Sankaranarayana Transports vs Commissioner of Income Tax, Kerala

M.S. Menon, C.J.—This is a reference by the income tax Appellate Tribunal Madras Bench, u/s 66 (i) of the Indian income tax Act, 1922. The assessment year with which we are concerned is 1957-58 and the accounting period, the 12 months ended on 30th September, 1956. Two questions have been referred for decision. They are:

(1) Whether the assessee is not entitled to claim development rebate under S. 10 (2) (vi-b) of the Act in respect of the two diesel engines fitted into bus Nos. MDM 5862 and MDM 6073 during the year of account?

(2) "Whether the assessce is not entitled to claim development rebate under S. 10 (2) (vi-b) of the Act during the year of account in respect of the new bus MDM 6018 and the new typewriter purchased?

Sub-section (1) of Section 10 provides that "the tax shall be payable by an assessee under the head ''Profits and gains of business, profession or vocation, in respect of the profit or gains of any business, profession or vocation carried on by him". Sub-section (2) of the section makes provision for the allowances enumerated therein. The relevant portion of sub-section (2) reads as follows:

(2) Such profits or gains shall be computed after making the following allowances, namely:--(vi-b) in respect of machinery or plant being new, which has been installed after the 31st day of March, 1954, and which is wholly used for the purpose of the business carried on by the assessee, a sum by way of development rebate in respect of the year of installation equivalent to twenty five per cent of the actual cost of such machinery or plant to the assessee:

Provided that no allowance under this Clause shall be made unless the particulars prescribed for the purpose of clause (vi) have been furnished by the assessee in respect of such machinery or plant.

Clause (vi-b) was inserted by the Finance Act of 1955''. The object of the provision was to grant a development rebate in respect of machinery and plant, provided (a) the machinery or plant is new and has been installed after the 31st March 1954, (b) it is used wholly for the purposes of the assessee''s business, and (c) the particulars prescribed for the purpose of clause (vi) (i. e. depreciation allowance) have been furnished.

The controversy in this case relates to the meaning of the words "machinery or plant which has been installed". There is a definition of the word "plant" in sub-section (5) of Section 10. According to the definition, "plant" includes "vehicles, books, scientific apparatus and surgical equipment purchased for the purposes of the business, profession or vocation".

There is no definition of the word "installed" in the Act. It has, however, been construed by the Supreme Court in Commissioner of income tax v Mir Mohammad Ali (1964 53 1. T. R. 165). The Supreme Court said "As observed by the Bombay High Court in the case of Commissioner of Income Tax (Central), Bombay Vs. Saraspur Mills Ltd., the expression ''installed'' did not necessarily mean ''fixed in position but was also used in the sense of inducted or introduced'' or to use, the language, of the. Madras High Court in the case of Commissioner of Income Tax, Madras Vs. Sri Rama Vilas Service (Private) Ltd., Madras, installed'' would certainly mean "to place, an apparatus in position for service or use".

It is common ground that the development rebate which has been denied to the assessee in respect of the two new diesel engines fitted on the old buses, the new bus, and the new typewriter is admissible, if the decision in Commissioner of income tax v M/s. C. W. M. S. (Pvt.) Ltd., (1960 KLT 78) is correct and should be sustained. That decision followed two decisions of the Bombay High Court Commissioner of Income Tax, Bombay City I Vs. Lever Brothers (India) Ltd., . The former decision has been quoted with approval by the Supreme Court in COMMISSIONER OF Income Tax, MADRAS Vs. MIR MOHAMMAD ALI. ARUNA MILLS LTD. : INTERVENER., . Still another decision in favour of the assessee is Raju and Mannar v Commissioner of income tax ( 1963 50 1. T. R. 202).

It should also be noted that clause (xi-b) was amended by Section 4 of the Taxation Laws (Amendment) Act, 1960, which came into force on and from 1st April 1960. Section 4 reads as follows;

In S. 10 of the income tax Act, in sub-section (2), after the proviso to clause (vi-b), - the following further proviso shall be inserted, namely :

Provided further that no allowance under this clause shall be made in respect of any machinery or plant which consist of office appliances or road transport vehicles.

The validity of the new proviso was challenged before, the Supreme Court; but without success. The Supreme Court said:

It was contended on behalf of the petitioner that the proviso offends Article 14 in that it descriminates between machinery which is office appliance or road transport vehicles and other kind of machinery. It is difficult to accept such a contention because there is nothing in the Constitution which prevents the Legislature from choosing the object of taxation from amongst various classes of machinery for the purpose of giving development rebate." ( Southern Roadways Private Ltd. Vs. Union of India (UOI) and Another, ).

In the light of what is stated above, we have no hesitation to hold that Commissioner of income tax v M/s. C.W.M.S. (Pte) Ltd., (1960 K. L. T. 78) was rightly decided, that the development rebate in respect of the two new diesel engines fitted on the old buses, the new bus, and the new typewriter is admissible, and that both the questions referred have to be answered in favour of the assessee and against the Department. We do so, and direct the Department to pay the costs of the assessee. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be sent to the Appellate Tribunal as required by sub-section (5) of Section 66 of the Indian income tax Act, 1922.