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TMI Blog1964 (4) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... under the second paragraph of clause (vi) and clause (via) of the Indian Income-tax Act, 1922. The Income-tax Officer only allowed 25% depreciation under the first paragraph of clause (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 section 10(2)(vi) or section 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" for the purpose of claiming extra depreciation, as envisaged in these sub-sections. We have to hold that the installation of the new engines is only a capital addition; for the above reasons the assessee was rightly refused the extra depreciation he claims." The Income-tax Appellate Tribunal, on the application of the assessee, referred the following question to the High Court : " Whether extra depreciation is admissible under the provisions of section 10(2)(via) of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 : . . . ; (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 plant and the initial depreciation allowance admissible under that clause for the first year of erection of the building or the installation of the machinery or plant) in the assessments for each of the five years commencing on the 1st day of April, 1949, and ending with the 31st day of March, 1954 : Provided that where, in respect of such machinery or plant, the assessee establishes that the market value of similar machinery or plant on the 31st day of March, 1953, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation. The question then is : Which is the correct view ? First, the history of paragraph two of clause (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 rehabilitation of industry and trade. The Second World War 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 technology. It is then pertinent to point out that the word " machinery " occurs in clauses (iv), (v), (vi) and (via) of section 10(2). Prima facie, the same meaning must be given to the word " machinery " in all these clauses. If a machine is machinery for purposes of giving an allowance in respect of insurance or for repairs or in respect of normal depreciation or for the purpose of paragraph one of clause (vi), it must also be machinery for the purpose of the second paragraph of clause (vi) and clause (via). But it is said that the scheme of paragraph two of clause (vi) and clause (via) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gement 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 section 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, professions 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 whether a mechanical contrivance is machinery for the purposes of the second paragraph of clause (vi) and clause (via) ? The Privy Council in the case of Corporation of Calcutta v. Chairman, Cossipore and Chitpore Municipality hazarded the following definition of " machinery " " 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 contrivances, by the combined movement and inter-dependent operation of their respective parts generate power, or evoke, mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 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 section 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 bead " Profits and gains of business, profession or vocation ". By sub-section (2) in the computation of taxable profits certain allowances prescribed therein are permissible. We are primarily concerned in this appeal with the initial allowance permissible under the second paragraph of clause (vi) of sub-section (2). But clauses (iv) , (v), (vi), (via) and (vii) are inter-related and it may be necessary briefly to refer to those provisions. By clause (vi) allowance for premium paid in respect of insurance against risk of damage or destruction of buildings, machinery, plant, furniture, stocks or stores, used for the purposes of the business, profession or vocation is admissible. Under clause (v) an amount paid on account of any current repairs to such buildings, machinery, plant or furniture is an admissible allowance. Clause (vi) rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contends that the building, 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 clause (vi) was enacted 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 the initial allowance, were not intended to be in the nature of replacement, addition or repair to existing units : they had to be buildings newly erected or machinery or plant being new installed. On behalf of the assessee it was contended that the legislature has not put any restriction of the nature suggested on behalf of the Commissioner and, therefore, any building or a part thereof newly erected or any new machinery or plant or a part thereof installed, qualified for the benefit of the initial allowance. The question to be decided is one about the intention of the legislature. Can it be said that when to an existing building a room or even a floor is added that the additional construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vances, by the combined movement and interdependent 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 petrol engine, in a vehicle used by a transport operator for the purpose of his business is machinery installed within the meaning of section 10(2)(vi), paragraph 2. Whether " machinery " is some contrivance for supplying motive power to another contrivance which directly produces an article or is a mechanical contrivance which produces or assists in the production of an article, it would be difficult to regard introduction of a mere part, which has no independent use in the business conducted by the assessee, as machinery installed for the purpose of the second paragraph of clause (vi). The legislature has provided for the normal depreciation by paragraph 1 of clause (vi) and in respect of newly installed machinery it has provided for the initial allowance, the object being to in ..... 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