Chandra Reddy, C.J.
1. The question to be answered by us in this reference under Section 66 (1) of the Indian Income-tax Act is formulated in these words :
'Whether the new diesel engines purchased and fitted to the old buses during the account year constituted 'plant or machinery' within the meaning of Section 10 (2) (vi-a) and Section 10 (2) (vi-b) so as to be entitled for additional depreciation allowance and development rebate respectively under those provisions.'
2. Before we deal with the question of law posed in this reference, it is useful to set out the facts giving rise to this reference as briefly as possible.
3. The assessee is a private limited Company carrying on the business of motor transport. The relevant assessment year is 1957-58, the accounting year being 1.4-1956 to 31-3-1957. In the year of account, the assessee replaced the petrol engines by diesel engines in four of the vehicles and claimed inter alia additional depreciation allowance and development rebate in respect thereof under Section 10 (2) (vi-a) and Section 10(2) (vi-b) respectively. These allowances were disallowed by the Income-tax Officer, which order was affirmed on appeal, by the Appellate Assistant Commissioner and, on further appeal, by the Income-Tax Appellate Tribunal.
4. At the request of the assessee, the Tribunal made a reference to this Court under Section 66 (1) of the Act.
5. In this reference, it is argued by Sri K. Ranganadhachari on behalf of the assessee that the language of the relevant Clauses of Section 10 (2) of the Indian Income-tax Act does not warrant the restricted meaning attributed to them by the Department and also by the Income-tax Appellate Tribunal.
6. Before we consider the soundness of this argument, it is necessary to read Clauses (vi), (vi-a) and (vi-b) of Section 10 (2). Section 10 (2) deals with the computation of the income of the assessee from the profits and gains of business, profession or vocation, which is exigible to tax. It also provides for making certain allowances contained in Clause (vi) of Section 10 (2). Clause (vi) recites :
'In respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent (where the assets are ships other than ships ordinarily plying on inland waters) to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed (and in any other case, to such percentage on the written down value thereof as may in any case or class of cases be prescribed.)'
Section (vi-a) recites :
''In respect of depreciation of buildings newly erected, or of machinery or plant being new which has been installed, after the 31st day of March 1948 a further sum (which shall be deductible in determining the written down value) equal to the amount admissible under Clause (vi) (exclusive of the extra allowance for double or multiple shift working of the machinery or plant and the initial depreciation allowance admissible under that clause for the first year of erection of the building or the installation of the machinery or plant) (in nut more than five successive assessments for the financial years next following the previous year in which such buildings are erected and such machinery and plant installed and falling within the period commencing on the 1st ay of April, 1949, and ending on tbe 31st day of March 1959'.
Clause (vi-b) is as under :
''In respect of a new ship acquired or new machinery or plant installed after the 31st day of March, 1954 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 acquisition of the ship or of the installation of the machinery or plant, equivalent to.
7. We are here mainly concerned with Clauses (vi-a) and (vi-b). Clause (vi-a) bears on normal depreciation allowance and Clause (vi-b) bears on development rebate. In this case, the assessee has no grievance because the allowances contemplated by Clause (vi) were allowed to him,
8. The only question is whether the assessee, who had fitted diesel engines into four of the vehicles, could claim the additional depreciation allowance and development rebate. In other words, the point for consideration is whether the diesel engines fitted into the vehicles would constitute a 'machinery or plant' within the contemplation of Clause (vi-a).
9. There has been a divergence of judicial opinion on this question, different High Courts taking different views on this matter. A Division Bench of the Bombay High Court in Maneklal Vallahhadas Parekh v. Commr. of Income-Tax : 37ITR142(Bom) expressed the opinion that the assessee, who had replaced petrol engines in his motor lorries by diesel engines at about half the value of the lorries themselves, was not entitled to the allowance of initial depreciation in respect of the diesel engines under paragraph 2 of Section 10 (2) (vi) of the Income-tax Act because what was installed in the vehicle which in substance formed part thereof could not be regarded as included in the connotation of the expression 'machinery'.
10. A dissenting note was struck by the Madras High Court in Mir Mohd. Ali v. Commr. of Income-tax : AIR1960Mad476 . The learned Judges ruled (bat if the diesel engine, which was fitted into the motor vehicle, was 'machinery' for the normal depreciation under the first paragraph of Section 10 (2) (vi), it should continue to be 'machinery' also for depreciation under the second paragraph of Section 10 (2) (vi) and Section 10 (2) (vi-a) of the Income-tax Act. In coming to that conclusion, they relied upon the observations of the Judicial Committee of the Privy Council in Corporation of Calcutta v. Chair, man. Cossipore and Chitpore Municipality, I L R 49 Cal 190 : AIR 1922 P C 27 as giving support to their decision. Their Lordships of the Privy Council remarked :
'Their Lordships concur with Lord Davey in thinking that there is great danger in attempting to give a definition of the word 'machinery' which will be applicable in all cases. It may be impossible to succeed in such an attempt. If their Lordships were obliged to run the hazard of the attempt, they would be inclined to say that the word 'machinery' when used in ordinary language prima facie means some mechanical contrivances which, by themselves or in combination with one or more other mechanical contrivances, by the combined movement and inter, dependent operation of their respective parts generate power, or evoke, modify, apply or direct natural forces with the object in each case of effecting so definite and specific a result.'
