1965 (3) TMI 94 - HC - Income Tax

Summary

Issues:
Interpretation of Rule 8 of the Indian Income Tax Rules, 1922 regarding depreciation entitlement at 10% for an electric supply corporation.

Analysis:
The judgment revolves around the interpretation of Rule 8 of the Indian Income Tax Rules, 1922, specifically regarding the entitlement to depreciation at 10% for an electric supply corporation. The Income Tax Officer and the Tribunal initially allowed the depreciation at 10%, considering it to fall under rule 8-III(3)E, which pertains to electric supply undertakings. However, the Appellate Assistant Commissioner held that the depreciation should only be at 5% under rule 8-III(3)(C)(v), which relates to electrical machinery - overhead cables and wires. The Tribunal, in its opinion, found validity in the contention that as an electric supply undertaking, clause E should apply, including overhead cables and wires under electric plant and machinery.

The Tribunal correctly interpreted the scope of clause E, including overhead cables and wires as part of electric plant and machinery. Rule 8 allows for depreciation of machinery and plant at certain percentages of the written down value or original cost. Clause E relates to electric supply undertakings, encompassing electric plant, machinery, and boilers. The Tribunal's decision aligns with the comprehensive sense in which the expression "electric plant, machinery, boilers" in clause E is used, indicating an inclusive approach that covers various parts of the plant and machinery without specific exclusions.

The department contended that machinery in clause E does not include overhead cables and wires, advocating for the application of sub-clause (v) of clause C instead. However, the Tribunal's interpretation, considering the nature of an exception to clause C for electric supply undertakings, supports the inclusion of overhead cables and wires under clause E. The judgment concludes that the Tribunal was correct in allowing 10% depreciation, overturning the Appellate Assistant Commissioner's decision, and ruling in favor of the assessee against the department. The reference was answered in favor of the assessee, with counsel's fee awarded.