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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 ..... ch 31, 1950 (relevant to assessment year (1950-51), he replaced the petrol engines in two of his buses (MDJ 583 and MDJ 723) by new diesel engines, incurring an expenditure of Rs. 18,544 in this connection. Before the Income-tax Officer, apart from claiming normal depreciation under the first paragraph of clause (vi) of section 10(2), he also claimed depreciation 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 installati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewly erected, or the machinery or plant being new has been installed, after the 31st day of March, 1945, a further sum (which shall however not be deductible in determining the written down value for the purposes of this clause) in respect of the year of erection or installation equivalent,-- (a) in the case of buildings the erection of which is begun and completed between 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in conjunction with one or more machines. Nor does it cease to be machinery merely because it is, for instance, installed as part of a manufacturing or industrial plant; (d) The statutory provision for depreciation is in the alternative. Whether it is plant or whether it is machinery without its being itself a plant, the assessee is entitled to claim the statutory allowance for depreciation. 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 " i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ualify for extra depreciation on the ground that it has not been installed and not because it has ceased to be machinery due to its non-installation. The fact that the rate of depreciation is provided for in the Act has also no bearing on the question of the construction of the word " machinery ". This fact only indicates that the legislature had made up its mind as to the extent of encouragement 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. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax v. Sri Rama Vilas Service (Private) Ltd. "installed" would certainly mean "to place an apparatus in position for service or use ". We are of the opinion that when an engine is fixed in a vehicle it is installed within the meaning of the expression in clauses (vi) and (via). Accordingly, we hold that the High Court was correct in answering the question referred to it in the affirmative. 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 provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business, profession or vocation of the assessee. However, to qualify for the initial allowance under paragraph two, the buildings must be newly erected or the machinery or plant being new must have been installed after March 31, 1945. The rival views are pressed upon us in support of the respective cases of the Commissioner and the assessee as to the meaning of the second paragraph. The Commissioner 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e regarded as machinery within the meaning of the Bengal Municipal Act, 1884, observed at page 445 : " If their Lordships were obliged to run the hazard of the attempt (to define 'machinery') they would be inclined to say that 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 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 articl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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