V. BALASUBRAMANIAN, VICE-PRESIDENT first appeal is by assessee and second by Department. assessee is engaged in carrying on business of live stock breeding, dairy farming and agricultural activities. assessee has stud farm. It had purchased and imported several horses from time to time with intention of breeding horses. horses were purchased for permanent user in business and not with purpose or intention of selling them. It would appear that assessee had mentioned in its balance sheet horses as coming under stock-in-trade. Thus for year ended 31st March, 1978, on assets side of balance sheet assessee showed Live Stock at cost of Rs. 3,31,673 as against corresponding figure of Rs. 2,18,633 as on 31st March, 1977. In its P&L A/c for that year, company took amount of Rs. 3,31,673 under head 'Closing Stock Live Stock. corresponding figure for earlier year being Rs. 2,18,633 it showed same as opening stock. During year three horses were purchased for Rs. 1,13,040. These two figures, opening and purchased together constituted Rs. 3,31,673 which was loss in P&L A/c for year ended 31st March, 1978 as live stock, closing stock at cost. P&L A/c showed receipts of Rs. 1,46,659 under head Milk, covering fees etc. Deducting therefrom sum of Rs. 1,42,082 on account of food, upkeeping of live stock, livery charges etc. gross profit of Rs. 4,577 was carried down for working out net profit for year. It would appear that during year, company changed accounting treatment in case of horses comprised in live stock and represented as stated above in P&L A/c and balance sheet. Earlier company had included cost of horses under head live stock and treated same as current assets. replenishment reserve at 30per cent of cost of horses was added in respective years. During year under appeal, assessee- company claimed to treat horses as fixed assets, depreciation being provided at 10per cent of their cost. cost of horses as on 1st April, 1978 amounting to Rs. 3,12,019 was transferred from current assets in balance sheet in head fixed assets constituting plant. company claimed depreciation at 10per cent on this item of fixed assets. During year, assessee-company purchased horses costing Rs. 18,000 which died during previous year itself. Since this horse also did not constitute stock in trade of assessee company, it claimed deduction under s. 32(1)(iii) and alternatively under s. 36(1)(vi). ITO rejected both claims. On appeal, CIT(A) rejected assessee s claim for depreciation on horses treated as plant. With regard to claim in respect of dead horse, he directed ITO to verify whether any amount has been realised after disposal of dead horse and to extent of difference between actual cost and amount realised and allow claim under s. 36(1)(vi). assessee had claimed common expenses for its businesses of agricultural activities, live stock and breeding activities totalling upto Rs. 79,048. assessee s claim was that these common expenses should be allocated between agricultural activities and live stock breeding in ratio of turnover for these two branches in ratio of turnover for these two branches of its activities. ITO however, allowed expenditure, proportionately on basis of gross profit. Out of overall claim made of Rs. 81,809, ITO thus allowed only Rs. 4,326 in live stock breeding part of business. assessee had claimed Rs. 44,802. CIT accepted claim of assessee. assessee has come up on appeal challenging decision of CIT(A) not granting depreciation on horses. Department has challenged CIT(A), order directing ITO to allow claim for deduction under s. 36(1)(vi) in respect of horses owned by assessee and also apportioning common expenditure between agricultural and non agricultural activities on basis of turnover rather than gross profit. ld. counsel for assessee has pointed out that business of assessee is running stud farm. animals were not purchased for resale but only for 'coverage and used in live stock breeding business. By mistake, assessee treated cost of horses purchased as livestock under head closing stock and at their cost. Since valuation was at cost, it did not really affect trading account of assessee but horses not meant for resale being brought under closing stock was clear mistake. In fact that this is so was clear from fact that assessee claimed no deduction initially as both left and right side of P&L A/c showed value of horses purchased. It was on realisation of this mistake that assessee claimed that horses purchased for live stock breeding should be treated as 'plant and depreciation granted on same. assessee in fact made it clear that progenies of horses were not to be treated as plant. As matter of fact, during this year there were no progenies. In support of its case, reliance is placed on English decision in case of Yarmouth vs. France (1889) 19 QBD 647 in which leading case horses were held to be plant. decision in case of Yarmouth has expounded further in Jarrod s case was approved by Supreme Court in case of CIT vs. Taj Mahal Hotel 1973 CTR (SC) 480: (1971) 82 ITR 44 (SC). Reference is also made to decision of Gujarat High Court in case of CIT vs. Elecon Engineering Co. Ltd. (1974) 96 ITR 672 (Guj), where scope of expression 'plant was clearly considered and held to include any article or object, fixed or movable, live or dead, used by businessmen for carrying on his business. Adverting to decision in case of Earl of Derby vs. Alimer (1915) 3 KB 374 in which case grant of depreciation on stallions was not allowed, it is pointed out that this decision rested on particular wordings of UK Act. Since horse purchased during year likewise did not constitute stock in trade of assessee itself it was eligible