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Ajodhya Prasad Tara Chand Khekra Vs. Commissioner of Income-tax, Lucknow. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 386 of 1963
Reported in[1967]66ITR576(All)
AppellantAjodhya Prasad Tara Chand Khekra
RespondentCommissioner of Income-tax, Lucknow.
Excerpt:
.....development rebate could only be claimed by a person who satisfied two conditions :(1) that the plant or machinery should be installed in such persons business, and (2) that it should be wholly used for the purposes of that very business carried on by him. even for the purpose of section 10(2) (vib), as it stood at relevant time and before the income-tax act of 1961, wherein by section 33, which corresponded to the old section 10(2) (vib), a specific provision was added excluding office appliance or a road transport vehicle from the definition of 'plant'.in any case, kolhus are neither office appliance nor 'vehicles' and, therefore, if not machinery would certainly be a 'plant' and as such qualify for depreciation and development rebate provided the other conditions of section 10(2)..........had erred in allowing development rebate thereon, because : (1) kolhu is not 'machinery or plant installed' within the meaning of section 10(2) (vib); and (2) it was not plant or machinery wholly used for the purposes of the business carried on by the assessee. according to the tribunal, the true interpretation of section 10(2) (vib) was that development rebate could only be claimed by a person who satisfied two conditions : (1) that the plant or machinery should be installed in such persons business, and (2) that it should be wholly used for the purposes of that very business carried on by him. but, as the assessee carried on the business of letting kolhus on hire to others in order that they may make use of them for the purpose of their business, the tribunal opined that it can.....
Judgment:

MANCHANDA J. - This is a case stated under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act). The question referred is :

'Whether the assessee is entitled to development rebate on the 50 new Kolhus added during the relevant previous year ?'

The material facts are these : The assessee in a firm which, inter alia, carries on business of letting out Kolhus on hire. The relevant assessment year is 1960-61, the accounting year whereof the year ending 30th of October, 1959.

During the said previous year, the assessee let out 829 kolhus, out of which 779 kolhus were old ones and 50 were new additions manufactured during the previous year. The original cost of the said additions of kolhus amounted to Rs. 15,032. New kharad machines were also added during the previous year whose original cost was Rs. 4,000.

The assessee claimed development rebate in respect of the 50 new kolhus and kharad machines added during the previous year, but the claim was ignored by the Income-tax Officer. The assessee appealed to the Appellate Assistant Commissioner and contended, inter alia, that development rebate should have been allowed on the additional kolhus and the kharad machines. The Appellate Assistant Commissioner upheld the assessees contention observing :

'The Income-tax Officer has not given any reason why development rebate has not been allowed. The assessee has created proper reserve. Hence development rebate is allowed on this amount of Rs. 19,032. The Income-tax Officer is directed to allow development rebate at 25%.'

Thereupon, the department filed an appeal to the Tribunal against the aforesaid decision of the Appellate Assistant Commissioner so far as it pertained to the additional kolhus valued at Rs. 15,032 and contended that the Appellate Assistant Commissioner had erred in allowing development rebate thereon, because : (1) Kolhu is not 'machinery or plant installed' within the meaning of section 10(2) (vib); and (2) it was not plant or machinery wholly used for the purposes of the business carried on by the assessee. According to the Tribunal, the true interpretation of section 10(2) (vib) was that development rebate could only be claimed by a person who satisfied two conditions : (1) that the plant or machinery should be installed in such persons business, and (2) that it should be wholly used for the purposes of that very business carried on by him. But, as the assessee carried on the business of letting kolhus on hire to others in order that they may make use of them for the purpose of their business, the Tribunal opined that it can not be said that the kolhus were installed and used for the purposes of the assessees business of hiring. To support the conclusion that the installation and the user of the plant or machinery must be by one and the same person, reference was made by the Tribunal to the provisions of section 12(3) of the Act, which catalogues the allowances to which an assessee who lets on hire machinery belonging to him is entitled to and, as that makes no reference to the allowance of development rebate under section 10(2) (vib), it was concluded that, even if the hiring constituted a business under section 10, the development rebate would not be admissible. The order of the Appellate Assistant Commissioner was accordingly reversed and the appeal allowed. Hence, this reference at the instance of the assessee.

