Imperial Tea Company Ltd. vs Commissioner of Income Tax

Sabyasachi Mukharji, J.—In this case, u/s 66(2) of the Indian income tax Act, 1922, the Tribunal as directed has referred the following questions for the assessment year 1959-60:

(i) Whether, on the facts and in the circumstances of the case, the Tribunal was competent to go behind the agreement for sale dated October 17, 1958 and fix a valuation of its own in the way it has done.

(ii) Whether, on the facts and in the circumstances of the case, the Assessee was properly assessed on Rs. 2 lakhs as profits under the proviso of Section 10(2)(vii) of the Indian income tax Act, 1922.

(iii) Whether, on the facts and in the circumstances of the case and on a correct interpretation of the agreement for sale, the Tribunal was justified in law in holding that the Assessee company has used the building, plant and machinery of Glencoe Tea Estate for its business during the accounting year 1958.

(iv) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the items enumerated in para. 9 of its order were not plant and machinery wholly used for the Assessee''s business.

As mentioned before the reference is in relation to the assessment year 1959-60 for which the relevant previous year ended on December 31, 1958. The Assessee is a sterling company incorporated in the United Kingdom and owned several tea estates in Assam. By an agreement for sale dated October 17, 1958, it had agreed to sell one of its own estates known as new Glencoe Tea Estate to a company called New Glencoe Company Ltd. which was incorporated on March 20, 1958. The negotiations which resulted in the agreement were conducted on behalf of the purchaser by two of its promoters who had paid Rs. 58,801 as earnest money on February 4, 1958. The agreed price for the sale of the estate was Rs. 11,75,001. The balance of the purchase price being Rs. 11,16,200 was paid on October 17, 1958. We shall refer later to the terms of the agreement for sale.

In the course of the assessment for the assessment year 1959-60, the relevant previous year being the calendar year 1958, the Assessee claimed a loss of Rs. 91,298 u/s 10(2)(vii) of the Indian income tax Act, 1922. The income tax Officer called for the correspondence as he was of the opinion that with the various import restrictions and the overall rise in the prices it was extraordinary that the company should suffer a loss on the sale of its plant and machinery especially when like most of the sterling companies the Assessee had also spent a good deal of money on the proper upkeep and maintenance of the new plant, machinery etc.

In the letter dated June 26, 1958, addressed by Sri Nur Nawas, one of the promoters, to Messrs Jardine Henderson Ltd., who were the managing agents of the vendor, it was stated that "I would like to refer you that my offer was for the whole of the estate which includes all machines, tools etc." At the stage of the draft sale agreement there was no mention of the apportionment of the sale consideration as set out in Clause 30 of the agreement which apportioned the amount of the purchase price as follows:

Land and growing tea ... Rs. 8,43,507

Buildings, plant and machinery and transport vehicles ... Rs. 3,31,493

Goodwill ... Re. 1

Total Rs. 11,75,001

It appears that on August 11, 1958, Messrs Sandersons and Morgans, Solicitors and Legal Advisors to the vendor''s managing agents, wrote to their clients, inter alia, "Please consider and let us know what should be the apportionment of the purchase price between the different items."

In the course of the assessment the Income tax Officer wrote to the purchaser asking him to explain how the allocation was made in the agreement. By a letter dated January 9, 1961, the Secretary of the company stated, inter alia, "the purchase price of the New Glencoe Tea Estate was agreed at Rs. 11,75,001 only and the apportionment of the value of different assets was done by the selling company and as long as the total sum did not exceed the agreed amount, we did not pursue into the details of the mode of such apportionment".