for deduction under s. 32(1)(iii) or alternatively under s. 36(1)(vi). Referring to question of common expenses, it is pointed out both on principle as well as common sense, bifurcation based on gross profit of two activities was incorrect. This would be clear, according ld. counsel, from very fact that difficulties would arise if there was gross loss under any head. Even when there was such loss, for carrying on that part of business activity, expenses have certainly to be incurred. Ultimately therefore, all expenses have actually to be related to gross revenue earned for which expenses have to be incurred. bifurcation therefore should be based only on gross revenue and not on gross profit. reallocation was done on scientific basis even if it involved change over in accounting, it constituted correcting as well as achieving refinement in proper allocation of common expenses. For Departmental, stress is laid on orders of authorities below. assessee itself had treated horses as stock-in-trade. cost of The assessee itself had treated horses as stock-in-trade. cost of horses had been passed to trading account from year to year. This would straight away negate claim for depreciation. There was no question of animals being treated as plant even otherwise. Even though Gujarat High Court decision based on other decisions have laid down that word "plant" should be given wide connotation, that decision indicated that it would depend on particular facts of case. Neither Supreme Court, nor any of High Courts have specifically observe that horse is plant. In fact, decision in London and Eastern Countries Loan and Discount Co. vs. Creasey 5 Tax Cases 383 referred to by CIT(A) clearly holds different view. Stress is laid in this context on provisions of s. 36(1)(vi) which specifically deals with animals which have been used for purpose of business or profession otherwise than stock in trade and have died or become permanently useless for such purposes. This, clearly indicated that legislature intended that in respect of animals not treated as stock in trade difference between actual cost and realisation on disposal of dead would only be deductible. Sec. 36(1)(vi) in present case however, would not apply, since assessee has treated horses stock-in-trade in books of account. On question of allowance of Rs. 18,000 for dead horse, no such deduction is admissible since horse constituted stock-in-trade. apportionment of common expenses on basis of overall turnover is also objected to. Support for this is sought from fact that in some of cases, actual expenses incurred for particular part of business can itself be found out. facts lie in small compass. assessee has business of live stock breeding. For this purpose, it purchases and imports horses. These horses it keeps for 'coverage . horses are not sold. During year under appeal, there were no progenies from these horses. question therefore of selling of progeny also did not arise. On basis of above factual position, assessee claimed that horses constitute is permanent assets by making use o f which it carried on business. By mistake cost of horses were treated as part of livestock stock in trade. But since valuation was at cost there being entries on both sides of profit and loss account no excess or deficit in value of horses came to be included in P&L A/c. In came to be included in P&L A/c. In other words, even though horses utilised as base apparatus for live stock breeding were shown under head stock-in- trade as matter of fact, they did not in any way, affect financial statement as they would have done if they were really treated as stock in trade. This may be by accident but result is same During year under appeal, assessee thought that method of entering adopted for value of horses in statement was incorrect. horses being capital and fixed assets and means of its earning income, assessee treated them as plant and claimed depreciation at 10per cent. This is field of controversy before us. In our view, mere fact that some entries were made under head closing stock, should not deprive assessee of benefit of depreciation if it was otherwise entitled to it. mistake can always be corrected. In present case no advantage had also been gained on account of above mistake. If therefore we come to conclusion on factual basis that horses could be treated as plant. It would be proper to so treat them and grant assessee claimed depreciation. In respect of horses as in case of other assets, they become only basic material with help of which income is earned. One method of arriving at correct annual profit would be debit P&L A/c with cost of horses every time year purchased. Any recovery on sale of horses after their use is exhausted could be treated as profit to be credited to P&L A/c. This would be correct method. But assessee has not adopted same. amounts spent for horses and lost on account of their depreciation or death certainly has to find place in P&L a/c and computation of profit. other method of doing this is to find out whether horses constitute in these circumstances 'plant entitled to depreciation. reference made by CIT(A) and ld. Departmental Representative to s. 36(1)(vi) in this connection is noteworthy. s. 36(1)(vi) provides that where animals are used in business and die or become useless, difference between cost of animals and realisation from corpse when dead etc. can be treated as expenditure allowed. This is only refinement over first method noted above. fact that statute deals with this method cannot, in our opinion, rule out as CIT(A) has pointed out any other method of taking into account deterioration of fixed asset like horses in computing