Commissioner of Income Tax vs Chandra Litho Press

Ramanujam, J.—The following two questions have been referred to this court for its opinion by the Income Tax Appellate Tribunal at the

instance of the Revenue :

(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to depreciation at

10% in respect of offset machinery used in its business ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal''s view that any machinery which runs on electricity would constitute

''other electrical machinery'' found in item III(iii) E-3(b) of column I, Part I of Appendix I to the Income Tax Rules, 1962, is sustainable in law ?

From the questions referred to above, it will be clear that the dispute between the parties is as to whether the offset machinery which runs on

electricity, used by the assessee in the course of its business, would constitute ""other electrical machinery"" occurring in item III(iii) E-3(b) of column

I, Part I of Appendix I to the Income Tax Rules, 1962, so as to enable the assessee to claim depreciation at the rate of 10%. The Income Tax

Officer has proceeded on the basis'' that since the offset machinery cannot generate electricity, it will not fall within the expression ""other electrical

machinery"" and, therefore, the assessee is not entitled to claim depreciation at 10%, while the assessee''s claim was that since the use of the offset

machinery cannot be had without the use of electricity, it should be taken to fall within the expression"" other electrical machinery"". The Tribunal

agreed with the contention of the assessee that since the use of the offset machinery cannot be had except with the use of electricity, it should be

taken to fall within the expression ""other electrical machinery"". The question is whether the view taken by the Tribunal in this case could be

accepted as tenable. This view taken by the Tribunal was the subject matter of a batch of tax cases before this court in Commissioner of Income

Tax, Tamil Nadu-IV Vs. M.S. Sahadevan, and this court has disagreed with the view taken by the Tribunal. As a matter of fact, in that case this

court did not accept either the contention of the Revenue or the contention of the assessee, but has chosen to take the view that the nature of the

machinery should decide as to whether it falls within ""other electrical machinery"" or not. The learned judges have expressed the view thus (p. 824) :

In our opinion, the correct way in which the entry is to be understood lies in between these two extremes. Wherever the machinery is such that in-

built into it is the electric motor, then it would be electrical machinery. For instance, taking a mono-bloc, it is possible to have a motor pump

separately and an electric motor separately. In such a case, it would not be electrical machinery. But the mono-bloc is worked electrically because

it cannot be operated except with the aid of electricity, as the electric motor is in-built into it. Other examples may also be thought of. Therefore,

the nature of the enquiry in order to find out whether it is electrical machinery or not is to investigate whether the electric motor is in-built into the

machinery and whether it forms vital and inseparable part and parcel of the machinery. The fact that electrical devices are put into the machinery

would not by itself determine the character of the machinery. The electrical devices would only be for the purpose of allowing electricity to pass

through the particular item to produce the desired results. Such machinery cannot be taken to be electrical machinery. However, where the

machinery itself is a single unit with the electric motor forming a vital and inseparable part of it, then the machinery would be electrical machinery.

Thus, the court has taken the view that the fact that the machinery cannot be used without electricity cannot make the machinery"" electrical

machinery"", that the fact that the machinery itself did not generate the motive power may not take it out of ""electrical machinery"" and that whenever

the machinery is such that in-built into it is the electrical motor, then it would be electrical machinery.

In this case, as there has been no investigation on the lines suggested by this court in the above case for the purpose of determining whether the

offset machinery in question falls within the entry ""other electrical machinery"", the questions have to be returned unanswered with a direction to the

Tribunal to get necessary materials from the assessee and proceed to decide the question de novo in the light of what is indicated in the judgment

rendered in the above case and decide the question as to whether the offset machinery used by the assessee in his business falls within the entry

other electrical machinery"" so as to enable him to claim depreciation at 10%. There will be no order as to costs.