11. A Division Bench of this Court in B. Srikantiah v. Commr. of Income-tax. : 41ITR518(AP) preferred to accept the principle enunciated by the Bombay High Court in : 37ITR142(Bom) . It felt unable to share tbe view of the Madras High Court in (1960) 38 ITR 413 : AIR 1961 Mad 476. It was observed in : 41ITR518(AP) that there was nothing in the first paragraph of Clause (vi) which lent colour to the assumption that the diesel engine was eligible for normal depreciation. There, valid reasons were given why additional depreciation allowance was not claimable by the assessee who fitted new diesel engines into old vehicles.
12. A Division Bench of the Kerala High Court in George Mathew v. Commr. of Income tax, : 43ITR535(Ker) declined to follow the Bombay ruling referred to above and expressed its concurrence with : AIR1960Mad476 '. In support of its conclusion the Kerala High Court called in aid the judgment of the Court of Appeal in Maden and Ireland Ltd. v. Hinton, (1958) 37 A T C 317. An examination of the facts of the English decision would show that it does not render any assistance in the interpretation of Clauses (vi-a) and (vi-b). In that case, the assessee was a manufacturer of boots, shoes and slippers and a number of heavy machines were used in the business and some knives and lasts were to be inserted into the machine. Particular types of shoes required knives and lasts of their own shape and the machines could not function without the knives and lasts. The question that presented itself in that Case was whether the expenditure incurred for acquiring lasts and knives would corstitute capital expenditure and it was answered in the affirmative. We do not think that this decision has any analogy here. We are not concerned here with the question whether the money spent in the acquisition of the diesel engines would constitute capital expenditure, or, whether it was revenue expenditure. The question in controversy is whether a diesel engine or other parts of a vehicle would constitute a 'machinery or plant' within the sweep and range of Clause (vi-a).
13. The opinion expressed by the Punjab High Court in Ambala Bus Syndicate Ltd. v. Commr. of Income-tax. accords with the principle enunciated by the Bombay High Court in : 37ITR142(Bom) and by this Court in : 41ITR518(AP) . The Division Bench of the Punjab High Court inter alia ruled that it is only in respect of a machinery or plant that would constitute a self-sufficient unit that depreciation allowance was permissible. There, the question was whether an assessee could claim depreciation allowance in respect of new bodies set on the motor vehicles and it was answered in the negative in the view indicated above.
14. Recently, a Division Bench of the Madras High Court in Raju and Mannar v. Commr. of Income-tax, : 50ITR202(Mad) reiterated the rule adumbrated in : AIR1960Mad476 . Having regard to the latest ruling of the Madras High Court Sri K. Ranganadhachari invites us to change our minds and to adopt the doctrine of : AIR1960Mad476 and the latest case : 50ITR202(Mad) . On a further consideration of the whole matter, we are unable to find any justifiable ground to strike a note different from that in : 41ITR518(AP) .
15. Apart from the weighty considerations that were pointed out in that case, there are other reasons which encourage our view and which induce us to reaffirm the principle enunciated in : 41ITR518(AP) . A careful scrutiny of the language of Clause (vi-a) vouches the principle underlying : 41ITR518(AP) . A departure from that rule leads us to that result, viz., whenever a new spare part is replaced to the machinery or plant, it amounts to an installation thereof and that would enable the assessee to claim an additional depreciation allowance and development rebate, thus prolonging indefinitely the period during which the allowance is admissible, though the clause sets a limit to the period during which the plant or machinery is eligible for additional deduction. Further, the terms 'machinery' and 'plant' are qualified by the expression 'being new'.
16. Could it be posited that a vehicle which is embraced within the comprehension of the word 'plant' becomes new every time either an engine or any other part of the vehicle is replaced by a new one We feel that such a connotation would be inconsistent with the concept of newness. It is manifest from Clause (vi-a) that the normal depreciation is allowed only in respect of machinery and plant. We feel that the expression 'machinery or plant' could not be invested with the meaning 'a part of a machinery or a part of a plant.'
17. It is not contended that the normal depreciation allowance is admissible not only in regard to the machinery or a plant or a self-sufficient unit but also in regard to every part of the machinery or a plant. Clause (vi-b) says that development rebate is permissible in regard to machinery or plant which is used for the purposes of the business carried on by the assessee. We find it difficult to lay down that an engine or a spare part which is to be fitted into a motor vehicle is used for the purposes of the business. A diesel engine or a spare part as such cannot be used de hois the motor vehicle for the business of the assessee. They will become useful only when they are fitted into the vehicle which could be used for the purpose of the business of the assessee.
18. We further feel that the expression 'installation' would not be apt or appropriate with reference to the fitting of an engine or a spare part, however, big or important it might be, into a motor vehicle. The deeper we go into the matter the deeper is our conviction that it is only a machinery which forms a unit or a self-sufficient unit that falls within the intendment of Clause (vi-a) or Clause (vi-b) and an engine or a part which forms part of a motor vehicle could not be described as a machinery or a plant for the purposes of Sub-clauses (a) and (b). It follows that the Income Tax Appellate Tribunal was right in rejecting the claim of the assessee for additional depreciation allowance and also development rebate-under Clauses (vi-a) and (vi-b) of Section 10 (2).
19. In the result, the reference is answered in favour of the department and against the assesses. The parties will bear their own costs.