profit. deterioration of fixed asset like horses in computing profit. direct decision in Yarmouth vs. France, (supra) holds horses to be plant. Even though in cases of London and Eastern Countries Loan and Discount Co. vs. Creasey 5 Tax Cases 383 and Earl of Derby vs. Ailmer (1915) 3 (KB) 374 stallions used serve mares were not head to be plant. This should be under stood as obtaining under particular wording of statute. On contrary, Gujarat High Court in case of Elecon Engg. Co. Ltd. (supra) has gone in detail into nature of word 'plant . Its meaning is to be held to be word of vide import. enquiry which is to be made in this connection is noted by their Lordships in that case as to what operation apparatus in question performs in assessee s business. case of Jayasinghrao Piraji Rao Ghatge vs. CIT (1962) 46 ITR 1160 (Bom) defined primary meaning of word 'plant as machinery, apparatus, fixtures, etc. employed in carrying on business or trade or mechanical or other industrial business. For its wider meaning it should represent capital investment in trade or business. Courts have held cases of building R.C. Chemical Industries vs. CIT (1981) 25 CTR (Del) 244: (1982) 134 ITR 330 (Del); Fencing around oil refinery CIT vs. Caltex Oil Refining (I) Ltd. (1976) 102 ITR 260 (Bom); Technical know-how CIT vs. Festa Elgi Pvt. Ltd. (1981) 129 ITR 499 (Mad); CIT vs. Vac Met Corpn. Ltd. (1978) 115 ITR 550 (Guj), CIT vs. Emco Electro P. Ltd. (1979) 12 CTR (Bom) 237; CIT vs. McGaw Ravindra Laboratories (India) Ltd. (1981) 132 ITR 401 (Guj); Books Catalysts & Chemical India (West Asia) Ltd. vs. CIT (1982) 31 CTR (Ker) 274: (1982) 137 ITR 110 (Ker); Concrete structed Addl. CIT vs. Madras Cements Ltd. 1977 CTR (Mad) 513: (1977) 110 ITR 281 (Mad); Well CIT vs. Warner Hindustan Ltd. (1979) 117 ITR 15 (AP); Cables for distribution of electricity CIT vs. Indian Turpentine and Rosin Co. Ltd. (1970) 75 ITR 533 (All); Sanitary and Pipeline Fittings CIT vs. Taj Mahal Hotel 1973 CTR (SC) 480: (1971) 82 ITR 44 (SC); Safe Deposit Vault CIT vs. Union Bank of India Ltd. (1976) 102 ITR 270 (Bom); Air-conditioning Equipment CIT vs. Central Bank of India Ltd. (1976) 103 ITR 196 (Bom); and Cold Storage CIT vs. Kanodia Cold Storage (1975) 100 ITR 155 (All) and CIT vs. Yamuna Cold Storage (1981) 23 CTR (P&H) 15: (1981) 129 ITR 728 (P&H) as plant entitled to depreciation on that basis. In case of Ambala Bus Syndicate Ltd. vs. CIT (1963) 49 ITR 480 (P&H) Punjab and Haryana High Court held that even though 'plant includes vehicles, part of vehicle such as body of vehicle would not come within definition. In some cases, however e.g. CIT vs. Kahodia Warehousing Corpn. (1980) 121 ITR 996 (All) ware-house; Jayasing Rao Piraji Rao Ghatge vs. CIT (1962) 46 ITR 1160 (Bom) Water Storage Tank and in case of CIT vs. Bank of India Ltd. (1979) 8 CTR (Bom) 230: (1979) 118 ITR 809 (Bom) electrical installations, assets were not treated as plant. Taking overall view of decided cases, what is normally utilised as apparatus or base which is itself not stock in trade but which could be utilised as basic item with which profits can be earned, has been regarded as plant. Our popular conception as to what these would look like or do not prejudice issue so long as they are utilised as basic asset without selling which and by working of which or with help of which other trading or business activities are carried on and income earned. Applying these decisions even though horse could be stock in trade in certain circumstances, could be personal affect or some other capacity in other circumstances, in present case where it is used only as medium for procreation of horses and live stock breeding, it could very well be understood as plant. As matter of fact, therefore, assessee s stand in this regard has to be accepted. If therefore, assessee has not been granted deduction of value of horses purchased from time to time in year when they are purchased with prices debited to P&L A/c, it is clearly entitled to treat value of horses as plant and claim depreciation on that basis. assessee s appeal on this point is allowed. As regards claim of Rs. 18,000 on account of death of horse purchased during year irrespective of what is stated earlier, assessee would be entitled to benefit of s. 36(1)(v). fact that if this horse has continued living in succeeding year on basis of being treated as plant, depreciation would be granted, would not disentitle assessee to relief under s. 36(1)(vi), in so far as there is no restriction on such grant noted in this section. sum of Rs. 1,18,000 is, therefore, to be allowed as deduction. ITO could however, check up whether in respect of this horse any corpse value is realised, if so, that has to be deducted from above of Rs. 18,000. On last question of apportionment of common expenses between agricultural and non-agricultural businesses, we have no hesitation in accepting agricultural and non-agricultural businesses, we have no hesitation in accepting assessee s claim. If as matter of fact, actual expenditure out of common expenditure pertaining to each of businesses could be worked out adopting that figure would be most correct method of allocation. In absence of these details rough and ready method of apportioning would be on basis of turnover in different businesses. We find that apportionment expenditure on basis of gross profit is positively incorrect since there are several variables applicability of which is to be considered in working out this computation. assessee s claim is accepted on this point also. assessee s appeal is allowed and Departmental appeal is dismissed. *** RUIA STUD & AGRICULTURAL FARMS (P) LTD. v. INCOME TAX OFFICER