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TMI Blog1962 (9) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting or previous year; thus it made the profit of ₹ 5,991 on the very first day of the previous year relevant to the assessment year 1947-48. It closed its business on April 7, 1946. Under section 10(1) of the Income-tax Act, an assessee has to pay tax under the head Profits and gains of business, profession or vocation in respect of the profits and gains of any business, etc., carried on by him. Under sub-section (2)(vii) such profits or gains are to be computed after making an allowance in respect of any such building, machinery or plant which has been sold or............the amount by which the written down value thereof exceeds the amount for which the building, machinery or plant............is actually sold... . This is subject to several provisos, proviso (2) being: ...where the amount for which any such building, machinery or plant is sold exceeds the written down value, so much of the excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profits of the previous year in which the sale took place. This was the proviso as it stood in the assessment year; it was amended in 1949, and the words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants. Section 10(2)(vi) allows allowances to be made for the amount of any premium paid in respect of insurance against risk........of buildings, machinery, plant, furniture, stocks or stores, used for the purposes of the business, profession or vocation . Section 10(2)(v) provides for an allowance to be made on account of the amount paid in respect of current repairs to such buildings, machinery, plant or furniture ; the word such means that this provision is to apply when current repairs are made to buildings, machinery, plant or furniture used for the purposes of the business, profession or vocation . Such means the buildings, machinery, plant or furniture referred to just before, and the buildings, machinery, plant or furniture referred to just before are the buildings, machinery, etc., used for the purposes of the business, profession or vocation referred to in the immediately preceding provision of section 10(2)(iv). Next comes the provision for allowance on account of depreciation of such buildings, machinery, plant or furniture ; again, the reference is to depreciation of the buildings, machinery, etc., used for the purposes of the business, profession or vocation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in section 10(2)(iv). In this interpretation I am supported by Commissioner of Income-tax v. Dalmia Cement Ltd. [1945] 13 I.T.R. 415, where Fazl Ali C.J. said: Sub-clause (vi) is obviously to be read with sub-clause (iv) as the words 'buildings, machinery, plant or furniture' are preceded by the word 'such'. When these two clauses are read together it becomes apparent that the words 'such buildings, machinery', etc., mean 'building, machinery' etc., used for the purposes of the 'business, profession or vocation.' In Rohtak and Hissar District Electricity Supply Co. Ltd. v. Commissioner of Income-tax [1962] 45 I.T.R. 539 Capoor and Grover JJ. accepted the contention that such plant, machinery or building used in section 10(2)(vii) must be restricted to plant, machinery or building used for the purpose of business, profession or vocation. It is for this reason that the question arises whether the trucks, which are undoubtedly plant as defined in section 10(5), were used for the purpose of the business (viz., that of plying motor trucks and lorries on hire) in the previous year. The assessee's business consists of plying truc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any person using any net for catching salmon is liable to penalty. R went with X in a river where salmon was usually caught, got out of his boat and walked along the bank of the river looking for salmon. The net was in the boat for the purpose of being put into the water when a salmon was seen near the surface; though it had not been put into the water, R was held to be guilty of using it for catching salmon: Moses v. Raywood [1911] 2 K.B. 271. As the net was ready with him in the boat, it was used for the purpose of catching salmon. In Counsel of the City of Newcastle v. Royal Newcastle Hospital [1958-59] 100 Commonwealth Law Reports 1, land though not put in active use was held by the Privy Council to be used; a tuberculosis hospital had acquired and kept it vacant in order to keep the hospital free from buildings in the immediate vicinity and to keep the surrounding air pure and clean, and this passive use of the land was held to be use of the land for the hospital. All these cases show that the statement that an article was in use at a particular time does not require that it was actively employed during the time in producing the result for which it was meant. Once it is acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... few hours before their sale and they were not put out of use, the sale must be held to be sale of plant used for the purposes of the assessee's business. The words used for the purposes of the business came in for discussion before the Supreme Court in Liquidators of Pursa Ltd. v. Commissioner of Income-tax [1954] 25 I.T.R. 265; [1954] S.C.R. 767 and Das J. observed at page 272: The word 'used' has been read in some of the pool cases in a wide sense so as to include a passive as well as active user. It is not necessary, for the purposes of the present appeal, to express any opinion on that point on which the High Courts have expressed different views. It is, however, clear that in order to attract the operation of clauses (v), (vi) and (vii) the machinery and plant must be such as were used, in whatever sense that word is taken, at least for a part of the accounting year. If the machinery and plant have not at all been used at any time during the accounting year no allowance can be claimed under clause (vii) in respect of them and the second proviso also does not come into operation. The Supreme Court thus left the question, what is meant by used , open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g his factory in good working order, and that involves the user of the factory and the machinery. Bhikaji Venkatesh v. Commissioner of Income-tax(1) was a similar case and Staples and Niyogi, Assistant Judicial Commissioner, held that the assessee's ginning factory which was not worked at all during the year was not used by him during the year even though he received his share in the profits of the pool. There was no evidence in that case of any covenant by which the assessee was required to maintain the machinery in reserve ready for actual use during the year of assessment and on this ground Beaumont C.J. distinguished it. With great respect I am unable to agree with the learned Assistant Judicial Commissioner's statement that the plain meaning of the word used is actually used and not capable of being used or generally used . I have pointed out how one speaks popularly of having an article in one's use even though it is not actively employed for the purpose for which it is meant. One does speak of having in one's use books or clothes even though one is not actually reading them or wearing them. One does speak of railway trains as being in use even tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such as was used for the purposes of the business for at least a part of the accounting year and that if it was not used at any time during the accounting year, no allowance can be claimed. Ramaswami and Ahmad JJ., held that the machinery was not used at any time during the accounting year because the assessee did not carry on the business at any time in the accounting year. When the business itself was not carried on there was no question of the machinery being used for the purposes of the business. It was not used, not only actively but also passively. In the present case the assessee did not discontinue its business before the sale of the trucks. Capoor and Grover JJ. laid down in Rohtak and Hissar Districts Electricity Supply Co. Ltd. v. Commissioner of Income-tax [1962] 45 I.T.R. 539 : In order to attract the operation of clauses (v), (vi) and (vii) of section 10(2) the machinery and plant must be such as were used, in whatever sense that word is taken, at least for a part of the accounting year , relying on the case of Liquidators of Pursa Ltd. v. Commissioner of Income-tax [1954] 25 I.T.R. 265; [1954] S.C.R. 767. The facts of the case are distinguishable from those ..... X X X X Extracts X X X X X X X X Extracts X X X X
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