From the aforesaid facts the income tax Officer came to the conclusion that the apportionment of the purchase price was made by the Assessee. He held that it was made at almost the penultimate stage at the instance of Messrs Sandersons and Morgans, the Assessee''s Solicitors and Advisors. According to the income tax Officer, it was evident that as long as the entire purchase consideration did not exceed the stipulated amount of Rs. 11,75,001, the purchaser was not concerned about such apportionment and therefore, could not be said to have applied its mind to such apportionment. Even admitting that there was no collusion between the vendor and the purchaser the apportionment as made in Clause 30 of the agreement could not be considered to be fair and bona fide and therefore, could not be binding on the department in computing the profit and loss u/s 10(2)(vii) of the Act. The income tax Officer, accordingly, proceeded to estimate the selling price of the building, plant and machinery independently of the apportionment mentioned in the agreement.

It appears that in making the wealth-tax assessments for the years 1957-58 and 1958-59 the Wealth-tax Officer had taken the value of the company''s agricultural land at Rs. 650 per planted acre. Such a valuation, was accepted by the company. In other cases, the planted acreage had been valued at Rs. 650. 616 acres had been planted in the present case. Therefore, the income tax Officer took the value at Rs. 4,52,400. The company had 710 acres of forests, waste land etc. not used for cultivation. In the wealth-tax assessment of various tea companies uncultivated portion of land had been systematically valued at Rs. 50 per acre. On this basis the uncultivated land of 710 acres was valued at Rs. 35,500. The income tax Officer felt that the selling price of Rs. 8,43,507 shown as the value of the land in Clause 30 of the agreement was pitched very high and should only be Rs. 4,52,400 for 696 acres of planted land at Rs. 650 and Rs. 35,500 for 710 acres of uncultivated land at Rs. 50 per acre amounting to Rs. 4,87,900. The excess was considered as the selling price of the other assets which the income tax Officer termed as ''camouflaged'' in the agreement as the selling price of the land. The excess being Rs. 8,43,507 minus Rs. 4,87,900, Rs. 3,55,607 was taken as relatable to the sale proceeds of the buildings, plant and machinery and was added thereto by the income tax Officer. He, therefore, computed the profit u/s 10(2)(vii) at Rs. 3,39,367.

The Assessee preferred an appeal before the appellate Assistant Commissioner against such computation of profit u/s 10(2)(vii) of the Indian income tax Act, 1922. The appellate Assistant Commissioner held that there was enough evidence on record by the income tax Officer to reject the allocation of sale price as shown by the company in the sale agreement. The appellate Assistant Commissioner upheld the order of the income tax Officer.

The Assessee, thereafter, preferred an appeal before the Tribunal and submitted that the department was not justified in making the adjustment in the apportionment of the sale price agreed to between the parties and more so as in the assessment of the New Glencoe Tea Company Ltd., the purchase cost of the building, plant and machinery had been accepted as shown in the agreement. The Assessee had no objection on the basis of the wealth-tax assessments to the value of the cultivated portion of the estate at Rs. 650 per acre as it was above the original cost of the Assessee and the department could not ignore the form of the transaction and determine the substance in the absence of any collusion between the vendor and the purchaser. The Tribunal on the materials on record came to the conclusion that there was no basis for the valuation of the land in the allocation made by the Assessee company. The Tribunal, further, observed that the Income tax Officer was justified in going behind the allocation and determining the correct value of the plant and machinery in order to determine whether any profit had accrued to the Assessee u/s 10(2)(vii) of the Act. The Tribunal applied a rough and ready method in the allocation made in the assessment year 1960-61 and considering all the circumstances he thought it reasonable to determine the Assessee''s profit under the proviso to Section 10(2)(vii) at Rs. 2 lakhs and the profit u/s 10(2)(vii) was accordingly reduced.

In the aforesaid circumstances, the four questions as directed by this Court have been referred u/s 66(2) of the Indian income tax Act, 1922, to this Court.

The material clauses in the agreement provided for the transfer, inter alia, of the following:

(4) All the plants and machinery that have been in the said Glencoe Tea Estate on the 1st of January, one thousand nine hundred and fifty-eight and all the plants and machinery that have been in use and are in use since 1st January, 1958, in the said New Glencoe Tea Estate including those described in the Third Schedule hereunder written.

