1. Tata Hydro Electric Power Supply Company Ltd., the assessee, is engaged in generating and supplying electric power. For the purposes of storage of water it had, inter alia, two dams, Walawhan Dam and Shirawata Dam. In the accounting year relevant to the assessment year 1962-63, the assessee spent Rs. 14,81,124 on anchoring of Walawhan Dam by the Coyne method and Rs. 29,87,802 on cement grouting of Shirawata Dam. In the accounting year relevant to the assessment year 1963-64, the assessee spent Rs. 47,151 and Rs. 23 lakhs on the cement grouting and improvement to Shirawata Dam by the Coyne method. A question arose, whether the assessee was entitled to claim development rebate on these amounts spent for the two years referred to above.
2. The contention, on behalf of the assessee, before the ITO was that the two dams were designed and constructed between the years 1911 and 1916. The design criteria and construction practices adopted were those then in vogue. The design did not allow for any uplift pressure as is the present practice. The dams were constructed as a mass and coarse rubble masonry structure with surkilime mortar. No cement was used at all. Naturally, after years of weathering, the dams could not be considered as impervious or as stable as the present day dams. It was, therefore, considered absolutely essential to strengthen the dams by the Coyne method which involves anchoring high tension steel into the bedrock of the dams, which is sub-sequently tensioned and grouted. Before anchoring the dams to the bedrock foundations under the Coyne methods, however, it was necessary to carry out extensive grouting over the full; length of the dams to make them stable and monolithic, thereby, conforming to present day design criteria and accepted construction practice. The inside structure of the dams of coarse rubble and surkilime mortar had to be consolidated and made waterproof to protect the high tensile steel cables used for anchoring the dams from corrosion. It was the case of the assessee that a considerable expenditure now incurred on the dams has resulted in a distinct improvement in them with regard to their stability and their resistance to uplift pressure which were dangerously lacking in the old dams. According to the assessee, these additions were so vital that for all practical purposes they have resulted in the creation of new dams. In the very nature of things, it was not possible to replace an obsolete dam by a new one. The assessee claimed that the considerable expenditure incurred on giving the dams a totally new stability may be treated as the creation of new assets entitled to development rebate and the provisions of s. 33 of the I.T. Act, 1961, need not be interpreted so literally as to deprive the assessee of the benefits. The assessee pointed out that in the statement in para. 1 of Appendix I to the I.T. Rules, 1962, Dams (Hydraulic Works) have been classified under plant and machinery.
3. The ITO took the view that by incurring the expenditure the assessee had not brought into existence any other new assets. According to him, at best the dams have been repaired in a modern and scientific manner but that was not sufficient and could not be considered eligible for development rebate.
4. In an appeal preferred by the assessee for both the years before the AAC, he took the view that though undoubtedly modifications to the dams brought considerable stability and resistance to uplift pressure to the dams and the same were strengthened by grouting and high tension steel, etc., yet the dams have retained their essential identity and no new dams could be said to have been brought into existence. According to him, the expenditure could not be equated to additions to plant which includes dam, as it has not brought into existence any dependent or independent additions to the dams, the materials used having lost their identity and having become merged into the dams. On this reasoning, he upheld the decision of the ITO and rejected the claim for development rebate for these years.
5. In second appeal before the Tribunal, it was urged on behalf of the assessee that owing to the nature of the dams the assessee could not pull down the old dams and, therefore, the dams should be considered as new dams after they were renovated by the Coyne method. Alternatively, it was contended on behalf of the assessee that anchoring its bedrock foundation by inserting high tension steel cables and consolidating the same and making the same waterproof and carrying on the work of cement grouting should be taken as additions to the existing dams and development rebate should be allowed on the expenditure incurred by the assessee.
6. On the other hand, it was contended, on behalf of the revenue, that having regard to the provisions of s. 33 of the I.T. Act, 1961, in order to claim development rebate, the plant and machinery must be a new one and should be used as a self-contained unit and the fact that under certain conditions, the addition may be regarded as self-contained for the purposes of any business in which it was used is irrelevant in considering its admissibility for development rebate. It was also urged on behalf of the revenue that it could not be said that the plant or machinery was installed as only the old dams were constructed or strengthened by incurring the expenditure and it cannot be said that after the expenditure new dams came into existence. It was also urged that even if the dam is regarded as plant or machinery, it was not new and reliance was placed upon the meaning, given in the Oxford Dictionary, of the word 'new' as 'not existing before', 'now first made', or 'brought into existence for the first time'. It was urged that the plant in the present case not being new, the same would not qualify for development rebate.
7. The Tribunal accepted the contention urged on behalf of the assessee. It was pointed out that from the very nature of things the assessee could not have pulled down the old dams and constructed new ones in their places. If the assessee had constructed new dams in place of old ones, the expenditure incurred in making additions to the dams by way of additional construction, which though was imbedded in the old dams, could not be said to be an expenditure not for additional construction. Having regard to the particular facts and circumstances of the case, the Tribunal took the view that the assessee was entitled to development rebate on the expenditure incurred for the two years under appeal and gave necessary directions to the ITO in that behalf.
