1. Two questions have been referred to us for our determination by the Tribunal at the instance of the revenue and those question are :
'(1) Whether, on the facts and in the circumstances of the case, the fencing constructed around the refinery processing units constitute 'plant' for the purposes of grant of depreciation allowance under section 10 (2) (vi)(via) and development rebate under section 10(2)(v)(vib) of the Indian Income-tax Act, 1922, for the assessment years 1959-60, 1960-61 and 1961-62
(2) Whether, on the facts and in the circumstances of the case, the capitalised interest of Rs. 17,97,201 on debentures and bank overdraft utilised for construction of the refinery can be added to the cost of the assets for the purpose of grant of depreciation allowance under section 10(2)(vi)/(via) and development rebate under section 10 (2) (vib) of the Income-tax Act for the assessment year 1959-60 ?'
2. At the outset it may be mentioned that, so far as the second question is concerned, the same is covered by the decision of the Supreme Court in the case of Challapalli Sugars Ltd. v. Commissioner of Income-tax In view of this decision the second question will have to be and the same is answered in the affirmative and in favour of the assessee.
3. Turning to the first question, the facts giving rise to the question are these : In the assessment made by the Income-tax Officer for the assessment years 1959-60, 1960-61 and 1961-62 (the relevant accounting years being the years ended December 31, 1958, December 31, 1959, and December 31, 1960, respectiverly), no depreciation or development rebate was allowed on fencing that was put up around the refinery processing units as in the earlier years. The Income-tax Officer refused the claim of the assessee, M/s. Caltex Oil Refining Ltd. on the ground that such fencing did not constitute 'plant'. The cost of the fencing involved in the aforesaid three years was Rs. 2,12,411, Rs. 33,646 and Rs. 50,091, respectively. The Appellate Assistant Commissioner treated the fencing put up around the refinery processing units as a plant for the purposes of grant of depreciation allowance and development rebate. The matter was carried further by way of second appeal to the Appellate Tribunal at the instance of the revenue and the Tribunal following its earlier order dated 5th January, 1966, in I. T. A. No. 7361 of 1963-64, for the assessment year 1958-59, held that for the years in question the fencing constituted 'plant' so as to be entitled to depreciation allowance and development and rebate. At the instance of the Commissioner of Income-tax, Bombay City-I, the aforesaid question has been referred to us for our determination.
4. The expression 'plant' has been defined in section 10 (5) of the Indian Income-tax Act, 1922. It is an inclusive definition and it runs thus :
''Plant' includes vehicles, books, scientific apparatus and surgical equipment purchased for the purpose of the business, profession or vocation.'
5. Apart from the fact that the definition is an inclusive one, the House of Lords in an earlier English case, Hinton (Inspector of Taxes) v. Maden and Ireland Ltd., took the view that the knives and lasts were 'plant' in the case of a company manufacturing shoes. In that case their Lordships accepted the meaning that was given to that word in an earlier case of Yarmouth v. France by Lindley L. J. That meaning which was quoted with approval is expressed thus :
'.... in its ordinary sense it includes whatever apparatus is used by a business man for carrying on his business - not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business.'
6. In the case of Commissioner of Income-tax v. Taj Mahal Hotel, the question that arose for consideration was whether in the case of an assessee, who was running a hotel, the sanitary fittings and pipelines could be regarded as 'plant' or not and the Supreme Court has taken the view that the sanitary fittings and pipeline fitting fell within the definition of 'plant' in section 10 (5) and the assessee was entitled to development rebate in respect thereof under section 10 (2) (vib). The Supreme Court has preferred to the decision of the Court of Appeal in Jarrold (Inspector of Taxes) v. John Good and Sons Ltd. 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 sub-divide 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 or number of the rooms. The question was whether these partitions were plant within section 279 and section 280 of the English Income-tax Act, 1952, so as to entitle the company to allowances under those sections. The material words in the relevant statue 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 purpose of the trade'. It was held that the partition were 'plant' as they were used in the carrying out of the company's trade or business. Relying upon this decision in Jarrold's case, in Taj Mahal Hotel's case the Supreme Court took the view that if the partitions in Jarrold's case could be treated as having been used for the purpose of the business of the trader, it was incomprehensible how sanitary fittings could be said to have no connection with the business of the hotelier, who could reasonably except to get more customers and earn larger profit by charging higher rates for the use of rooms if the bath rooms had sanitary fittings in the bath rooms in a hotel could fall within the definition of the expression 'plant' as defined under section 10 (5).
7. In the light of these decisions that we will have to consider in the instant case is whether the fencing that was put up around the refinery processing units could be regarded as 'plant' so as to entitle the assessee to claim depreciation and development rebate on the cost thereof. It was not disputed before us that under the Petroleum Rules, 1937, it was obligatory upon a person refining or blending petrol to surround the installation by a wall or fence and precaution was required to be taken to prevent unauthorised persons from having access to its storage shed or installation and the rules also provided that the fencing around the refinery processing unit should be approved by the chief inspector. That being the position, it is clear to us that the refinery processing unit could not be put into use without protective fencing and from that point of view the fencing could be regarded as part of the processing unit. Moreover, the Tribunal has found that from the cost as well as the materials used it was clear that the fencing was a substantial structure. It has further found that the process units were installed at a cost exceeding Rs. 8 crores and it is these process units that were surrounded by protective fencing and that the nature of construction clearly indicated that there was a considerable degree of durability to the fencing. In view of these facts which have been found by the Tribunal, it will be difficult to resist the claim of the assessee that the fencing surrounding the refinery processing units should be regarded as part of the plant. If the fencing were to be regarded as a separate item and not as a part of the processing unit, still in view of the Petroleum Rules, 1937, it is quite clear that without the fencing put up around the processing units, the processing units could not be at all put to use and as such the fencing would fall within the meaning of the expression 'plant' as given by Lindley L. J. in the case of Yarmouth v. France.
8. In the circumstances, we are of the view that the Tribunal was right in coming to the conclusion that the fencing constructed around the refinery processing units constituted 'plant' for the purpose of granting depreciation allowance as well as development rebate. The question is, therefore, answered in the affirmative and in favour of the assessee. No order as to costs.