PUNCTUATIONS AND GRAMMAR
Interpretation of statutes is a work of art and not an exact science. Although we are equipped with a deep legacy of interpretative principles, the derivation of “Intent of legislature” has always been a vexed question. Interpretative skills warrant travelling beyond explicit words to extract the underlying intent. In the process of evolution of a legal word, clause, sentence, sub-section or section, attention is also paid to the punctuation marks in between such sentences to validate the interpretation emerging from the plain wordings. Similarly, the curious question of “AND” being read as “OR” or vice-versa has left many legal luminaries perplexed. The article is an attempt to address both these matters in tandem.
BACKGROUND
The thought about this subject occurred on reading the case of CCE vs. Shapoorji Pallonji1 where the Supreme Court, affirming the decision of the Patna High Court, relied upon punctuation marks to interpret an enactment. The dispute in the case was on the taxability of works contract services rendered to IITs/NITs established under a special enactment of the Government to render educational activities. While there was no dispute on the aspect of Government supervision, the exemption was applicable only if they constituted ‘Governmental Authorities’ under the notification. The definition was first introduced in the exemption notification of 2012 and then underwent a change in 2014, with punctuation playing a critical role in the amendment. The comparison of the unamended and amended definitions is tabulated below:
| EXEMPTION NOTIFICATION – 2012 | CLARIFICATION NOTIFICATION – 2014 |
| 2(s) “governmental authority”’ means a board, or an authority or any other body established with 90% or more participation by way of equity or control by | 2(s) “governmental authority” means an authority or a board or any other body;
(i) Set up by an Act of Parliament or a State Legislature; or |
| Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W of the Constitution; | (ii) established by Government,
with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution; |
1. [2023] 155 taxmann.com 303 (SC) affirming [2016] 67 taxmann.com 218 (Patna)
Naturally, a question emerged whether the phrase “with 90% or more participation…….under article 243W of the Constitution” was applicable to both clauses (i) and (ii) or limited to only clause (ii) of section 2(s). In other words, whether IITs / NITs, which were admittedly set up by an Act of Parliament, were also required to comply with the condition of conducting municipal functions and governed with 90% equity / control. The revenue made out the case that (a) punctuations ought not to be adopted strictly for interpretation of the statute; (b) the phrase “or” should be read as “and” and consequently, the latter part of the definition would apply to both the sub-clauses.
In response, the Patna High Court stated that the phrase “or” is a disjunctive phrase and cannot be read as “and”; hence clause (i) is complete and independent from the latter part of the definition. The Supreme Court affirmed the High Court’s view as follows:
- The original definition was restricted to only such governmental authorities which satisfied all the three prerequisites of being established under a statute, under 90% control and performing municipal functions of 243W. Because of the unworkability of such a definition, an amendment was introduced to expand its scope. The Court then held that the amendment should not be rendered unproductive by interpreting the amended definition in the same sense;
- The word “and” or the word “or” are conjunctions with the former being normally conjunctive and the latter being normally disjunctive — unless the terms lead to uncertainty, vagueness or absurdity which warrant alternative interpretation, the law should be read in its ordinary and natural sense without any interchange of words — therefore, clauses (i) and (ii) which are divided by the disjunctive word “or” are independent;
- Use of semicolon after clause (i) makes the said clause independent and distinct from clause (ii). Clause (ii) on the other hand does not close with a semicolon but with a comma suggesting a continuation of the said clause but this is not so with clause (i). The use of such punctuation was deliberate to overcome the unworkability of the previous definition. Therefore, any interpretation leading to subsistence of the unworkability should be avoided.
One may observe that though punctuations played an important role, the Court has not solely relied upon the use of punctuations. The Court took cognizance of the unworkability of the erstwhile definition and the primary purpose of the amendment. It turned its eye towards the punctuation as a confirmatory note over the intention derived from the amendment. By itself, punctuations could not have been the deciding criteria over the scope of the definition.
