JUDGMENT
G.T. Nanavati, J.
1. The Income-tax Appellate Tribunal, Ahmedabad, has referred the following four questions to this court under section 256(1) of the Income-tax Act, 1961 :
At the Revenue’s instance :
“1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in deleting the addition of Rs. 46,107 from the computation of the assessee’s total income ?
2. Whether it was incumbent upon the Income-tax Officer to have made an order under section 201 for recovering the amount of the tax due on the amount paid to the non-resident in order to sustain the addition of Rs. 46,107 ?
3. Whether the Income-tax Appellate Tribunal was right in law in holding that surtax should be excluded in computing the income of the assessee-company ?”
At the assessee’s instance :
“4. Whether, on the facts and in the circumstances of the case, the assessee was entitled to development rebate on the wall clock in the factory premises ?”
2. The assessee is an industrial undertaking and is carrying on the business of manufacturing diesel engines, compressor pumps, etc. During the assessment proceedings for the assessment year 1973-74, the assessee claimed development rebate, inter alia, in respect of a wall clock costing Rs. 2,064, deduction of expenditure of Rs. 46,107 being the amount remitted by it to Messrs Kautex Works in connection with import of certain parts utilised by the assessee for manufacturing machinery and also deduction of the amount payable by it as surtax.
3. As regards the development rebate claimed by the assessee, the Income-tax Office was of the view that a wall clock cannot be called a plant and, therefore, he disallowed the claim of the assessee. The said finding of the Income-tax Officer was confirmed by the Appellate Assistant Commissioner in appeal. The Tribunal was also of the view that merely because the wall clock was put in the factory of the assessee, that was not enough to make it a tool of the assessee’s manufacturing trade. Expenditure of Rs. 46,107 was disallowed by the Income-tax Officer on the ground that, under section 195 of the Act, it was an obligation of the assessee to deduct tax at source in respect of that amount and as the assessee had not done so, the whole expenditure cannot be regarded as permissible deduction. The Appellate Assistant Commissioner confirmed the said finding in appeal. But the Tribunal upheld the contention of the assessee and held that it was a permissible deduction and the proper thing for the Income-tax Officer was to make an order under section 201 for recovering the amount of tax due on the amount paid to the non-resident. The assessee’s claim for deduction of the amount payable as surtax was rejected by the Income-tax Officer and that view confirmed by the Appellate Assistant Commissioner in appeal. The Tribunal, on the other hand, upheld the contention of the assessee, as it was of the view that the said amount was deductible.
4. As the revenue was not satisfied with the order of the Tribunal as regard granting of the assessee’s claim with respect to the expenditure of Rs. 46,107 and deductibility of the surtax amount, it moved the tribunal under section 256(1) of the Act for referring four questions to this court. While opposing the Revenue’s application, the assessee suggested six more questions to be referred to this court. Ultimately, the Tribunal thought it fit to refer the above-stated four questions to this court.
5. The point which arises for consideration as a result of question No. 3 is covered by the decision of this court in S. L. M. Maneklal Industries Ltd. v. CIT [1988] 172 ITR 176. This court has held that the amount of surtax payable by the assessee is not to be excluded while computing his income. Following the said decision, question No. 3 will have to be answered in the negative, that is, in favour of the Revenue and against the assessee.
6. Questions Nos. 1 and 2 pertain to the amount which was paid by the assessee to Messrs Kautex Works in connection with import of certain parts utilised by the assessee for manufacturing machinery. As stated earlier, the only ground on which the claim has been payable on the said amount under section 195 of the Act. Before us also, learned advocate appearing for the Revenue urged that, as the tax which was required to be deducted at source was not deducted, the whole amount of Rs. 46,107 cannot be regarded as permissible expenditure. In our opinion, there is no substance in this contention. Section 195 appears in the chapter dealing with collection and recovery of tax. Section 195 makes the person making payment to a non-resident responsible for deduction of tax payable on such sum. It is difficult to appreciate how non-compliance with the said section can make a permissible deduction a non-permissible deduction. If the person responsible does not collect tax, then suitable action can be taken under section 201 of the Act. We are, therefore, of the opinion that the Tribunal was right in taking the view that the amount of Rs. 46,107 was required to be deleted from the computation of the assessee’s total income and that the proper course for the Income-tax Officer was to make an order under section 201 for recovering the amount of tax due on the said amount paid to the non-resident.