The other terms of the agreement provided, inter alia, as follows:

(9) On payment of the balance of the purchase money the vendor shall execute and register in favour of the purchaser or its nominee or nominees a proper conveyance or assurance of the said tea estate. The said conveyance of assurance shall be prepared stamped and registered by all at the expenses of the purchaser. All outgoings prior to the first day of January, one thousand nine hundred and fiftyeight, shall be borne and paid by the vendor.

(16) Possession of the said tea estate will be given to the purchaser on payment by the purchaser in full of the purchase price including the price or sum mentioned in Clauses 20, 24, 25 and 26 thereof. The sale shall be deemed to take effect as from the first day of January, one thousand nine hundred and fiftyeight.

(17) Pending completion of sale and delivery to the purchaser of the said tea estate, the vendor shall on behalf of the purchaser carry on the work of the tea estate which shall, as from the said date (i.e. the first day of January, one thousand nine hundred and fiftyeight) be for and on the account and at the cost and benefit of the purchaser who shall pay and reimburse to the vendor all such expenses including cash advance, if any and all kinds of liabilities incurred by the vendor in bona fide carrying on the work of the said tea estate as on and from the said date till the possession of the said tea estate is made over to the purchaser (taking into account the salary of managerial staff and the Indian staff and labour the vendor''s Calcutta agents Messrs Jardine Henderson Ltd.''s usual remuneration and office allowance totalling Rupees five hundred and a month in lieu of commission and all other expenditure incurred by the vendor whether in the said tea estate or in Calcutta in connection with such working of the said tea estate as on and from the said date as aforesaid) on presentation to the purchaser of the accounts thereof and the purchaser shall subject to the provisions of this clause accept the accounts of the vendor or of its Calcutta agents as correct. The purchaser shall not be entitled to any damages or any other sum or sums either from the vendor or its agents in connection with the bona fide carrying on of the work of the said tea estate on behalf of the purchaser. The vendor shall be entitled to debit the purchaser with all expenditure incurred by the vendor or its agents in relation to the said tea estate as recorded in its or other books incurred for and relating to the period commencing on the from the said date upto the date of delivery of possession of the said tea estate to the purchaser including the expenditure which was incurred in the year 1957 for the year 1958 upto the limit of Rs. 41,483-57 P. The purchaser shall be entitled to the profit of business in respect of the said tea estate as and from the said i.e. first day of January, 1958.

All costs incurred or to be incurred from the first day of January, one thousand nine hundred and fiftyeight, in dealing with the disposal of tea produced up to the thirtyfirst day of December, one thousand nine hundred and fiftyseven, some quantity of which is or shall be lying at the factory for sorting, packing and despatching etcetera shall be borne by the vendor and the same shall be removed at the vendor''s cost before delivery of possession of the said tea estate to the purchaser.

All rents, taxes, cess, income tax, agricultural income tax, super tax, excess profit tax, sales tax and expenses for garden management and upkeep and all other outgoings and liabilities accrued or not accrued whatsoever relating to the said tea estate and payable upto and including the thirtyfirst day of December, one thousand nine hundred and fifty seven, shall be paid and provided by the vendor and as from the first day of January, one thousand nine hundred and fifty eight, by the purchaser and necessary apportionment or adjustment, if any, to that end shall be made. The vendor and the purchaser will undertake to indemnify each other against the respective obligation in respect of such payments.

(18) The vendor shall be entitled to all the proceeds of sale of tea of one thousand nine hundred and fifty seven crop and of export rights relating to one thousand nine hundred and fifty seven crop though these sales have been effected since the first day of January, one thousand nine hundred and fifty-eighth.

