Page 140 - GSTL_7th May 2020_Vol 36_Part 1

98 GST LAW TIMES [ Vol. 36
In other words, plant would include any article or object fixed or
movable, live or dead, used by businessman for carrying on his business
and it is not necessarily confined to an apparatus which is used for mechan-
ical operations or processes or is employed in mechanical or industrial
business. In order to qualify as plant the article must have some degree of
durability, as for instance, in Hinton v. Maden & Ireland Ltd., 39 I.T.R. 357,
knives and lasts having an average life of three years used in manufactur-
ing shoes were held to be plant - In C.I.T. Andhra Pradesh v. Taj Mahal Hotel,
82 I.T.R. 44, the respondent, which ran a hotel, installed sanitary and pipe-
line fittings in one of its branches in respect whereof it claimed develop-
ment rebate and the question was whether the sanitary and pipeline fittings
installed fell within the definition of plant given in Section 10(5) of the 1922
Act which was similar to the definition given in Section 43(3) of the 1961
Act and this Court after approving the definition of plant given by Lindley
L.J. in Yarmouth v. France as expounded in Jarrold v. John Good and Sons Lim-
ited - 1962, 40 T.C. 681 C.A., held that sanitary and pipeline fittings fell
within the definition of plant.
13. In Inland Revenue Commissioner v. Early Curie & Co. Ltd. - 16 I.T.R.
62, the House of Lords held that a dry dock since it fulfilled the function of
a plant must be held to be a plant. Lord Reid considered the part which a
dry dock played in the assessee company’s operations and observed :
“It seems to me that every part of this dry dock plays an essen-
tial part.... The whole of the dock is I think, the means by which, or
plant with which, the operation is performed.”
Lord Guest indicated a functional test in these words :
In order to decide whether a particular subject is an ‘appa-
ratus’ it seems obvious that an enquiry has to be made as to what op-
eration it performs. The functional test is, therefore, essential at any
rate as a preliminary. In other words the test would be : Does the arti-
cle fulfill the function of a plant in the assessee’s trading activity? Is it
a tool of his trade with which he carries on his business? If the answer
is in the affirmative, it will be a plant.”
2.10 According to Hon’ble Supreme Court the purpose of supplying
technical know-how to the assessee was to enable it to undertake its trading ac-
tivity of manufacturing the goods and therefore it had a vital function to perform
in the manufacture of goods. In fact it is only with the aid of technical know-how
that the assessee was able to commence its manufacturing activity and these
documents really formed the basis of the business of manufacturing instruments
by the assessee. It is true, that by themselves the documents incorporating tech-
nical know-how did not perform any mechanical operations or processes but that
according to Supreme Court cannot militate against their being a plant since they
were in a sense the basic tools of the assessee’s trade having a fairly enduring
utility.
2.11 In this case of Scientific Engineering House (P) Ltd. (supra) Hon’ble
Supreme Court has approved the decision of Hon’ble Gujarat High Court in the
case of Commissioner of Income Tax, Gujarat v. Elecon Engineering Co. Ltd. - 96 I.T.R.
672, wherein the Gujarat High Court has, after exhaustively reviewing the case
law on the topic, held that drawings and patterns which constitute know-how
and are fundamental to the assessee’s manufacturing business are ‘plant’.
Hon’ble Gujarat High Court has in the case of Elecon Engineering Co. Ltd. (supra)
which has been approved by Hon’ble Supreme Court, after reviewing various
authorities, concluded as under :
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