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Tax Case No. 68 of 1958, decided on 26th October 1959.
S. 10 (2) (vib), (5)‑Buses and Lorries‑ Whether "plant and machinery installed "‑Bus or lorry purchased and put on road in the course of business‑Assessee whether entitled to development rebate‑" Installed ", meaning of.
Buses and lorries come within the scope of the statutory expression " plant " both in clause (via) and clause (vib) of section 10 (2) of the Income‑tax Act.
In view of the extended statutory definition of the word " plant " in section 10 (5) of the Act, the word " installed " relation to machinery or plant must be considered to mean such installation as that machinery or plant is capable of. " Installed " means " to place an apparatus in position for service or use ".
The statutory test of installation is satisfied when the assessee purchases a bus or lorry and puts it on the road in the course of business.
Commissioner of Income‑tax v. Saraspur Mills Ltd., (1959) 36 I T R 580 fol.
By this application, the Commissioner of Income‑tax, Madras, requires the Appellate Tribunal to refer to the High Court a question of law which is said to arise out of the order of o Tribunal in I. T. A. No. 5829 of 1956‑57, dated August 30, 1957. Inasmuch as in our opinion, a question of law does arise out of the order of the Tribunal, we hereby draw up statement of the case agreed to by both the parties and refer it to the High Court of Judicature at Madras under section 66 (1) of the Indian Income‑tax Act.
2. The assessee is a private limited company owning buses and lorries. Its business is that of transport of passengers and goods. In the year ending on December 31, 1954, corresponding to the assessment year 1955‑56 it purchased a number of new vehicles. It claimed a development rebate of Rs. 60,745 under section 10 (2) (vib) of the Income‑tax Act on the value of these vehicles. There is no dispute as to the amount. The Income‑tax Officer disallowed the claim as, in his opinion, this rebate is admissible in respect of plant and machinery newly installed during the year and that vehicles like buses and motor cars do not qualify for the rebate and that the introduction of new buses does not amount to " installation of a plant and machinery ". But he allowed what is called initial, depreciation on these vehicles.
3. Development rebate was introduced by the Finance Act of 1955. The relevant portion of the section is as follows:
" 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 purposes 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 percent. Of the actual cost of such machinery or plant to the assessee ".
4. What is called " initial depreciation " was introduced by the addition of clause (via) to section 10 (2) by the Taxation Laws (Extension to Merged States and Amendment) Act, 1949 The relevant portion is as follows:
" Where the buildings have been newly 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 ".
The appropriate rate for machinery or plant was 20 percent. of its cost to the assessee.
5. On appeal, the Appellate Assistant Commissioner way, of the view that though the same word, viz., " installed " hay; been used in both the sections, a stricter interpretation of that word was called for when it is used in regard to development rebate. He considered the dictionary meaning of that word ant came to the conclusion that some kind of fixing up of the apparatus or plant and machinery 'was necessary and that, as buses do not require to be fixed up anywhere, development rebate was not allowable. His order is annexture A ' and form part of the case.
6. On further appeal to the Tribunal, it accepted the interpretation placed by the assessee on the word "install" am allowed the appeal. The order of the Tribunal is annexture B' and forms part of the case.
7. The following question of law arises:
"Whether the buses and lorries are plant and machinery installed' and whether development rebate under section 10(2) (vib) of the Income‑tax Act is allowable on buses and lorries "
C. S. Rama Rao Sahib for Commissioner.
V. Sethuraman for the Assessee.
.‑The question referred to this Court under section 66 (1) of the Indian Income‑tax Act ran:
"Whether the buses and lorries are plant and machinery installed' and whether development rebate under section 10 (2) (vib) of the Income‑tax Act is allowable on buses and lorries "
That question was answered in favour of the assessee by the Tribunal, and the question of law was referred to this Court at the instance of the Department.
Section 10 (2) (via) provides for what is called an extra initial depreciation, and that applies to machinery or plant, being new, which has been installed after the 31st day of March 1948. Section 10 (2) (vib) provides for a further relief to the taxpayer, and what was called a development rebate has been granted in the case of new machinery or plant installed after the 31st day of March 1954. The word "plant" itself was given a statutory definition in section 10 (5) of the Act, "Plant" includes vehicles,' books, scientific apparatus and surgical equipment purchased for the purposes of the business, profession or vocation.
It should be clear that the expression " plant or machinery installed " should be given the same meaning both in section 10 (2) (via) and section 10 (2) (vib). That the buses and lorries come within the scope of the statutory expression " plant " is not disputed. What the learned counsel for the Department urged was that in the case of buses and lorries the further requirement of section 10 (2) (vib) that they should be " installed" before the development rebate is allowable, has not been satisfied. The word " installed " itself has not been statutorily defined. In view of the extended statutory definition of the word " plant" in section 10 (5) of the Act, it seems clear to us that the word " installed " in relation to the machinery or plant, must be construed to mean such installation as that plant is capable of. The Assistant Commissioner referred to the dictionary meaning of the word " installed " as given in Webster's New International English Dictionary " to set up or fix in position for use or service as to instal a heating or lighting system". The Shorter Oxford Dictionary in English gives as one of the meanings " to place an apparatus, a system of lighting, heating, or the like in position for service or rise ". Much the same meaning is given in Fund and Wagnall's New Standard Dictionary " to place in position for service or use, as to instal hot water system ". Putting aside the examples given in the dictionary meaning to explain the scope of the word " installed ", " installed " would certainly mean " to place an apparatus in position for service or use ". As we said, that a bus or a lorry is a plant within the meaning of section 10 (2) (vib) cannot and does not admit of any doubt. The only other question is whether, when a bus or a lorry is purchased and is also put on the road in the course of the business that the assessees carried on, it could be said that the requirement of installation has been satisfied. That the bus or lorry has been set up for use or service when it is put on the road seems clear to us and in that sense buses or lorries were installed. The statutory test of installation was satisfied by the assessee because such installation as the buses and lorries were capable of was completed.
The learned counsel for the Department urged that the requirement of installation with reference to plant and machinery could not possibly be satisfied by a bus or a lorry. Learned counsel could not support an extreme contention, that installation necessarily meant something fixed to earth and thereby becoming immovable. When we pointed out that a mobile van with movable machinery for carrying out the repairs in the case of a bus operator was a familiar example and any machinery purchased and used for such a mobile unit would be machinery "installed", learned counsel could not challenge that position. That is why we said the word " installed " has to be given its normal meaning and with reference to a given plant or a machinery we have got to see whether such installation as that machinery is capable of has been achieved. That test, in our pinion, was satisfied by the assessee when he put the buses and lorries on the road, that is when his " plant or machinery was set up for service.
We find that the Bombay High Court has taken a similar view in Commissioner of Income‑tax v. Saraspur Mills Ltd. ((1959) 36 I T R 580). We respectfully agree with the principle of interpretation laid down by the Bombay High Court in that case.
The question referred to this Court is answered in the affirmative and in favour of the assessee. As the Department has failed, it will pay the costs of the assessee. Counsel's fee Rs. 250.
Question answered in the affirmative.
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