(30) The said sum of Rs. 11,75,00 being the purchase price shall be apportioned as follows:

(a) The premises consisting of land growing tea hereby secondly agreed to be sold. ... Rs. 8,43,507

(b) The buildings, quarters and other structures hereby thirdly agreed to be sold. ... Rs. 1,86,010

(c) The plants and machinery hereby fourthly agreed to be sold ... Rs. 1,37,964

(d) The transport vehicles hereby fifthly agreed to be sold. ... Rs. 7,519

(e) Goodwill, benefits of pending contracts export quota rights and all other articles and things being the premises hereby respectively firstly, sixthly, seventhly and eighthly agreed to be sold. ... Re. 1

We have mentioned some of the correspondence preceding the execution of the agreement. The first question for consideration which arises in this case is, whether the Revenue and the Tribunal were justified in going behind the agreement in determining the true allocation to the different items mentioned in the agreement. Counsel for the Assessee contended that where the document was not a colourable one, there was no allegation of fraud or collusion between the parties in this case, it was not proper for the Tribunal to ignore the bargain between the parties and allocate different sums to the different items mentioned in the agreement.

The principles upon which this question will have to be resolved are now well-settled by the decision of the Supreme Court. In this connection, we may refer to the decision of the Supreme Court in the case of Guzdar Kajora Coal Mines Ltd., Calcutta Vs. The Commissioner of Income Tax, Calcutta, . In that case, the Supreme Court held that the original cost to the Assessee of a particular asset was a question of fact which had to be determined on the evidence or materials placed before or available to the Income tax authority. Any document or formal deed mentioning the consideration or the cost paid for the purchase of an asset by the Assessee would be a piece of evidence and prima facie the statements or figures given therein would show how much the cost of the asset to the Assessee was. But, if circumstances existed showing that a fictitious price had been put on the asset or there was fraud or collusion between the vendor and the Assessee and there had been inflation or deflation of the value for ulterior purposes, it was open to the income tax authorities to refuse to accept the price mentioned or allocation given in the deed, or alleged by the Assessee and to ascertain what the actual cost was or to determine the allocation between depreciable and non-depreciable assets. It was therefore open, according to the Supreme Court, to the Income tax authorities to determine and to the Assessee to show whether the goodwill of the business taken over by the Assessee was not included in the consideration or price paid for the assets. Even if it was not expressly mentioned that the goodwill had been sold, it could be shown by evidence whether the same had been purchased or not by the Assessee. In that case, in the deed of con veyance executed by the liquidators of the vendor company, the consideration of Rs. 6 lakhs paid by it was allocated as follows:

(a) Machinery, plant, stores and other movables Rs. 3,50,000,

(b) buildings and structures Rs. 1,50,000 and (c) other assets not capable of being passed by delivery Rs. 1,00,000.

For the assessment years 1946-47 to 1951-52 depreciation was allowed to the Assessee on the old written down values. For the years 1952-53 and 1953-54 the Assessee claimed depreciation on the basis of the valuation in its balance-sheets and accounts. In the report called for by the appellate Tribunal the income tax Officer found, inter alia, that (i) some of the Directors and share-holders of the Assessee and the vendor company were the same and connected; (ii) the valuation of the depreciable assets and consumable stores were written up whereas the valuation of the non-depreciable assets were written down; (iii) though the vendor company had been making good profits no provision had been made for the goodwill of the business. The income tax Officer allocated the consideration of Rs. 6 lakhs as follows:

(a) goodwill Rs. 2,56,960, (b) mines and development as per balance sheet of the vendor company Rs. 2,48,323, (c) stores and stock Rs. 60,744 and (d) worked out value of other depreciable assets at Rs. 33,973.

The appellate Tribunal rejected the Assessee''s claim holding, inter alia, that the allocation in the deed of conveyance was arbitrary. There was a reference of the question whether the income tax Officer was competent to go beyond the conveyance and fix a valuation of the assets on his own. The High Court answered the question in the affirmative and on appeal the Supreme Court confirmed the decision.

