1967 (7) TMI 43 - HC - Income Tax

Assessee-company installed new bodies on the old chassis of its tram cars which it plies in the City of Calcutta - held that new tram-car bodies installed on old chassis were machinery or plant by themselves and accordingly additional depreciation and development rebate were allowable in respect thereof u/s 10(2)(via) and 10(2)(vib)

Summary

Issues: Interpretation of the term "machinery or plant" under section 10(2)(via) and 10(2)(vib) of the Income-tax Act, 1922 for allowance of additional depreciation and development rebate.

In this judgment by the High Court of Calcutta, the issue revolved around whether new tram-car bodies installed on old chassis could be considered as machinery or plant by themselves, making them eligible for additional depreciation and development rebate under section 10(2)(via) and 10(2)(vib) of the Income-tax Act, 1922. The Calcutta Tramways Company Limited had claimed additional depreciation and development rebate for installing new bodies on old tram car chassis. The Income-tax Officer initially disallowed these claims, but the Appellate Assistant Commissioner allowed the claim for additional depreciation while disallowing the claim for development rebate. Both the assessee and the department appealed to the Tribunal, which relied on the decision of the Madras High Court and allowed both claims. The Commissioner contended that the new bodies could not be considered as machinery or plant, citing a Supreme Court decision and the definition of plant in the Act. Conversely, the assessee argued that since normal depreciation was allowed under section 10(2)(vi) for the bodies, they should also be eligible for additional depreciation and development rebate under section 10(2)(via) and 10(2)(vib) respectively.

The judgment analyzed the definition of plant under section 10(5) of the Act, which includes vehicles, and rule 8(3) of the Income-tax Rules providing for special rates of depreciation for machinery and plant. The assessee's counsel highlighted that as the assessee was entitled to normal depreciation on the bodies under section 10(2)(vi), they should also qualify for additional depreciation and development rebate. The court agreed with the assessee's argument, emphasizing that the bodies could be considered as machinery or plant, making them eligible for the additional benefits. The judgment concluded by answering the question in the affirmative in favor of the assessee, thereby allowing the claims for additional depreciation and development rebate on the new tram-car bodies installed on old chassis.

Overall, the judgment clarified the interpretation of the term "machinery or plant" under the relevant sections of the Income-tax Act, 1922, and ruled in favor of the assessee, affirming their entitlement to additional depreciation and development rebate for the new tram-car bodies.