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Commissioner of Income-tax Vs. Electrosteel Castings Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtOrissa High Court
Decided On
Case NumberSpecial Jurisdiction Case No. 158 of 1977
Judge
Reported in(1981)24CTR(Ori)181; [1981]130ITR25(Orissa)
ActsIncome Tax Rules, 1962; Income Tax Act, 1961
AppellantCommissioner of Income-tax
RespondentElectrosteel Castings Ltd.
Appellant AdvocateStanding Counsel
Respondent AdvocateB.K. Mohanty and ;P.K. Misra, Advs.
Excerpt:
.....430 and new india assurance co. ltd. v smt rita devi, 1997(2) glt 406, approved. new india assurance co. ltd. v birendra mohan de, 1995 (2) gau lt 218 (db) and union of india v smt gita banik, 1996 (2) glt 246, are not good law]. - 3. assessee appealed to the aac challenging the disallowance, but failed to obtain any relief. in second appeal before the tribunal, the assessee reiterated its contention and maintained that the special rate relating to hydraulic works, pipelines and sluices related to machineries coming under those heads installed in hydraulic works and not inside the factories or works like that of the assessee. , come under the aforesaid heading, hydraulic works, pipelines and sluices'.on a careful consideration of the facts as well as the scheme of the appendix..........sanitary and water supply installations inside the factory did not come under the head 'hydraulic works, pipelines and sluices' as described under item iii(ii)a(1) of appendix i to the income-tax rules, 1962, and that the assessee was entitled to extra shift depreciation allowance thereon as claimed by it?'2. assessee is a public limited company deriving income from manufacture and sale of steel castings, grinding media, steel ingot castings and g.i. pipes. the relevant assessment year'is 1974-75 with the year ending with 30th of september, 1973, as the previous year. assessee claimed before the ito extra shift depreciation allowance on sanitary and water supply installations of the ghaziabad unit of the assessee's works. the ito disallowed the claim on the ground that the machinery.....
Judgment:

Misra, C.J.

1. The Cuttack Bench of the Income-tax Appellate Tribunal at the instance of the revenue has stated this case underSection 256(1) of the I.T. Act of 1961 (hereinafter referred to as 'the Act'), and has referred the following question for opinion .of the court:

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sanitary and water supply installations inside the factory did not come under the head 'Hydraulic works, pipelines and sluices' as described under item III(ii)A(1) of Appendix I to the Income-tax Rules, 1962, and that the assessee was entitled to extra shift depreciation allowance thereon as claimed by it?'

2. Assessee is a public limited company deriving income from manufacture and sale of steel castings, grinding media, steel ingot castings and G.I. pipes. The relevant assessment year'is 1974-75 with the year ending with 30th of September, 1973, as the previous year. Assessee claimed before the ITO extra shift depreciation allowance on sanitary and water supply installations of the Ghaziabad unit of the assessee's works. The ITO disallowed the claim on the ground that the machinery came under the head 'Hydraulic works, pipelines and sluices' for which no extra shift allowance was admissible.

3. Assessee appealed to the AAC challenging the disallowance, but failed to obtain any relief. In second appeal before the Tribunal, the assessee reiterated its contention and maintained that the special rate relating to hydraulic works, pipelines and sluices related to machineries coming under those heads installed in hydraulic works and not inside the factories or works like that of the assessee. It, therefore, contended that the extra shift allowance was admissible. The revenue, on the other hand, contended before the Tribunal that the Rules had statutory force and when extra shift allowance had been denied for the class referred to in the Appendix, the benefit could not be extended to the assessee. The Tribunal held :

'We have heard the contentions of both the parties and have gone through the facts on record. Admittedly, the assessee is a manufacturer of steel castings and maintains a factory for that purpose. The items of machineries with which we are concerned here are the ' sanitary and water supply installations' inside the factory of the assessee. The short point for decision before us is whether the sanitary and water supply installations consisting of tube-wells, pipelines, etc., come under the aforesaid heading, 'Hydraulic works, pipelines and sluices'. On a careful consideration of the facts as well as the scheme of the Appendix laying down the rates of depreciation for the different types of machineries and plant, we are of opinion that the assessee is entitled to succeed in this appeal. ' Hydraulic works, pipelines and sluices ' are items which are not defined under the Act or under the Rules. Their meanings have, therefore, to be gathered from the context in which they are used as well as in accordance with their meaning in common parlance. Before the Income-tax Rules, 1962, came into force, the Indian Income-tax Rules, 1922, were in force. Item-E of the Appendix to those Rules contained the following two items :

' E. Electric supply and undertakings--(i) Electric plant, machinery, boilers,

(ii) Hydro-electric concerns--hydraulic works, pipelines and sluices (N.E.S.A.).'

The Income-tax Rules, 1962, have taken out the 'hydraulic works, pipelines and sluices' as a separate item and have grouped them under item-A thus :

'A. (1) Hydraulic works, pipelines and sluices (N.E.S.A.).

(2) Overhead cable and wires (N.E.S.A.).

(3) Salt works--reservoirs, condensers, salt pans, delivery channels and piers, if constructed of masonary, concrete, cement, asphalt or similar materials (N.E.S.A.).'

Looking at the context in which they are used in the Indian Income-tax Rules, 1922, we are inclined to agree with the assessee that they related to electric supply undertakings and, in particular, to such types of machineries used by hydro-electric undertakings. This view also gets support from the use of the word 'sluices' which is common in hydroelectric generating system. Even looking at the context in which these items occur in the Income-tax Rules, 1962, we feel that the tube-wells and pipelines used inside the factory manufacturing steel castings cannot be said to be machineries that can be described as 'hydraulic works, pipelines and sluices'. Consequently, the prohibition in granting extra shift allowance which applies only to hydraulic works, pipelines and sluices used in hydro-electric projects or other hydro-electric works did not apply to the tube-wells and pipelines used in the assessee's factory. Hence, we feel that the extra shift allowance, as found admissible under the Rules, should be allowed on these items......'

4. To a great extent the finding of the Tribunal is indeed one of fact, namely, the assessee's factory does not come under the head 'Hydraulic works, pipelines and sluices'. We are impressed by the Tribunal's analysis that the heading is really 'hydraulic works, pipelines and sluices' or machineries connected therewith. Admittedly, the Ghaziabad unit of the assessee's factory is not concerned with that type of work and the assessee's claim, therefore, is not covered by the entry in Appendix I. Therefore, the Tribunal was right in its conclusion that the assessee's claim was admissible and the restriction in the Appendix did not preclude the benefit from being extended to the assessee. No material has been placed by learned standing counsel to persuade us to take a different view. We would, accordingly, answer the question referred to us against the revenue by saying :

On the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sanitary and water supply installations inside the factory did not come under the head 'Hydraulic works, pipelines and sluices 'as described under item III(ii)A(1) of Appendix I to the I.T. Rules, 1962, and that the assessee was entitled to extra shift depreciation allowance thereon as claimed by it.

5. The assessee would be entitled to the costs of this reference. Hearing fee is assessed at rupees one hundred.

J.K. Mohanty, J.

6. I agree.


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