7. As regards the assessee’s claim for development rebate for the wall clock installed in the factory premises, it was submitted by the learned advocate for the assessee for that the said wall clock should have been considered as plant and on that basis, the assessee’s claim ought to have been granted. The fact that the wall clock was installed in the factory premises has not been disputed. From the statement of case, it appears that the said clock was used by the workers for reading time, whenever necessary. The only ground on which the claim was not upheld by the Tribunal was that the clock being an office appliance, it cannot be regarded as a plant and, therefore, no development rebate under section 33 was permissible. The learned advocate for the assessee has relied upon the decision of the Supreme Court in Scientific Engineering House P. Ltd. v. CIT [1986] 157 ITR 86, wherein it has been held that the word “plant” would include any article or object, fixed or movable, live or dead, used by a businessman for carrying on his business and it is not necessarily confined to an apparatus which is used for mechanical business. The Supreme Court in that case has quoted with approval the following observations made in IRC v. Barclay, Curle and Co. Ltd. [1970] 76 ITR 62, 67 (HL) (at page 96 of 157 ITR) :
“It seems to me that every part of this dry dock plays an essential part…… The whole dock is, I think, the means by which, or plant with which, the operation is performed.”
8. Barclay’s case [1970] 76 ITR 62 (HL) refers to the functional test in order to determine whether an article can be said to be essential or not. With respect thereto, the Supreme Court has observed as under (at page 96 of 157 ITR) :
“Does the article fulfil 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.”
9. From the above decision, it becomes clear that the word “plant” as appearing in the relevant section of the Act has been construed very widely and various articles like drawings, designs, charts, sanitary pipeline fittings, fans and air-conditioners have been regarded as “plant” by the courts.
10. The learned advocates also relied upon the decision of this court in CIT v. Tarun Commercial Mills Ltd. [1985] 151 ITR 75 wherein air-conditioners and electric fans were held to be “plant” and not office appliances. While deciding as to what can be termed as an office appliance, this court held that it was difficult to lay down any strait-jacket formula but the initial test for determining the nature of the article is what is known as the test of common or popular parlance as understood by a person dealing with those articles. The second test would be the principal and primary use for which the goods are required and for which the same are capable of being used. The third test is what is known as the commercial test, i.e., how the article or goods are known in the world of “trade and commerce”. This court then pointed out that electric fans and air-conditioners are capable of being adopted for the purposes for which they are meant, namely, for maintaining a particular bearable climatic temperature in laboratories, workshops, surgical and nursing homes and even in private residential buildings. Therefore, even though electric fans and air-conditioners are used for obtaining optimum efficiency of the persons working in the offices, this court refused to describe them as office appliances. This court held that before an appliance can be said to be an offices appliance, it must be an appliance which is mainly used in offices as an aid or facility for the proper functioning of the offices. In short, an appliance which is of general use cannot be described as an office appliance merely because it is normally used in offices. So far as wall clocks are concerned, they are not only used in offices but also in factories, residential buildings and various other places. Therefore, a wall clock being a general utility, cannot be described as an office appliance. Next, we have to consider whether a wall clock can be regarded as “plant” for the purpose of section 33 of the Act. As pointed out above, the word “plant” has been very widely construed and if it is an article which is considered necessary and which is likely to advance the business of the assessee, then it has to be regarded as a plant used by him for the purpose of carrying on his business. There is no dispute as regards the fact that the wall clock has been installed by the assessee in its factory premises and it is used by the workers working therein for the purpose of reading time. It was not pointed out to us that keeping of a wall clock in the factory is required under the Factories Act or any other labour legislation. But its necessity in the factory cannot be seriously doubted. It would certainly be useful for the purpose of carrying on the business of the assessee and if, for that purpose, the assessee thought it fit to install the same, it cannot be said that it did not play an essential part in the assessee’s operations. We are, therefore, of the opinion that the Tribunal was wrong in holding that it was not a tool of the assessee’s manufacturing trade.
11. In the result, questions Nos. 1 and 2 are answered in the affirmative, that is, against the Revenue and in favour of the assessee. Question No. 3 is answered in the negative, that is, in favour of the Revenue and against the assessee. Question No. 4 is answered in the affirmative that is, in favour of the assessee and against the Revenue. No order as to costs.