As there is no case directly in point and the matter is res integra, it will be useful to set out the relevant provisions of the Act at the very outset. Section 10(1) reads :

'The tax shall be payable by an assessee under the head Profits and gains of business, profession or vocation in respect of the profits or gains of any....... carried on by him.

(2) Such profits or gains shall be computed after making the following allowances, namely :..

(vi) in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent,... to such percentage..

(vib) 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 purpose 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 ship or of the installation of machinery or plant, equivalent to,..' The relevant portion of section 10(5) runs :

'....plant includes vehicles, books, scientific apparatus and surgical equipment purchased for the purpose of the business, profession or vocation;...'

A combined reading of the provisions set out above makes it clear that the words 'plant and machinery' in section 10(2) have to be given a very wide meaning. Even for the purpose of section 10(2) (vib), as it stood at relevant time and before the Income-tax Act of 1961, wherein by section 33, which corresponded to the old section 10(2) (vib), a specific provision was added excluding office appliance or a road transport vehicle from the definition of 'plant'. In any case, kolhus are neither office appliance nor 'vehicles' and, therefore, if not machinery would certainly be a 'plant' and as such qualify for depreciation and development rebate provided the other conditions of section 10(2) (vib) are satisfied. There cannot also be much doubt that depreciation as well as development rebate could only be claimed by the person who is the owner of the property. Sub-clause (vi) of sub-section (2) of section 10 makes it clear that depreciation can only be claimed by the person whose property is attached (sic). The words used are 'being the property of the assessee', in other words, the owner of the property. The assessee in the present case is undoubtedly the owner of the kolhus. The conditions for qualifying for development rebate are :(1) that the asset is new, (2) installed after the 31st of March, 1954 (3) it should be owned by the assessee, (4) it is used wholly for the purposes of the assessees business, and (5) the development rebate reserve must have been created.

The Appellate Assistant Commissioner found that the development rebate reserve was duly created by the assessee and that act was not found challenged or controverted by the Tribunal and, therefore, that condition must be taken to have been satisfied. It was also not doubted that the It was also not doubted that the assessee was the owner of the kolhus nor that the asset was a newly manufactured one in the relevant assessment year which was after the 31st of March, 1954. Conditions Nos. 1, 3 and 5 would therefore be satisfied. The difficulty, however, only is with regard to condition Nos. 2 and 4. That is (1) were the kolhus 'installed' after 31st of March, 1954, and (2) were they used wholly for the purposes of the assessees business. The word 'installed' is not defined in the Act and, therefore, a reference to the dictionary meaning is permissible. In Websters New International Dictionary the word 'installed' has several meanings, such as the 'installations' of a person in office; more appropriately, when dealing with plant or machinery it means : 'to induct; give a place; to set up and fix in position for use as such; setting up or placing in position for service or use.' What constitutes installation will depend upon the nature of the business and the article that has to be installed. A boiler in a factory cannot be installed until it is set up and fixed in position for use as such. On the other hand, a truck or a car which is plant or machinery within the meaning of section 10(5) of the Act would be installed the moment it is set up or placed in position for service or use. Similarly, in the case of business which consists wholly of hiring of kolhus, the kolhus could be said to be installed the moment they are set up or placed in position for service or use. It is the last of the meanings reproduced hereinabove from the dictionary that would really be applicable. In any event, when there are two possible meanings, the meaning most favourable to the assessee in a taxing statute has to be applied. It has been found as a fact by the Tribunal, as stated in the case, that these 50 new kolhus which were added were also let out by the assessee. The kolhus on which development rebate is claimed once were admittedly let out and were, therefore, wholly used for the assessees business which consisted of hiring out of such kolhus. The assessee was neither a crusher of sugarcane nor was that his business, and, therefore, kolhus could not have been used by him for that purpose. His business was wholly that of hiring out of kolhus. The 50 new kolhus were in fact hired out, and, therefore, they were used wholly for the purpose of the assessees business. The fact that the person who hired the kolhus also made use of them would not make the kolhus any the less 'used wholly for the purpose of the assessees business'. The tribunal, therefore, fell into error when interpreting section 10 (2) (vib) by inserting certain words which do not find a place there. They inserted the word 'in' after the word 'used' and before the word 'business' and thus came to the conclusion that kolhus must be used by the assessee for crushing sugarcane and no one else. This violets the fundamental canon of construction of fiscal statutes as adumbrated by Rowlatt J. in Cape Brandy Syndicate v. Commissioners of Inland Revenue that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment; there is no equity about a tax; there is no presumption as to a tax; nothing is to be read in, nothing is to be implied, one can only look fairly at the language used.