Therefore, as a proposition of law it is well-settled that in proper cases where there are materials, which are relevant for consideration, the income tax Officer has the option to examine what would be proper allocation and such re-examination can be done depending upon facts and circumstances of each case. The allocation made to different items either as a vendor or vendee by the Assessee is not conclusive of the matter in all cases. Counsel for the Assessee contended that there the document in question was not colourable, prima facie the document was genuine, the allocations made in the document should be treated as genuine and she. Id not be altered. It may be accepted as proposition that the document which is not impeached either as colourable or fraudulent, should provide some basis of valuation. It has to be understood that generally document of this kind of bargain between the seller and the buyer is regarded as prima facie good evidence for a very good reason. It is presumed that as businessman the buyer or seller when enters he into terms and settle a price which, if not motivated or entered with ulterior purposes, is genuine and prevalent price available in the market. Where, however, in a particular case it appears that the price which was fixed in the document is not the result of terms bargained between the parties but the result of unilateral desire of one party, this presumption in favour of the document for the evidentiary value naturally decreases.

In this case, it is abundantly clear that the purchaser was not interested as to the allocation of the price. From the correspondence mentioned before, viz. the letter from the vendee and the stage at which the Solicitor suggested to the vendor about it, it is clear that the apportionment of the price between different items mentioned was shown unilaterally by the vendee company and was not made as a result of any bargain between the parties, ''the Gargain was on the total price paid. As to how the price had to be allocated to different items there is no indication of any genuine agreement between the parties and no desire was expressed by the vendor company. Therefore, we have to examine the value of this document in the light of these facts. The Tribunal has referred to certain facts, namely, at a time when there was an embargo on the import of plant and machinery of this type, the value of this plant and machinery should have appreciably increased, specially when the plant and machinery had been maintained at a considerable cost and for the maintenance of which the Assessee had spent a considerable amount of money; the trend of rise in price of land value as also trend of rise in prices of plant and machinery of this type where there was import restriction. These various factors suggested that the value given in the document itself was not correct one and the Revenue authority was competent to examine to determine what should be the proper allocation. In this connection, it has to be borne in mind that the Assessee failed to produce any relevant evidence to substantiate or any data on the basis of which such bargain had been made. Taking these factors into consideration we are of the opinion that in this case though the document was not colourable and was not impeached, there were facts in view of the circumstances in which the particular clause was entered into for the income tax Officer to enter into the determination of the question of allocation. In the aforesaid light, therefore, it is; clear that it was possible for the Income tax Officer to go beyond the valuation.

The next part of the first question is, whether it was possible for the Revenue authorities to fix a valuation in the manner it has done. This question is similar to question No. 3 referred to hereinbefore. It is connected with question No. 2 which was fixation of profits at two lakhs. These are two inter-connected questions. This naturally calls for determination of the valuation of the land and building. The Tribunal was not in accord with the Income tax Officer that the valuation should be on the basis of Rs. 650 per cultivated acre and Rs. 50 per uncultivated acre. The Tribunal found that in the assessment order for 1960-61 the Tribunal in its order in income tax Appeal No. 11280 of 1962-63 had also rejected the valuation suggested by the income tax Officer on the aforesaid basis. The Tribunal was of the opinion that the value of the land had appreciated by 50% of the original cost while the value of the plant and machinery could be said to have increased by 100%. The counsel for the Assessee contended that this was an arbitrary basis. But it appears that the basis was accepted before the Tribunal in the case of Washabarie Tea Estate and on this basis the Tribunal had proceeded for the assessment year 1960-61. According to this basis, the value of profit u/s 10(2)(vii) would be Rs. 1,86,043. According to Revenue, it should be Rs. 2,39,500. The counsel for the Assessee contended that here the Tribunal was in error because it was necessary for the Tribunal to determine the amount of sale price and then determine whether there was profit u/s 10(2)(vii). The Tribunal could not give the arbitrary figure of Rs. 2 lakhs as profit arrived u/s 10(2)(vii). It is true that the Tribunal has not in its order given details of the process how it has arrived at the figure of Rs. 2 lakhs, but it is evident that the basis for this arrival had been indicated in the order of the Tribunal. Before the Tribunal attention was drawn to the said precedent of Washabarie Tea Estate, i.e. the basis of the valuation of the land and building and the Tribunal reached the valuation of the land and building shown in the present apportionment and 10 that extent tried to increase the value of the plant and machinery and taking the mean of the two extremes of Rs. 1,80,000 and Rs. 2,39,500 the Tribunal proceeded on a via media of the two. In this case, as we mentioned before, the Tribunal had to make a rough and ready method of its own. After having rejected the basis and there being no evidence given by the Assessee for the apportionment made to different items mentioned in Clause 30 of the agreement, the Tribunal had to proceed in making some amount of guess and that amount of guess is permissible and in this method certainly is neither possible nor can it be attempted. The Tribunal should not proceed in an arbitrary manner without any reason or without any objective data. We find that there was as much data available before the Tribunal for its conclusion as could be expected and there were certain limited indications in the data and in the absence of any other better material and in the background of the fact that the apportionment made by the Assessee was not correct, there was no other alternative for the Tribunal but to proceed in the manner it has done. In that view, it cannot be said that the figure arrived at was arbitrary or excessive.