8. From this order of the Tribunal, the following question has been referred to us for our determination :
'Whether, on the facts and in the circumstances of the case, it was rightly held that the assessee was entitled to development rebate on the expenditure incurred by the assessee for the assessment years 1962-63 and 1963-64 on anchoring Walawhan Dam and cement grouting of Shirawata Dam ?'
9. When this reference reached hearing on the earlier occasion, by consent of parties, we directed the assessee to file a statement in relation to the Coyne method of anchoring the dams. Such statement together with the necessary plans have been filed and by consent of parties the said statement as well as the plans are treated as part of the statement of the case.
10. Mr. Joshi, on behalf of the revenue, contended that the strengthening of the dams by the Coyne method is not a plant within the meaning of s. 33 of the Act, nor can it be said that by so doing a new plant is installed. He submitted that the object of anchoring the dams is to strengthen the old existing dams and once the work of carrying out such strengthening by the scientific process is carried out, it is not a separate entity and cannot be regarded as plant within the meaning of s. 33 of the Act. He submitted that by anchoring the dam by following the Coyne method what was really done was to strengthen the existing dams and no new plant can be said to have been installed. He relied upon the dictionary meaning of the word 'new' and stated that nothing can be said to be new unless it was not existing before, or newly made or brought into existence for the first time. In short, his submission was that since the old dams existed right from the year in which they were constructed, by incurring the expenditure for strengthening the same by the modern scientific method no new dam is constructed or installed and as no plant is installed within the meaning of s. 33 of the Act, the assessee would not be entitled to development rebate in respect of the amount spent by it for such strengthening of the dams. That the expenditure that has been incurred in the two years in respect of the two dams is for strengthening the said two dams is quite evident from the very maps that have been produced by the assessee, because both the maps clearly show that the drawings are for the proposed strengthening of Walawhan Dam and Shirawata Dam. Thus, his submission that the conditions laid down is s. 33 of the Act were not fulfilled and the assessee was rightly denied the claim for development rebate by the taxing authorities. He urged that the Tribunal did not approach the problem having regard to the relevant provisions of the Act in regard to the requirements to be fulfilled before development rebate could be allowed under s. 33 of the Act. The mere fact that the assessee could not pull down the old dams and construct new ones in their places was not by itself sufficient, according to his submission, to allow a claim for development rebate simply because substantial expenditure was incurred for strengthening the old dams.
11. Under s. 33 of the Act, inter alia, in respect of new machinery or plant installed after March 31, 1954, which is owned by the assessee and is only used for the purposes of business carried on by it, a sum by way of development rebate at the rates therein prescribed is, subject to the provisions of s. 34, allowable as a deduction in respect of the previous year in which the machinery or plant was installed. Having regard to these provisions, what we have to consider is that by incurring the expenditure for strengthening the Walawhan Dam and Shirawata Dam, did the assessee install a new plant within the meaning of s. 33 of the Act. By consent of the parties, a statement pointing out the Coyne method of anchoring the dam is taken on record as forming part of the statement of the case. As per this statement, this was the procedure followed in respect of both the dams, while the expenditure was incurred :
'First, a pit four feet wide and four feet deep on the surface of the dam and a reinforced cement concrete-pad, two feet high is laid in the pit. Then a hole 4 inches in diameter is bored through the entire height of the dam and further about 20 feet into the bedrock.
Next, grouting is done, i.e., liquid cement is forced into the hold under high pressure and allowed to dry completely. Then the hold is rebred though the cement, again right through the entire height of the dam and about 20 feet into the bedrock.
Thereafter, liquid cement is placed at the bottom, about 13 feet of the hole in the bedrock, and a cable about 3 inches in diameter made of 60 to 102 high tensile steel wires, is lowered into the liquid cement in the bedrock, and then cement is allowed to dry completely. Thus, an anchor is formed around the cable and inside the bedrock, and the cable is thereby firmly fastened to the bedrock. The length of the cable runs throughout the 20 feet of the bedrock and the entire height of the dam and two feet above the surface of the dam. A reinforced cement concrete cap, about two feet in diameter and about two feet high, is similarly formed and fixed on the top of the cable, leaving a space of about 1 1/2 feet between the surface of the dam and the bottom of this cap.
Next, the cable is jacked up by hydraulic jacks at a pressure of about 220 tons. After the cable is fully tensioned, three permanent packers (concrete cylinders) are placed rightly between the pit surface of the dam and bottom of the RCC cap.
Liquid cement is also forced into the angular space between the cable and the side of the hold to protect the cable against corrosion.
Thus, this huge steel and concrete clamp anchors the dam to the bedrock, i.e., the clamp holds the dam pressed and fastened to the bedrock and prevents it from being uplifted by the pressure of water seepage under its base.
Such clamps are placed at distances of between 4 feet and 10 feet over the entire length of the dam. Since the dam is constructed in a valley, the height of the dam varies at different places, and the distance between two clamps varies, depending upon the height of the dam at the particular place.
