TMI Blog1964 (4) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... ner and transport operator at Vel- lore, North Arcot District. He had a fleet of buses, and during the year of account ending with March 31, 1950 (relevant to assessment year 1950-51) he replaced the petrol engines in two of his buses (MDJ 583 and MDJ 723) by new Diesel engines, incurring an expenditure of ₹ 18,544/in this connection. Before the Income Tax Officer, apart from claiming normal depreciation under the first Paragraph of cl. (vi) of s. 10(2), he also claimed depreciation under the second paragraph of cl. (vi) and cl. (via) of the Indian Income Tax Act, 1922. The Income Tax Officer only allowed 25 per cent depreciation under the first paragraph of cl. (vi). The assessee appealed unsuccessfully to the Appellate Assistant Commissioner on this point. There were other points involved in the appeal but as we are not concerned with them in this appeal, they are not being mentioned. On further appeal, the Appellate Tribunal held that the assessee is not entitled to extra depreciation under s. 10(2) (vi) or s. 10(2)(via) because however important the engine might be for running of a motor, it is after all part of an equipment and it cannot by itself become machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof as may in any case or class of cases be prescribed; and where the buildings have been newly erected, or the machinery or plant being new has been installed, after the 31st day of March, 1945, a further sum (which shall however not be deductible in determining the written down value for the purposes of this clause) in respect of the year of erection or installation equivalent,- (a) in the case of buildings the erection of which is begun and completed between the 1st day of April 1946 and the 31st day of March 1952 (both dates inclusive), to fifteen per cent of the cost thereof to the assessee; (b) in the case of other buildings, to ten per cent of the cost thereof to the assessee; (c) in the case of machinery or plant, to twenty per cent of the cost thereof to the assessee: Provided that- (via) in respect of depreciation of buildings newly erected, or of machinery or plant being new which has been installed, after the 31st day of March, 1948, a further sum (which shall be deductible in determining the written down value) equal to the amount admissible under clause (vi) (exclusive of the extra allowance for double or multiple shift working of the machinery or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Chairman, Cossipore and Chitpore Municipality(3); (c) Machinery does not cease to be machinery merely because it has to be used in conjunction with one or more machines. Nor does it cease to be machinery merely because it is, for instance, installed as part of a manufacturing or industrial plant; (d) The statutory provision for depreciation is in the alternative. Whether it is plant or whether it is machinery without its being itself a plant, the assessee is entitled to claim the statutory allowance for depreciation. The question then is: Which is the correct view? First, the history of para two of cl. (vi) may be noticed. The object of the Income Tax (Amendment) Act, 1946 (VIII of 1946), which first inserted the provisions regarding extra depreciation, was to encourage the modernisation and re- habilitation of industry and trade. The Second World War (1961) 41 I.T.R. 518. (2) (1960) 38 I.T.R. 413. (3) (1922) I.L.R. 49Cal. 190. had ended recently and during the long war machinery and plant had not only not been replaced or modernised but had been subjected to excessive wear and tear and needed rehabilitation. During the War, there had also been great,,, -advance in tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and not that because it has not been installed it has ceased to be machinery. Suppose a new machinery is purchased but not installed, it would not qualify for extra depreciation on the ground that it has not been installed and not because it has ceased to be machinery due to its non-installation. The fact that the rate of depreciation is provided for in the Act has also no bearing on the question of the construction of the word 'machinery'. This fact only indicates that the legislature had made up its mind as to the extent of encouragement to be given to industry and, therefore, it did not consider it necessary to delegate this to the rule-making authority. The definition of the word 'plant' in s. 10(5) equally does not throw any light on the meaning of the word 'machinery'. The word 'plant' is of wide import, but even so it may be argued that vehicles, books, scientific apparatus and surgical equipment are not 'plant' in all businesses, pro- fessions and vocations. The legislature settled this possible controversy, but without throwing any light on the true meaning of the word 'machinery'. What then is the test for determining w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Saraspur Mills Ltd.(1) the expression 'installed' did not necessarily mean 'fixed in position' but was also used in the sense of 'inducted or introduced'-, or to use the language of the Madras High Court in the case of Commissioner of Income Tax, Madras v. Sri Ram Vilas Services (Pvt) Ltd.(2), installed would certainly mean 'to place an apparatus in position for service or use'. We are of the opinion that when an engine is fixed in a vehicle it is installed within the meaning of the expression in cls. (vi) and (via). Accordingly, we hold that the High Court was correct in answering the question referred to it in the affirmative. The appeal, therefore fails and is dismissed with costs. SHAH, J.- I am unable to hold that the respondent is entitled to the allowance under s. 10(2)(vi) paragraph 2, in respect of the diesel engines claimed by him. Section 10 of the Indian Income-tax Act provides that tax shall be payable on the profits and gains of an assessee under the head 'profits and gain of business, profession or vocation . By sub-s. (2) in the computation of taxable pro- fits certain allowances prescribed therein are permissible. We are pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been newly erected or the machinery or plant being new has been installed after March 31, 1945, is allowable. Use of the definite article the in the second paragraph indicates that the buildings, machinery or plant referred to in that paragraph must also be used for the purpose of the business, profession or vocation of the assessee. However to qualify for the initial allowance under paragraph two, the buildings must be newly erected or the machinery or plant being new must have been installed, after March 31, 1945. Two rival views are pressed upon us in support of the respective cases of the Commissioner and the assessee as to the meaning of the second paragraph. The Commissioner contends that the buildings, machinery or plant for which the initial allowance is admissible must be a self-contained unit capable of being put to use in the business, profession or vocation for the benefit of which it is erected or installed. It is submitted that the second paragraph of cl. (vi) was en- acted with the object of giving a fillip to industry which had been starved during the war years of new machinery and building activity. But the buildings, machinery, or plant to qualify for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewhat difficult to define. The Judicial Committee in Corporation of Calcutta v. Cossipore and Chitpore Municipality(1) when it was called upon to consider whether a tank supported on (1) L. R. 48 I.A. 435. columns, and which could be filled by pumping from a re- servoir belonging to the Corporation could be regarded as machinery within the meaning of the Bengal Municipal Act, 1884, observed at p. 445: If their Lordships were obliged to run the hazard of the attempt (to define machinery) they would be inclined to say that the word 'machinery' when used in ordinary language, prima facie means some mechanical contrivances which, by themselves or in combination with one or more other mechanical contrivance, by the combined movement and inter-dependent operation of their respective parts generate power, or evoke, modify, apply or direct natural forces with the object in each case of effecting so definite and specific a result. But we are not called upon in this case to decide whether a diesel engine is in the abstract machinery: the question is whether a diesel engine, which is used for replacing a pet- rol engine, in a vehicle used by a transport operator for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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