COMMISSIONER OF Income Tax, KERALA vs CALICUT WYANAD MOTOR SERVICE PRIVATE LTD.

RAGHAVAN, J. - This is a reference u/s 66(1) of the Indian Income Tax Act by the Income Tax Appellate Tribunal, Madras A Bench, and the question of the law referred is whether the assessees are entitled to development rebat e on certain motor vehicles u/s 10(2)(vib).

The assessee are a private limited company owning a fleet of motor vehicles and doing transport business. In the year of account 1954-55, the assessee purchased four buses at a cost of Rs. 74,327 for use in their business and in the returns submitted by the m for the assessment year 1955-56, they claimed either development rebate or initial depreciation on the cost of these vehicles, which ever was applicable. The Income Tax Officer allowed initial depreciation of 20 per cent. of the cost u/s 10(2)(vi) but disallowed development rebate of 25 per cent. u/s 10(2)(vib). The reasoning of the Income Tax Officer was that motor vehicles were not "plant installed."

The assessee appealed to the Appellate Assistant Commissioner who concurred with the decision of the Income Tax Officer and dismissed the appeal. On further appeal to the Income Tax Appellate Tribunal the Tribunal reversed the decision of the Appellate Assistant Commissioner and allowed development rebate of 25 per cent. On the cost of the motor vehicles. The Tribunal held that the word "installed" occurred in section 10(2)(vi) and since the Income Tax Officer interpretation and the word so as to apply to motor vehicles when the allowed initial depreciation, he ought to have given the same interpretations to the same word occuring in section 10(2)(vib) also.

On applications by the Commissioner of Income Tax to the Income Tax Appellate Tribunal the above question has been referred to us for the decision.

Two decisions of the Bombay High Court are placed before us on this question. The first is Commissioner of Income Tax v. Saraspur Mills Ltd. In that case the Saraspur Mills Ltd., Purchased certain motor cars and bicycles in the year of account 1954-55 for use in their business and claimed in the year of assessment 1955-56 development rebate u/s 10(2)(vib) on the cost of these motor cars and bicycles. The Income Tax authorities allow ed the assessees the normal depreciation u/s 10(2)(via) but they did not allow any development rebate. On appeal the Tribunal allowed development rebutter as claimed by the assessee holding that motor cars and bicycles were "plant installed" u/s 10(2)(vi)-tax Act by the . On reference to the Bombay High Court u/s 66(1) of the Act their Lordships of the Bombay High Court observed as follows :

"The expression installed is also used in the sense of inducted or introduced, and if that be the sense in which that expression is used, there is nothing inconsistent in the context in which that word is used which will justify us in holding that the word plant in section 10, sub-section (2), clause (vib), of the Income Tax act was not intended to included vehicles."

The second decision in Commissioner of Income Tax v. Lever Brothers (India) Ltd. The same learned judge who decided the former decided this case also. It was held that in this case that motor lorries and motor-cars were "plant or machinery installed" and it was further held that even officer applicances would come within the term "plant or machinery installed."

We are in agreement with this view expressed by their Lordships of the Bombay High Court in the two decisions referred to above. u/s 10(5) of the Act "plant" includes vehicles. In the case before us the assesses are doing transport business and the plant or machinery which are wholly used by them for the purposes of the business carried on by them are motor vehicles run by them and by their nature these vehicles are in capable of being fixed in position when they are worked or used. Hence we hold that the term "plant installed" applies to motor vehicles, which are "inducted or introduced" into the business.

We, therefore, answer the question referred to us in the affirmative, that the assessees are entitled to development rebate on the costs of the vehicles u/s 10(2)(vib) of the Act.

The Commissioner will pay the costs of the assesses which is fixed at Rs. 100.

Question answered in the affirmative.