Case A25
Judges: AM Donovan ChJD Davies M
GR Thompson M
Court:
No. 2 Board of Review
J. D. Davies (Member): About 1960, a large city building was erected in Melbourne for the taxpayer, a public company. In the year under review, the substituted accounting period ended 30 September 1961, about three floors of the multi-storey building were let to tenants, the balance being occupied by the taxpayer and being used mainly to house its administration, clerical and design staff, but also a number of activities, such as engineering development work, mechanical computer, photographic and printing department, film library, theatrette, cafeteria, garage, automotive maintenance shop and a workshop. In its income tax return for the year, the taxpayer claimed depreciation on a number of items relating to the building, and two of these became the subject of reference to the Board. They were the general electrical wiring, trunking and conduit throughout the building and the ceilings composed of acoustic metal pan fittings. Also claimed for the year and referred to the Board was depreciation on similar acoustic ceilings fitted to the taxpayer's similar premises in Sydney. The quantum of the amounts claimed by the taxpayer was not disputed before the Board though they were based in part upon estimates and could not be precisely dissected from the costs rendered by the subcontractors engaged on the building work.
2. The case turns upon the width of the expression ``plant or articles'' in sec. 54 of the
Income Tax and Social Services Contribution Assessment Acts,
and the view which I hold and which I have expressed in prior cases is that the term ``plant'' as it is used in that section has a conventional or consensual meaning. Its connotation is neither technical nor derived from legal decisions, though such decisions are a useful guide. In
17 T.B.R.D.
Case
S25 (144), I sought to explain the ramifications of the word ``plant'' and set out the many factors which influenced a decision whether a particular piece of property be plant or not. In so doing, I sought, however, not to prescribe the meaning of the word ``plant'' but merely to elucidate its conventional meaning. I need not repeat what I there said.
3. I am firmly of the opinion that neither the ordinary electrical wiring, trunking and conduit nor the acoustic pan ceilings of a city office building are plant. The gist of the matter, in my opinion, is that, though an accountant might depreciate these items in his annual accounts, neither laymen nor engineers would regard them as within the connotation of the word plant.
4. Are the items nevertheless ``articles'', for both plant and articles - terms which are not mutually exclusive - are depreciable if they satisfy the other requirements of sec. 54. ``Articles'' is a very wide term indeed, but it does not, in my opinion, encompass property forming an integral and substantially permanent part of realty. An article is a distinct piece of property which has significance of its own, not something which has relevance to and significance only as part of a larger whole. In my opinion then, neither the electrical wiring, trunking and conduit, nor the acoustic pan ceilings, nor any parts thereof, forming as they did a substantially permanent part of the taxpayer's
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building, were in the connotation of the term ``articles''.5. It was said by counsel for the taxpayer that the whole building should be regarded as plant. In my opinion, however, it is clearly not the special type of structure falling within that description. Counsel then submitted that the acoustic ceilings or the acoustic metal pans separately were plant or articles. He relied upon evidence that the Melbourne building, with which the Sydney building was similar, was designed to provide as much light and open office space as possible. With this in mind, the building was provided with glass walls on the north and south sides and the office partitions were made, wherever possible, movable and not of full height. In the result, it was necessary to provide a ceiling having the quality of absorbing sound. The ceilings provided comprised perforated metal pans which contained sound absorbing material and which clipped into a metal framework suspended below the concrete floor of the storey above. Counsel submitted that the ceilings were plant because of the function they played in providing suitable office accommodation or because of their relationship to the partitions which, being movable, were regarded by the Commissioner as depreciable articles, or that the ceilings, or at least the separate metal pans which were merely clipped into position, were chattels and therefore articles. In my opinion, neither the ceilings nor any part thereof had the qualities of plant, nor were the ceilings nor the metal pans, though they were removable, chattels and therefore articles, but rather did they form a permanent and integral part of the realty.
6. The electrical wiring with which we are concerned comprised what is known as the rising mains (pyrotenic cables carrying the electricity from floor to floor), the trunking (metal containers carrying a number of separate wires from junction box outlets) and the conduit through which some of the electrical wires travelled, particularly from the trunking to an outlet. Electricity to the building was provided either by the city electricity supply or by the taxpayer's own generator, which stood in the basement of the building. From there it went to the main switch, along the rising mains through a number of junction boxes, along the wires in the trunking and conduit box to the final outlets. Some 50% of the electricity used in the building was taken up by the lifts and air-conditioning units, but the electrical wiring involved in these units was regarded by the Commissioner as part of the units and depreciation has been allowed thereon. Depreciation has also been allowed by the Commissioner, though in part inadvertently, on the main switch, the junction boxes and the incandescent and fluorescent light fittings, these fittings being treated by the Commissioner as articles. The electrical wiring with which we are concerned, then, carried some 50% of the electricity used in the building, and of that amount 95% was supplied to the incandescent and fluorescent lights and 5% to the power outlets. Many of the machines and pieces of equipment which drew power from the power outlets were, of course, themselves depreciable, being either plant or articles.
7. Counsel for the taxpayer submitted first that the rising mains and electrical wiring, the trunking and conduit were articles, being chattles which were removable and replaceable. In my opinion, they were not chattels or articles but formed part of the building, part of the realty. He then submitted that the rising main electrical wiring, trunking and conduit were plant because of their function and appearance. In my opinion, however, they were neither plant nor to be regarded as an integral part of plant. He finally submitted, not without force, that it was illogical to allow depreciation on the main switch, junction boxes, light fittings and the machines and equipment using the power outlets and yet not to depreciate the wiring which joined all these items and carried the electricity from the one to the other. The fallacy of the argument, however, lies in the distinction between plant and articles. Had the items been depreciated as plant, counsel's argument would have been irresistible, but many of the items were depreciated simply because they were treated separately as articles.
8. For these reasons, then, I would disallow the taxpayer's objections. In giving these reasons, I have sought not to discuss the decided cases and the principles to be applied, for this has been done quite fully in already published decisions of the Board. Counsel for the taxpayer relied strongly on the recent decision of Kitto J. in
Broken Hill Pty. Co. Ltd.
v.
F.C. of T.
(1968) 41 A.L.J.R. 377
. I do not find in his Honour's
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judgment, however, any departure from the principles which I understood to be accepted and which I attempted to elaborate on in Case S25.9. For these reasons, I would uphold the Commissioner's decision on the objection and confirm his assessment.
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