The interpretation sought to be placed by the Tribunal and reiterated by the learned standing counsel before us would certainly require some words to be inserted into section 10(2) (vib) for which there can be no warrant. If the position was as simple as the Tribunal and the department would have it, then there in no case would plant or machinery which is hired out ever qualify for development rebate. If that was the true position than there would have been no need to make to a specific provision such as in section 12(3) of the Act nor in the section 57(ii) of the Act of 1961, which corresponds to the old section 12(3) of the Act when read with section 56(2) (ii). The latter makes it abundantly clear that the income from machinery, plant or furniture, belonging to the assessee and let on hire is only to be assessed under other sources 'if the income is not chargeable to income-tax under the head Profits and gains of business or profession.' Therefore, the legislature clearly contemplates that income from machinery, plant or furniture hired out can be assessed under the head 'business' and not necessarily only under the head 'other sources'. It is not, therefore, correct for the department to say that hiring out of machinery, plant, etc., could only have been assessed under the 'other sources'. If the income from hiring can be assessed under the head 'business' there is no reason why development rebate under section 10(2) (vib) should not be admissible to such an assessee. The Tribunal, therefore, could not have derived any support from the provisions of section 12(3) of the Act and not section 12 of the Act.

The view we are taking finds some support from the decisions of Madras and Bombay High Courts. In Fomra Brothers v. Commissioner of Income-tax where certain cars were being hired out by an agent of Burmah Shell for the use of Burmah Shell officials and development rebate on new cars purchased for this purpose was held to qualify for development rebate. In Commissioner of Income-tax v. Saraspur Mills Ltd. Shah J., as he then was, interpreted the word 'installed' to also mean 'inducted or introduced' and not necessarily' fixed in position' and held that manufacturer of cloth who had purchased certain motor-cars and bicycles for use in the business was entitled to development rebate. In Commissioner of Income-tax v. Sri Rama Vilas Service (Private) Ltd., the Madras High Court in Commissioner of Income-tax v. Saraspur Mills Ltd. held, that a bus or lorry can be said to be installed when it is set up for use or service upon its being put on the road and 'therefore the statutory test of installation was satisfied by the assessee because such installation as the buses and lorries were capable of was completed'. The last sentence was clutched upon by the standing counsel to show that kolhus were capable of installation unlike buses and they, not having been fixed in position for crushing by the assessee, could not be said to have been installed. There is no force in this contention, as already observed. The question of installation is not only linked up with the article as such but also with the nature of the business. In a hiring out business, the installation of a plant or machinery can only be by placing it in position for service or use. The moment the assessee placed the kolhus in his show room and actually hired them out the statutory requirement for claiming development rebate would be satisfied.

For the reasons given above, the question referred is answered in the affirmative and in favour of the assessee. The department will pay the costs of this reference which we assess at Rs. 250. Counsels fee is also assessed at Rs. 250.

Question answered in the affirmative.


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