In the aforesaid view of the matter, both the questions Nos. 1 and 2 must be answered in the affirmative and in favour of the Revenue.

We have to deal with the third question, that is, whether the Tribunal was justified in holding that the Assessee company had used the building, plant and machinery for its business during the accounting year. The vendee company was incorporated on March 20, 1958. The Assessee company admitted that during the period of accounting it had carried on business. There were materials to show that the Assessee company carried on business of the said tea estate. The counsel, however, contended that the Assessee company did not carry on business on its own account. The counsel for the Assessee company drew our attention to the decision of the Supreme Court in the case of Commissioner of Income Tax, Madras Vs. Ajax Products Ltd. through its Liquidator, and also the decision in the case of Commr. of Income Tax, U.P. and Ajmer-Merwara, Lucknow Vs. Bijli Cotton Mills Ltd., Agra, . The facts dealt with in these cases were facts with which we are not concerned in this case. It appears further in the decision of this Court in the case of Commissioner of income tax, West Bengal v. Tea Producing Company of India Ltd. 48 ITR 200, it was clearly held that a vendee company could not have carried on business before its incorporation even as an agent of the vendee (vendor) company. If that is the position, then in this case the Assessee company could not have carried on business as agent or on behalf of the vendee company before March 20, 1958. The counsel for the Assessee, however, contended before us that the Assessee company had carried on business as agent or on behalf of the promoters of the vendee company. It is true that there were negotiations and the promoters of the company. But there is no evidence that the promoters authorities or that the Assessee company carried on business by any agreement or by arrangement on behalf of the promoters until the new vendee company was incorporated. Furthermore, it does not appear that this contention was ever raised before the Tribunal. If that is the position, then if admittedly the Assessee company was carrying on business and as the true position in law is that this contention was ever raised before the Tribunal. If that is the position, then if admittedly the Assessee company was carrying on business and as the true position in law is that the Assessee cannot be deemed to have carried on business as agent of the vendee company before the date of incorporation of this new business and there being no evidence that the Assessee company was carrying on business as agent of some one else, it must be held that the Assessee had used the building, plant and machinery for the purpose of its own business during the accounting year 1958.

In the aforesaid circumstances, question No. 3 must also be answered in the affirmative and in favour of the Revenue.