It would be interesting to note that the said decision would be binding while analyzing the definition of “governmental authority” as well as “government entity” in the exemption notification for services2 under the GST law. The examination of the said issue can be categorised into three baskets (a) where in many AARs, the semicolon in the said definition was either completely ignored or it was assumed by contending parties that 90 per cent equity / control condition and municipal functions was applicable to both clauses, i.e., governmental authority / entity established under a special Act was required to be subjected to 90 per cent equity / control and performing municipal functions for it fall under the said definition3. The probable reason could be that even if the condition over municipal functions was to be considered as irrelevant as part of the definition of governmental authority / entity, the exemption entry by itself (Entry 3/3A) specified the requirement of the function being part of the constitutional function of Article 243G/W, making such an argument toothless. Moreover, most of the entities performing such municipal functions were under 100 per cent equity / control of the Government and the said condition was inherently satisfied without any ambiguity. (b) In another basket of AARs, where the specific issue was raised, the Patna High Court’s decision was followed and accepted4 by holding that clause (i) of the definition was independent; (c) In the third basket of decisions, it was adversely held that the said matter was under challenge before the Supreme Court and hence, the plain reading ought to be adopted5 — implying that the condition was applicable to both clauses. With this verdict of the Supreme Court, these AARs would need re-consideration and the correct interpretation would have to be applied. The interesting challenge would now arise on the question of binding applicability of such AARs which were rendered on an incorrect premise, especially if the parties to the AAR have not appealed against such decisions. This seemingly settled question would again form fertile ground for litigation under the GST law.
2. Notification 12/2017-CT(R) dated 28th June, 2017 3. RAJASTHAN HOUSING BOARD 2023 (70) G.S.T.L. 95 (A.A.R. - GST - Raj.) 4. NHPC Ltd 2018 (19) G.S.T.L. 349 (A.A.R. - GST) 5. NATIONAL INSTITUTE OF DESIGN 2021 (53) G.S.T.L. 92 (A.A.R. - GST - Guj.); NIRMA UNIVERSITY 2022 (59) G.S.T.L. 437 (A.A.R. - GST - Guj.); National Dairy Development Board [2019] 103 taxmann.com 404 (AAR - GUJARAT)
PURPOSE OF PUNCTUATIONS IN TEXTS
We now turn to the role played by punctuation in English grammar. Punctuation, according to the Oxford Learner’s Dictionary, is defined as “the marks used in writing that divide sentences and phrases”. The Merriam-Webster Dictionary defines punctuation as “the act or practice of inserting standardized marks or signs in written matter to clarify the meaning and separate structural units.” According to the Cambridge Dictionary, the term “punctuation” is defined as “(the use of) special symbols that you add to writing to separate phrases and sentences to show that something is a question, etc.”, and “punctuation is the use of symbols such as full stops or periods, commas, or question marks to divide written words into sentences and clauses”, according to the Collins Dictionary. The role of some punctuations is:
| Punctuations | Role played |
| Full stop [.] | End of a sentence |
| Comma [,] | Insert a pause into a sentence |
| Colon [:] | Signifies a series or an explanation |
| Semicolon [;] | Indicates two independent clauses |
| Hyphen [-] | Connecting compound words |
| Parenthesis [( )] | Supply further details in a sentence |
| Apostrophe [‘] | Denote some letters omitted |
| Quotation Marks [“] | Denote text speech or words |
| Ellipsis […] | Omission of words or letters, used in quoting texts |
It may be noted that the above explanations are not accurate in all circumstances and one may have considered the underlying texture of the sentences rather than directly adopting the above meaning.
IMPORTANCE IN INTERPRETATION OF STATUTES
The golden rule of interpretation (especially in taxing statutes) has always been to interpret the text in simple and literal form without any addition, modification, alteration, etc. Intention of legislation and aids of interpretation should be resorted only in cases of vagueness, absurdity and unworkability. According to GP Singh’s – Principles of Interpretation, in modern statutes, punctuation is a minor element in the construction of a statute and emphasis on punctuation in a carefully punctuated statute should be examined only in cases of doubt.
