unit fell within the meaning of "plant" under the said two provisions. Under section 32(1), depreciation allowance can be claimed in respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purpose of business or profession in the manner set out in clauses(i) to (vi) immediately following. Under section 33, development rebate can be had in respect of a new ship or a new machinery or plant business carried on by him. It is, therefore, plain that if the approach roads leading to the Kanjari unit can be described as "plant", the assessee would be entitled to depreciation allowance under section 32 and development rebate under section 33 of the Act. On behalf of the Revenue, it was strenuously contended by Mr. Shelat that even if the word "plant" is considered to be one of wide import, unless the test laid down by this court in Elecon Engineering Company's case ([1974] 96 ITR 672) is satisfied, the approach roads would not fall within the meaning of "plant". This court in the aforesaid case took into consideration the meaning of the word "plant" given in several dictionaries, etc., as well as decisions of English courts and the courts of this country and observed that two material facts emerged, namely, (i) in each case, the word "plant" was construed after having regard to its context and circumstances of the case; and (ii) that in none of the cases the court was concerned with the interpretation of the word "plant" occurring in a statute wherein it was defined. According to the learned judges, plant includes any article or object, fixed or movable, live or dead, used by a businessman for carrying on his business. It is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in the mechanical or industrial business. It would not cover the stock-in-trade or an article which is merely a part of the premises in which the business is carried on. In order to qualify as plant, the article must have some degree of durability and is not capable of being consumed or worn out quickly in the course of a few operations or within a short time. In the ultimate analysis, the test evolved for application was, does it (apparatus) fulfill the function of a plant in the assessee's trading activity ? Is it the tool of the taxpayer's trade ? If it is, then it is plant, no matter that it is not very long-lasting or does not contain working parts such as a machine does and plays merely a passive role in the accomplishment of the tradingjpurpose. This test was applied in CIT v. McGaw Ravindra Laboratories (India) Ltd. ([1981] 132 ITR 401 (Guj)), wherein the assessee claimed deduction on the amount spent for the construction of roads leading to the assessee's building. Placing reliance on the decision of this court in Elecon Engineering Company's case ([1974] 96 ITR 672), the Tribunal had come to the conclusion that the roads formed part of the plant of the assessee-company. The Revenue contended otherwise. This court observed that ordinarily one would consider the roads constructed in connection with the factory building, to be appertaining to the building itself and to be a part of the building because, in the absence of the roads, the buildings cannot be used for the purpose for which they are designed and built. Counsel for the assessee in that case realising that, on the facts and in the circumstances of the case, it was difficult to submit that the test laid down by this court in Elecon Engineering Company's case ([1974] 96 ITR 672) was satisfied, conceded that the roads should be treated as building for the purpose of depreciation. In other words, counsel for the assessee conceded as was argued by the Revenue that roads could not form part of plant in the facts and circumstances of that case. In the present case also, in view of the bare fact that the roads were construed for approach to the Kanjari unit and nothing more, counsel for the assessee felt the same difficulty and conceded that it was difficult to support the Tribunal's finding that the roads formed part of plant of the assessee-society. In view of this concession made by learned counsel for the assessee-society, we do not consider it necessary to deal with two other decisions, CIT v. Sandvik Asia Ltd. ([1983] 144 ITR 585 (Bom)) and CIT v. Bangalore Turf Club Ltd. ([1984] 150 ITR 23 (Kar)), to which our attention was drawn by learned counsel for the Revenue. We, therefore, answer questions Nos. (6) and (8) in the negative, that is, against the assessee and in favour of the Revenue, in so far as the Tribunal's decision that the approach roads formed part of plant of the assessee-society is concerned, but we would like to clarify that the assessee would be entitled to depreciation under section 32 of the Act as building.

16. The last question which we are required to consider is, whether the Tribunal was right in holding the assessee was not entitled to deduction under section 32(1)(iii) of the Act. Section 32(1) provides for depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purpose of the business. Clause(iii) thereof with which we are concerned provides that in the case of any building, machinery, plant or furniture which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of the scrap value, if any, fall short of the written down value thereof : provided that such deficiency is actually written off in the books of the assessee. The assessee would entitled to depreciation allowance under this clause if the building, machinery, plant or furniture is sold, discarded, demolished or destroyed in the previous year. In the present case, from the facts which we have stated earlier, it becomes obvious that physical verification of the stock was made by the assessee-society for the first time in 18 years preceding September, 1965. The resolution passed by the assessee-society on September 24, 1965, itself shows that certain glass vessels, etc., were non-existent or were found missing during the inventory. The assessee contends that these articles were destroyed in the process of producing, supplying and distribution of milk. It is difficult to agree with the assessee that articles which are found missing during an inventory can be said to be "destroyed". Secondly, it is difficult to say that these articles were destroyed in the previous year to entitle the assesseejto claim the benefit of section 32(1)(iii) of the Act. For both reasons, we are of the view that the Tribunal rightly held that the assessee was not entitled to deduction for these articles under the said provision. We must, therefore, answer the first question in the affirmative, that is, in favour of the Revenue and against the assessee.

17. For the above reasons, the questions are answered as stated above. The reference is disposed of accordingly with no order as to costs.