The last question relates to that part of the order of the Tribunal in which the Tribunal has dealt with certain items, viz. re-wiring of the manager''s bunglow at Rs. 10,384, pumps, battery cooker and cooking range as mentioned in the paper-book at p. 131. The Tribunal was unable to accept the position that re-wiring of the manager''s bunglow cooking range or cooker could be said to be for the purpose of the Assessee''s business. According to the Tribunal, none of these items could be called plant and machinery. However, it appears to us that in view of the decision of the Supreme Court in the case of Commissioner of income tax, Madras v. Mir Mohammad Ali 55 ITR 165 (170) and in the case of Commissioner of Income Tax, Madras Vs. Raju and Mannar, the Assessee was entitled to development rebate on these items as claimed. So far as these are concerned, we may refer to the decision in the case of H.M. Inspector of Taxes v. Maden and Ireland Ltd. 38 T.C. 390 (417) it was observed by Lord Reid as follows:

It is not disputed that ''plant'' is also used in the Act as an ordinary English word. It is not altogether an easy word to construe; it may have a more or less extensive meaning according to its context. As a general statement of its meaning I would adopt the words of Lindley L.J. in Yarmouth v. France 19 Q.B.D. 647 at page 658:

In its ordinary sense, it includes whatever apparatus is used by a businessman for carrying on his business not his stock-in-trade which he buys or makes for sale; but all good and chattels, fixed or moveable, live or dead, which he keeps for permanent employment in his business.

I would also refer to the judgment of Uthwatt J. in J. Lyons and Company Ltd. v. Attorney-General (1944) Ch. 281 at page 286-7:

I do not think that the use throughout Section 24 of the Act of the word ''plant'' as part of the phrases ''plant or machinery'' and ''machinary and plant'' has the effect of confining the meaning of the word to such plant as is used for mechanical operations or processes. Next I find it unnecessary, for the purposes of a decision in this case, to enter on the question whether any particular limitation should be placed on the general sense borne by the word ''plant'' by reason that the Act in which it appears is a rating Act. I propose to assume that no such limitation should be placed.... Confining my attention to trade plant, I am content to accept the general description in Yarmouth v. France that ''plant'' includes whatever apparatus or instruments are used by a businessman in carrying on his business. The term does not include stock-in-trade, nor does it include the place in which the business is carried on. Whether any particular article more properly falls within ''plant'' as thus understood or in some other category depends on all the circumstances of the case.

Subject to one point, I have no doubt that these knives and lasts are plant in the ordinary sense of the word. It is true that they are numerous, small and cheap. But one trader may have to use a few large articles while another may have to use a large number of small articles and I see no good ground for distinguishing between them as regards investment allowance. The one point is the durability of these articles. When Lindley L.J. used the phrase ''permanent employment in his business'', he was using it in contrast to stock-in-trade which comes and goes and I do not think that he meant that only very long-lasting articles should be regarded as plant. But the word does, I think, connote some degree of durability and I would find it difficult to include articles which are quickly consumed or worn out in the course of a few operations. There may well be many borderline cases, but these articles have an average life of three years and if their cost can fairly be called capital expenditure, I cannot refuse to them the description of ''plant'' unless the Act discloses some special reason for doing so. The word ''investment'' may indicate a rather longer duration than what might be sufficient in other cases. But it seems to me that machinery could not be disqualified for investment allowance because it only had a life of three years and I see no reason why stricter test as to durability should be applied to plant than to machinery when the Act appears to treat them on an equal footing.

We are in respectful agreement with the aforesaid observations.

In view of the extended meaning of the plant and machinery in the modern context, we are of the opinion that re wiring of the manager''s bunglow, pumps or battery can be treated as plant and machinery for the Assessee''s business in view of the facts and circumstances of the case. In the context of our business and social standard, if an Assessee was obliged to provide a manager''s bunglow, to make it suitable for living pumps and battery were necessary to be provided; we are, however, unable to accept the position that cooker and cooking range could be said to be plant and machinery for carrying on the business of the Assessee by that standard. In the aforesaid view of the matter, we answer by holding that the Tribunal was not correct in holding that re-wiring of manager''s bunglow and pump actually were not plant and machinery wholly used for the Assessee''s business. But the Tribunal was correct in holding that cooker and cooking range were not plant and machinery used for the Assessee''s business.

Each party will pay and bear his own costs.

Pyne, J.

I agree.