In a tax case of Shree Durga Distributors vs. State of Karnataka6 the Court was examining whether Dog Feed and Cat Feed were included in the phrase “animal feed” forming part of an entry which read as follows:
“5. Animal feed and feed supplements, namely, processed commodity sold as poultry feed, cattle feed, pig feed, fish feed, fish meal, prawn feed, shrimp feed and feed supplements and mineral mixture concentrates, intended for use as feed supplements including de-oiled cake and wheat bran.”
6. 2007 (212) E.L.T. 12 (S.C.)
The appellant contended that the comma after supplements which specifies a series of products is with reference to “feed supplements” only. The primary term “animal feed” is to be understood in its general sense and ought not to be limited to the list of items following the phrase “feed supplements”. It was contended that there are three parts to this entry (a) animal feed, (b) feed supplements with a list succeeding it, and (c) mineral mixture concentrates. The court refuted the basic premise of the argument by stating that there are only two categories (a) animal feed and feed supplements; (b) mineral mixture concentrates. The first category includes a comma and the word “namely” is applicable to the entire category. The list is exhaustive and since dog / cat feed does not fall into the list, they are not part of the said entry. Moreover, the said entry has two “ands”, with the former completing to the first category and the latter joining the first and second categories.
In another case of the State of Gujarat vs. Reliance Industries7, the Supreme Court examined the significance of commas and full stops in the following section:
“Notwithstanding anything contained in this section, the amount of tax credit in respect of a dealer shall be reduced by the amount of tax calculated at the rate of four percent on the taxable turnover of purchases within the State –
(i) Of taxable goods consigned or dispatched for batch transfer or to his agent outside the State, or
(ii) Of taxable goods which are used as raw materials in the manufacture, or in the packing of goods which are dispatched outside the State in the course of branch transfer or consignment or to his agent outside the State.
(iii) Of fuels used for the manufacture of goods: …”
7. 16 SCC 28 (2017)
In the said facts, a manufacture using fuel was prima-facie covered under both clauses (ii) and (iii), and hence, the revenue claimed that the dealer ought to reverse the input tax credit under both clauses, i.e., twice. The Court analysed all three clauses and observed that the word “or” after clause (ii), makes clause (i) and (ii) as one set and (iii) as a distinct clause. While clauses (i) and (ii) are split by a disjunctive “or” condition, clause (iii) is an independent clause by itself separate from the previous set. Hence, fuels which are used in the manufacture of goods would be subjected to two reversals (4 per cent + 4 per cent), provided the overall reversal does not exceed the input tax credit claim. Here, the court has given due importance to the comma and full stop in clauses (i), (ii) and (iii), respectively. Based on this, it delinked both these clauses from clause (iii) and hence made the same applicable even if the previous clauses were applied.
On the other hand, in the case of Falcon Tyres Ltd vs. State of Karnataka8, the court was examining whether the semicolon after the word “cotton” made the section disjunctive and separate from the main portion. The extract under consideration is below:
“Entry 2 of Second schedule – Agricultural produce including tea, coffee, and cotton.
2(A)(1) ‘agricultural produce or horticultural produce’ shall not include tea, coffee, rubber, cashew, cardamom pepper and cotton; and such produce as has been subjected to any physical, chemical or other process for being made fit for consumption, save mere cleaning, grading, sorting or drying;”
It was contended by the appellant that the semicolon divided the said definition into two parts and the second part was independent and disjunct from the first. Hence, rubber which was though excluded from the first could be included in the second part (being generic in nature) on account of the use of a semicolon. The court rightly rejected the reliance on punctuation on the grounds that the definition was exclusive and “such produce” cannot be meant to include rubber which was otherwise excluded from the definition. In the decisions above, punctuation operated as a guiding factor for courts in interpretation. While words would also take prominence, punctuation only worked as a topping to make the final decision palatable with the intent of the legislature.
8. 6 SCC 530 (2006)
APPLICATION OF ABOVE ANALYSIS
The above brief on punctuation now leads us to live scenarios under GST.
