Commissioner of Income Tax vs Saraswati Industrial Syndicate Ltd.

S.P. Goyal, J.—This judgment will dispose of four references, ITR Nos. 98, 99, 100 and 130 of 1976 as they are between the same parties and involve common questions of law.

The assessee, a public limited company, is engaged in the manufacture of sugar and machinery for sugar mills, cement factories, etc. The assessee claimed depreciation at the rate of 15 per cent. u/s 32(1)(ii) of the I.T. Act in respect of the written down value of certain machinery on the plea that during its use it comes into contact with corrosive chemicals as contemplated in item (7), Clause B, entry (ii) of Para. III of Pt. I of App. I to the I.T. Rules, 1962. The ITO as well as the AAC allowed depreciation at the rate of 10 per cent. instead of 15 per cent. under entry (i), Para. III. Pt. I of App. 1 to the Rules. The Appellate Tribunal, however, disagreed with the view of the lower authorities and allowed depreciation of 15 per cent. on the ground that the expression "corrosive chemicals" covered not only free chemicals but also non-free chemicals provided they were corrosive in effect so far as metals were concerned.

In the four assessment years, the subject-matter of these references, the assessee also claimed various amounts as guest-house expenses. Questions Nos. 1 and 2 in ITR Nos. 98 and 99 relate to these expenses. So far as these two questions are concerned, learned counsel for the parties are agreed that they have to be answered in the affirmative, that is, against the revenue and in favour of the assessee in view of our judgment in ITR Nos. 50 to 52 of 1976 ( Saraswati Industrial Syndicate Ltd. Vs. Commissioner of Income Tax, ), between the same parties. These questions are accordingly answered in the affirmative.

The real dispute between the parties centres round the third question in ITR No. 98, which runs as under :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the words ''corrosive chemicals'' employed in entry (ii)B(7) of Para. III of Part I of Appendix I to the Income Tax Rules, 1962, contemplate not only free chemicals but also non-free chemicals of corrosive effect ?"

As noticed above, the Tribunal allowed depreciation at the rate of 15 per cent. because it was of the view that the term "corrosive chemicals" would cover not only free chemicals but also non-free chemicals. To elucidate this view, the learned counsel for the assessee argued that sugarcane juice, which comes into contact with the machinery, contains lime and sulphuric acid, which are corrosive chemicals and the fact that they were mixed with sugarcane juice would be of no consequence. We are unable to subscribe to this view. Lime and sulphuric acid are mixed with the sugarcane juice to filter and purify the juice but by their mixture, the juice itself is not converted into a chemical.

According to Webster''s Dictionary, the word "chemical", when used as noun, means a substance, as an acid, alkali, salt, synthetic, organic compound, obtained by a chemical process prepared for use in a chemical manufacture or used for producing a chemical effect. It is obvious from the dictionary meaning of the word "chemical" that the sugarcane juice cannot be covered by this term simply because some acid has been mixed with it for its nitration. Moreover, the acid and the lime is mixed in the sugarcane juice for the purpose of its filtration and once the chemical reaction has been caused, most of its effect would be lost and whatever remains, settles down along with the sediments at the bottom. Thereafter, the filtered sugarcane juice which comes into contact with the machines before it is converted into crystallised sugar cannot be said to be a corrosive chemical by any stretch of reasoning.

Consequently, the third question noted above is answered in the negative, that is in favour of the revenue and against the assessee. No costs.