The same Coyne method explained above was adopted in respect of both Walawhan and Shirawata Dams. About 480 clamps are inserted in Walawhan Dam and about 600 clamps in Shirawata Dam.
The clamp in its final form is of the shape indicated in 'A'. The view of the cross section of the cable is as shown in 'B'.'
12. The first question that we have to consider is whether by anchoring the old existing dam by following this procedure can a plant be said to have been installed. The word 'plant' must be given a wide meaning. In s. 43(3) of the Act 'plant' is defined as 'including ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession'. In CIT v. Taj Mahal Hotel : 82ITR44(SC) , the Supreme Court pointed out that it is well settled that where the definition of a word has not been given it must be construed in its popular sense if it is a word of everyday use. Popular sense means 'that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it'. The very fact that even books have been includes shows that the meaning intended to be given to 'plant' is wide. The word 'includes' is often used in the interpretation clause in order to enlarge the meaning of the words of phrases occurring in the body of the statute. When it is so used, these words and phrases must be construed as comprehending not only such things as they signify, according to their nature and import, but also those things, which the interpretation clause declares, that they shall include. In the case before the Supreme Court, the question that arose for consideration was whether sanitary and pipe line fittings installed in a hotel can be regarded as 'plant' so as to qualify for development rebate. The Supreme Court pointed out that to have sanitary fittings, etc., in a bath room is one of the essential amenities or conveniences which are normally provided in any good hotel, in the present times. A hotelier can reasonably expect to get more customers and earn larger profit by charging higher rates for the use of rooms if the bath rooms have sanitary fittings in bath rooms in a hotel were 'plant' for the purpose of qualifying for development rebate. It may be incidentally mentioned that after exhaustively reviewing the case law on the topic, the Gujarat High Court in CIT v. Elecon Engineering Co. Ltd. : 96ITR672(Guj) , held that drawings ands patterns, which constitute know-how and are fundamental to the assessee's manufacturing business, are 'plants'. It is also well settled in view of the judicial decisions that neither the word 'plant' nor the word 'machinery' is confined to a self-contained unit-plant includes part of a plant, e.g., the engine of a vehicle; machinery includes part of a machinery, and building includes part of a building.
13. It should not be overlooked that Walawhan Dam and Shirawata Dam were constructed in the years 1911 and 1916. At that time, the modern technique for construction of dams was not so much advance. In the two years, with which we are concerned, lakhs of rupees have been spent in anchoring Walawhan Dam and Shirawata Dam. It is undoubtedly true that by incurring this expenditure no independent asset has come into existence but in order to entitle an assessee to claim development rebate creation of an independent asset is not essential. If by incurring this expenditure the existing dams have been so strengthened as to prolong their lives for a sufficiently long duration, then by incurring this expenditure a new plant can be said to have been installed so as to entitle the assessee to claim development rebate. Instead of demolishing the old dams and constructing new ones in their place, what has been done by the assessee by modern scientific technique is that huge expenditure has been incurred as a result of which the lives of the existing dams will be prolonged for a sufficiently long period. This will result in a new plant being installed within the meaning of s. 33 of the Act, even though by the incurring of the expenditure, the dams are not having any independent existence apart from the old dams themselves. Thus, by adopting the Coyne method of anchoring the two dams the new plant can be said to have been installed within the meaning of s. 33 of the Act, and the Tribunal was right in allowing the claim of the assessee for development rebate.
14. Our attention was drawn by Mr. Joshi to the decision of the Supreme Court in the case of Cochin Company v. CIT : 67ITR199(SC) and the decision of the Punjab High Court in the case of CIT v. Hindustan Milk Food . . Both these cases deal with reconditioning of old machinery, and in the first case, the Supreme Court pointed out that the question still remains whether the two machines after being reconditioned were entirely different from the old machinery and whether the latest improvements incorporated into them made the machines substantially new within the meaning of the relevant section. The Supreme Court in that cases found that the relevant materials on several aspects of the matter which were required to be considered, were not on record and, therefore, the decision of the High Court was set aside and the matter was remanded for determination of the relevant facts.
15. In the case before the Punjab High Court, it was pointed out that where development rebate was claimed in respect of reconditioned machinery it should be seen whether the reconstruction amounted to a substitution of the entire machinery, meaning by entirely nor necessarily the whole but substantially the whole of the subject-matter of the machinery. It should be seen as to when the machinery was first manufactured, the cost of the improvements in relation to its total cost and so on. On the facts, the Punjab High Court allowed development rebate with regard to the machinery which involved substantial reconditioning while disallowing the same with regard to the other machines where substantial reconditioning was not made.
16. The principles laid down in that cases will not be directly applicable to the facts of the present case. It cannot be disputed that by incurring this expenditure the life of both the dams has been substantially lengthened and, in our opinion, the Tribunal was right in accepting the claim of the assessee for allowance of development rebate.
17. In the result, our answer to the question referred to us is in the affirmative and in favour of the assessee. The revenue shall pay the costs of the assessee.