Blocked ITC clause – Section 17(5) is a classic test case to apply the interpretation principles on account of repeated use of punctuation in this long list of blocked credits. As we are aware, the section is an overriding exception to the general rule of allowing input tax credit on all business expenses. The section is exhaustive with semicolons, colons and full stops used in its legislation. Each sub-clause ends with a semicolon except clauses (b), (d) and last clause (i). Whether this observation is of significance may be worth testing.
(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:-
(a) Motor Vehicles for transportation of passengers …………..;
(aa) Vessels and aircraft ……………;
(ab) Services of general insurance …………;
(b) the following supply of goods or services or both-
(i) food and beverages, ………. leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:
Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre; and
(iii) travel benefits extended to employees on vacation such as leave or home travel concession:
Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.
(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
Explanation.––For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;
(e) goods or services or both on which tax has been paid under section 10;
(f) goods or services or both received by a non-resident taxable person except on goods imported by him;
(fa) goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013);
(g) goods or services or both used for personal consumption;
(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and
(i) any tax paid in accordance with the provisions of sections 74, 129 and 130.
Explanation.–– For the purposes of this Chapter and Chapter VI, the expression “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes-
(i) land, building or any other civil structures;
(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.
Case 1 – Food & beverages clause: At clause (b), one may observe that it is further subdivided into three sub-clauses with a full stop at the end. The first sub-clause of (b) i.e. (i) denies ITC on food and beverages, renting of motor vehicles, etc., and uses the colon punctuation “:” followed by a proviso. The proviso permits, otherwise ineligible, ITC to be claimed if the ITC is used for making an outward supply of the same category of goods or services or as an element of a composite / mixed supply. The question would be whether the proviso which permits ITC is applicable to only clause (b) or even the preceding clauses (a), (aa), (ab). The answer could be simple that the proviso is restricted only to sub-clause (i) of clause (b) and cannot be extended to other clauses. This is purely because each clause ends with a semicolon which signifies that it is independent of the other clauses. The preceding clauses have completed their stipulations by themselves and hence, are not dependent on subsequent clauses for its operation. Moreover, sub-clause (i) of clause (b) ends with a colon and continues into the proviso which subsequently ends with a semicolon, clearly implying that clause (b) is incomplete until the proviso is also considered a part of it. Hence, the benefit of the proviso can be availed only in respect of food, beverages, renting / hiring of motor vehicles if the same are an element of an output supply.
Case 2 – Statutory obligation clause: We can extend this issue to another proviso which succeeds clause (b)(iii). The question of whether the proviso that permits ITC in respect of statutory obligations would extend to all the sub-clauses (i), (ii) and (iii) of clause 17(5)(b) becomes relevant. In other words, whether ITC on canteen facilities which are covered in sub-clause (i) is also eligible if they are provided by factories under a statutory obligation. Applying interpretation principles, an ambiguity over the applicability of the said proviso to clause (b) in its entirety prevails. With the analogy applied in Case 1, the question may seem a difficult issue to address. One may technically state that the benefit of proviso would be restricted only to travel benefits extended by employers to its employees. Fortunately, the CBIC Circular No 172/04/2022-GST9 has stepped in to resolve this conflict and highlighted the true intention of the GST council. It was clarified that the intent of inserting the proviso to 17(5)(b) was to make it applicable to all scenarios of section 17(5)(b) including canteen and rent-a-cab services and not merely restricted to the third clause.
9. dated 6th July, 2022
Case 3 – Immovable Property clause: A very interesting facet arises when we read clauses (c) and (d). Both clauses attempt to restrict input tax credit on construction of immovable property other than plant and / or machinery. While clause (c) permits input tax credit on construction for “plant and machinery”, clause (d) permits such input tax credit when used for “plant or machinery”. The explanation to the said section defines “plant and machinery” and not “plant or machinery”. Naturally, the question arises whether the definition of plant and machinery could be adopted for the phrase plant or machinery.
