1985 (1) TMI 10 - HC - Income Tax

Summary

Issues:
1. Interpretation of whether offset machinery running on electricity qualifies as "other electrical machinery" for depreciation at 10%.
2. Determining the criteria for classifying machinery as "electrical machinery" based on the presence of an in-built electric motor.

Analysis:
The High Court of Madras was presented with two questions by the Income-tax Appellate Tribunal regarding the eligibility of an assessee to claim depreciation at 10% for offset machinery running on electricity. The primary dispute revolved around whether such machinery could be categorized as "other electrical machinery" under the Income-tax Rules. The Income-tax Officer contended that since the offset machinery did not generate electricity, it did not fall under the classification of "other electrical machinery." However, the assessee argued that as the machinery relied on electricity for operation, it should be considered as such. The Tribunal sided with the assessee, leading to the current legal scrutiny. The court referenced a prior case, CIT v M. S. Sahadevan, where it was established that the presence of an in-built electric motor was crucial in determining whether machinery qualified as "electrical machinery." The court emphasized that the machinery's ability to function solely with electricity and the integral nature of the electric motor were key considerations. It was clarified that the mere reliance on electricity for operation did not automatically classify machinery as "electrical machinery." Instead, the machinery's design and the presence of an in-built electric motor were decisive factors.

Given the lack of a thorough investigation into whether the offset machinery in question met the criteria outlined in the previous case, the court directed the Tribunal to gather necessary evidence from the assessee. The Tribunal was instructed to reevaluate the classification of the offset machinery as "other electrical machinery" based on the principles elucidated in the earlier judgment. The court ordered a fresh assessment to determine whether the machinery qualified for depreciation at the rate of 10%. No costs were awarded in this matter.