We may analyse the explanation of the term “plant and machinery” in greater detail to unearth the intent of defining such a phrase. It is apparent, the said phrase has been used in the context of construction activity involving capitalisation to an immovable property. Therefore, the terms “plant and machinery” or “plant or machinery” prima-facie fall under the overall umbrella of “capital goods” as defined under the GST law — i.e., goods which are capitalised in the books of accounts of the assessee. Then why did the legislature choose to define the phrase “plant and machinery” and not “plant or machinery” when both are towards a similar objective? The legislature is always presumed to lay down the law in the most efficient and crisp manner without the use of any futile words unless there is strong necessity / evidence to the contrary. This settled principle provokes the idea that “plant and machinery” is to be treated distinctly from “capital goods”.
The starting point to assess this difference would be to search for such phrases at other instances in the statute and assess such interchangeability. Take, for example, section 18(6) which provides for the reversal of ITC or payment of output tax on supply of “capital goods or plant and machinery”. Noticeably, the legislature has used the phrases “capital goods” and “plant and machinery” in proximity to each other, interjecting a disjunctive word, indicating separate meanings to be assigned to each phrase even though plant and machinery prima-facie appears to be a sub-set of capital goods.
What does this possibly mean? While it is difficult to assign a definitive reason, an answer could be obtained by a comparison of definitions of “capital goods” and “plant and machinery”. Capital goods are defined to mean goods: implying movable property, but “plant and machinery” has been defined to mean equipment, apparatus, etc., which are “fixed to the earth by foundational or structural support”. There would be scenarios where capital goods procured as movables but by way of affixation to the immovable property (such as construction of buildings, etc.) lose their character as movables and become part of an overall immovable property on account of the permanent fixation to earth. The immovable property emerging from the usage of movables would then fall outside the definition of capital goods. Because of losing their character as goods after fixation to earth, it was necessary for the legislature to use a separate phrase alongside capital goods in various instances so that the same treatment could be accorded to such goods akin to movable capital goods. In the absence of any explanation, one could possibly have claimed that the equipment’s on fixation would lose their character of goods and hence, fall outside the definition of “capital goods” even though they are capitalised. This mischief has now been addressed by adding an explanation for the purpose of the entire chapter.
One may recollect the legacy of litigation around the immovability of machinery, equipment, etc., under the Central Excise as well as the Cenvat Rules. Under the Central Excise regime, we have had decisions of assembly / installation of plant and machinery at the site leading to an immovable property on account of the manner and intent of affixation with the land. The apex court’s decision of Sirpur Paper Mills, Triveni Engineering & Indus. Ltd, Solid & Correct Engineering Works, etc., have developed the principles of permanent fixation, cannibalization, for testing the immovability of plant and machinery10. Under the Cenvat Credit Rules, the decisions of Vodafone India Ltd; Indus Towers Limited; Vodafone Essar South Ltd11 have examined whether telecommunication towers which were installed qualified as inputs or capital goods for availment of CENVAT pursuant to installation on an immovable property. On similar lines, decisions in ICL Sugars Limited, SLR Steels, Pipavav Shipyard, etc12 have examined the eligibility of CENVAT of storage tanks, pollution control equipment and overhead cranes based on immovability principles. We also had Tribunal decisions of eligibility of CENVAT in Vandana Global Ltd, Reliance Gas Transportation Infrastructure Ltd13 on foundational support, pipelines, etc., rendered on the principles of immovability. These decisions compelled the legislature to bridge the gap between movables, retaining their characteristics as movable after its usage and movables which lose their characteristics as movables when forming part of immovable property. This gap was bridged by way of this explanation which focuses on such hybrid items which may be movables at the time of receipt / availment but have an end use for business as immovables. Thus, an explanation has been added for the purpose of the entire Chapter of Input tax Credit stating that apparatus, equipment and machinery fixed to the earth either by structural or foundational support would be coined by a specific term “Plant and machinery”. In contradistinction to the phrase “capital goods” which has its emphasis on goods, the emphasis of the term “plant and machinery” has been on the fixation of such goods (a.k.a. capital goods) to the earth and forming part of immovable property. In loose terms, “plant and machinery” is a specified term attributed to those capital goods which are not immovable property, assigning it a distinct identity.
10. 1998 (97) E.L.T. 3 (S.C.); 2000 (120) E.L.T. 273 (S.C.); 2004 (167) E.L.T. 501 (S.C.); 2010 (252) E.L.T. 481 (S.C.) 11. 2015 (40) S.T.R. 422 (Bom.); 2016 (45) S.T.R. J55 (Del.); 12. 2011 (271) E.L.T. 360 (Kar.); 2012 (280) E.L.T. 176 (Kar.); (2023) 4 Centax 246 (Guj.); 13. 2010 (253) E.L.T. 440 (Tri. - LB) reversed in 2018 (16) G.S.T.L. 462 (Chhattisgarh); 2016 (45) S.T.R. 286 (Tri. - Mumbai)
This theory also fits well while analysing section 29(5) & Rule 40 which uses the phrase “goods held in stock or capital goods or plant and machinery”, again bearing proximity with each other. Explanation to Chapter V of the GST Rules which read as follows:
“Explanation. — For the purposes of this Chapter, –
(1) the expressions ‘capital goods’ shall include ‘plant and machinery’ as defined in the Explanation to section 17”
The explanation specifically includes “plant and machinery” as defined in the explanation to section 17 for the purpose of the availment / reversal of ITC under the GST law. Noticeably, this section has distinguished between “Plant and machinery” and “Plant or machinery”.
Implanting this analysis to section 17(5)(c) and (d) would lead to a better appreciation of the intent of the legislature. One may observe that both phrases are used in parenthesis alongside the construction of an immovable property. We have just understood above that “plant and machinery” refers to those equipment which are affixed as immovable property and “plant or machinery” has no such prescription. On careful consideration, one can note that section 17(5)(c) blocks ITC vis-à-vis the service activity of works contract which results in an immovable property except when such service activity is an input service for outward works contract service. The emphasis is on blockage of the ITC on works contract service resulting in an immovable property. What is delivered by the supplier on rendition of a works contract service is an immovable property. The parenthesis alongside immovable property excludes all “plant and machinery” which fall under the explanation, i.e., fixed to the earth by structural or foundational support and acquire the character of being an immovable property (per settled central excise, cenvat principles). Though they may have been movable at the time of rendition of works contract service and brought to site for installation as immovable property, they form part of immovable property and can avail the benefit of exclusion from
blocked ITC. Typically, turnkey and composite works contract arrangements, where the supply and installation are also performed by the contractor, fall under this clause.
ITC restriction under section 17(5)(d), on the other hand, is not with reference to an act of supply but on the condition of receipt of goods or services which are not forming part of any works contract activity. This is attempted to block ITC where the taxpayer assimilates all goods and services under vivisected arrangements (rather than a composite works contract / turnkey arrangements) with the end use of construction of an immovable property. Since the prescription is with reference to state in which the “goods are received” (in movable form) and then installed on own account by the taxpayer or under separate service contracts, the legislature in its wisdom thought that the general phrase “plant” or “machinery” is more apt rather than specific definition “plant and machinery” under explanation to section 17(5). Implying that the words “plant” or “machinery” needs to be assessed in its generic sense independently at the point of receipt (say factory gate) and the use into an immovable property becomes an event subsequent. While both would be capitalised to the immovable property, the former clause is indicative of turnkey contracts and the latter clause is indicative of vivisected contracts where goods and services are received to the account of the taxpayer and the taxpayer then performs/ assigns the installation separately. Thus, goods or services when procured independently and movable at the time of receipt with subsequent use for construction of immovable property — towards “plant” or “machinery”, may fall outside the scope of section 17(5)(d) even if they are capitalised to immovable property. This convoluted analogy would not hold goods for availment of composite works contract services for “plant and machinery” as buildings, telecommunication towers, pipelines are specifically excluded from the said phrase under plant and machinery.
To summarise, the phrase “plant and machinery” is a specific nomenclature used for hybrid goods which on fixation to earth form an immovable property. They are not necessarily plant and machinery used in its general sense but must be understood strictly based on the explanation. However, “plant” or “machinery” are two distinct words divided by a term “or” which has not been defined in the Act and must be understood independently in its generic sense. Trade parlance use of the word “plant” or even “machinery” would assist in claiming an exclusion from ITC blocked credit under section 17(5)(d). One may tabulate this understanding further:
| Term | Understanding | ITC Testing | Condition | Installation |
| Plant and machinery | One consolidated phrase bearing a specific nomenclature and well-defined | Vis-à-vis receipt of works contract services | Part of composite supply of immovable property | Equipment, apparatus, etc. fixed to earth |
| Plant or machinery | Generic sense in terms of trade usage with both terms being independent of each other | Vis-à-vis at point of receipt of goods / services | Goods and services separately received as movables but subsequently used towards immovable property on own account | No specific condition as regards manner of fixation |
The tabulation indicates that the words “and” and “or” and their interchangeability is not the moot issue here. Rather the moot issue for examination is the entire phrase “plant and machinery” and its applicability to section 17(5)(c)/(d). Had the intent of the legislature been to apply the same meaning, it would have implanted the said phrase in entirety in section 17(5)(d) as well. However, having chosen to adopt a separate phrase on account of past experiences due importance ought to be given to such distinction.
So where does this seemingly zealous interpretation lead to!!! Can the matter of ITC on shopping malls in the case of Safari Retreats14 which is currently pending before the Supreme Court be examined from this perspective? Similarly, whether hotels, cold storages, cinema theatres, etc. which are aggrieved by substantial ITC blockage, claim that the building is a “plant” in a generic sense used for the purpose of business to generate income and hence eligible for ITC credit as part of the exclusion in section 17(5)(d), even-though they are primarily civil constructions and otherwise barred from availment of ITC?
14 2019 (25) G.S.T.L. 341 (Ori.)
In the context of depreciation under income tax we are aware the term “plant” was given a wide import and not just limited to equipment or apparatus which are mechanical or industrial in nature, but also include all goods used by a businessman for the purpose of carrying on his business. We have had cases where anything which facilitates trade or business (apart from stock in trade) or a “tool in trade” was considered as plant irrespective of it being fixed or movable, mechanical or electrical. Income tax law has adopted the “trade parlance” and “functional test” to decide whether an object is a “building” or “plant” or “machinery” i.e., merely a shelter or a tool of running business.
We have the famous case of Taj Mahal Hotels15, where the Court examined whether hotel installations (such as pipelines, electricals, etc.) are plant for the purpose of claim of development rebate (akin to accelerated depreciation). The court affirmed the taxpayers position holding that wide import to the plant would include such installations within its ambit. Subsequently in Anand Theatres16, the court, distinguishing Taj Mahal Hotels, refuted the claim that cinema buildings are plants even though they may be purpose-built. Yet, we have decisions w.r.t. to cold storages in Shree Gopikishan Industries (P.) Ltd. and subsequently in Shri Soneshware Cold Storage17 which distinguished the Anand Theatres decision to hold that from a functionality perspective, a cold storage would be more appropriately classifiable as a plant rather than a mere building. However, in Geetha Hotels P Ltd18, the old principle of Taj Mahal hotels (despite the decision of Anand Theatres) was applied to grant the benefit to the extent of fittings and fixtures which have been installed on the hotel premises. To summarise, we have the case of Navodaya19 where the Tribunal members visited the premises involving a film studio with specialised floorings and equipment and held it to constitute a plant based on the following principles:
- Functional test is a decisive test.
An item which falls within the category of building cannot be considered to be a plant. Buildings with particular specifications for atmospheric control like moisture or temperature are not plants.
- In order to find out as to whether a particular item is a plant or not, the meaning which is available in the popular sense, i.e., the people conversant with the subject-matter would attribute to it, has to be taken.
- The term “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 any apparatus which is used for mechanical operations or process or is employed in mechanical or industrial business. The article must have some degree of durability.
- The building in which the business is carried on cannot be considered to be a plant.
- The item should be used as a tool of the trade with which the business is carried on. For that purpose, the operations it performs have to be examined.
15. (1971) 82 ITR 44 (SC) 16. 17. [2003] 131 Taxman 729 (Calcutta) & [2015] 56 taxmann.com 433 (Gujarat) 18. (2000) 243 ITR 192 (SC) 19. [2016] 67 taxmann.com 180 (SC) affirming [2004] 271 ITR 173/135 Taxman 258 (Ker.)
We, thus, have a see-saw of decisions on this aspect and evidently the functionality of the building would tilt the bar to either side. Yet, one should not lose sight of the contextual setting in which these decisions were rendered under the income tax law vis-à-vis the current subject in hand. There may arise some reluctance to equate these contexts as depreciation was a mandatory requirement under the income tax law but input tax credit is statutory concession of sorts and subjected to legislative discretion. Deriving legislative intent would be a slightly challenging task for taxpayers and courts when it involves external aids of interpretation. Certainly, this would be an emerging area of study and the course taken by the Supreme Court in the Safari retreat’s case would be an interesting wait.
The ultimate takeaway from this analysis would be to recognise the importance of punctuation and grammar very contextually. Alternative interpretational permutations involving punctuation would have to be tested to arrive at the “better interpretation” for the situation. Each alternative would have to be viewed in an unbiased manner and the holistic result should be foreseen prior to concluding the legal position.
Lecture Meeting on Important Income-tax Decisions of 2014 on 29th January 2015
Programme on Real Estate Investment Trusts (REITs) & Infrastructure Investment Trusts (InvITs) on 7th February 2015
In the first session CA. Mayur Nayak effectively explained, many important points aptly punctuated with humour. He explained the importance of clarity of goal, attitude to win, discipline, consistency, effective time management and how to overcome distractions. He guided them to have Balanced food, effective study and relaxation. He emphasised that harmony of physical, emotional, intellectual and spiritual alignment would help them to face any challenges in life including that of exams. 
In the second session CA. Shrinivas Joshi focused on CA exams. He explained at length as to how to prepare with qualitative studies for exams including use of appropriate reference materials. He shared the information that excellent study materials and faculties are available freely to clarify and guide on a variety of subjects covered in the syllabus. He explained at length as to what the examiner expects from the students and also cleared their doubts on misinformation and wrong impressions in the minds of the students about the ICAI exams and its results. He shared the important tips as to how to write the papers and manage time of three hours in exams. He answered all questions raised by the students. 
The Seminar on Media and Entertainment Industry was conducted by the International Taxation Committee of the BCAS on 12 February 2016 at St. Regis Hotel (Palladium Hotel). This seminar was organized jointly with Accounting & Auditing Committee and Indirect Taxation Committee. The speakers at the seminar and the topics covered were as under: 
Mr. Jehil Thakkar on Know the industry – current issues – Business models, cash flows, vehicle for investments, etc. (Industry overview and typical situations)
Mr. Utkarsh Sanghvi on Indirect tax issues in media and entertainment industry, including: Service tax, VAT and customs. 
The seminar was attended by more than 50 participants. The seminar became very informative and provided an overview of industry as a whole and detailed technical analysis on taxation, accounting and auditing aspects. The Seminar provided an insight into the industry and focused on the issues faced in the industry and the current trends in respect of the Media and Entertainment industry. The sessions at this seminar were all interactive and generated good amount of debate among the participants and the presenter. 
Lecture Meeting on Important Case Laws of 2015 on Indirect Taxes held on Wednesday, 17th February 2016 at IMC Hall Churchgate Shri. K. Vaitheeswaran dealt with various important case laws of 2015 on Indirect Taxes. He discussed and deliberated upon case laws in the field of Central Excise, Customs, Service Tax and Sales tax. He dealt with intricacies of the cases with an impact analysis. 
Lecture Meeting on Important Income Tax Decisions of 2015 was held on Wednesday, 24th February 2016 at the Jaihind College Auditorium. 
