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Commissioner of Income-tax Vs. Saraswati Industrial Syndicate Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference Nos. 29 and 30 of 1971 and 14 of 1972
Judge
Reported in[1982]136ITR366(P& H)
AppellantCommissioner of Income-tax
RespondentSaraswati Industrial Syndicate Ltd.
Cases ReferredHinton v. Maden
Excerpt:
- sections 100-a [as inserted by act 22 of 2002], 110 & 104 & letters patent, 1865, clause 10: [dr. b.s. chauhan, cj, l. mohapatra & a.s. naidu, jj] letters patent appeal order of single judge of high court passed while deciding matters filed under order 43, rule1 of c.p.c., - held, after introduction of section 110a in the c.p.c., by 2002 amendment act, no letters patent appeal is maintainable against judgment/order/decree passed by a single judge of a high court. a right of appeal, even though a vested one, can be taken away by law. it is pertinent to note that section 100-a introduced by 2002 amendment of the code starts with a non obstante clause. the purpose of such clause is to give the enacting part of an overriding effect in the case of a conflict with laws mentioned with the.....sandhawalia, j.1. this set of income-tax references at the instance of both the revenue and the assessee raises certain interesting questions of interpretation. as common questions of law and fact arise, i propose to dispose of them by this single judgment.2. these references pertain to two assessment years 1964-65 and 1965-66 of the assessee, m/s. saraswati industrial syndicate ltd., yamunanagar, for which the respective accounting periods ended on the 31st of august 1963, and the 31st of august, 1964. in the relevant statements of the case, as many as nine questions in all have been framed, but i propose to deviate from the serial order therein and first take up the two questions at the instance of the revenue.3. m/s. saraswati industrial syndicate ltd. is a company carrying on the.....
Judgment:

Sandhawalia, J.

1. This set of income-tax references at the instance of both the revenue and the assessee raises certain interesting questions of interpretation. As common questions of law and fact arise, I propose to dispose of them by this single judgment.

2. These references pertain to two assessment years 1964-65 and 1965-66 of the assessee, M/s. Saraswati Industrial Syndicate Ltd., Yamunanagar, for which the respective accounting periods ended on the 31st of August 1963, and the 31st of August, 1964. In the relevant statements of the case, as many as nine questions in all have been framed, but I propose to deviate from the serial order therein and first take up the two questions at the instance of the revenue.

3. M/s. Saraswati Industrial Syndicate Ltd. is a company carrying on the business of manufacture and sale of sugar and machinery for sugar mills and other industries. During July, 1963, its managing director visited Japan in connection with the company's business. A deduction of Rs. 11,922 on account of expenses was hence claimed by the company. The ITO disallowed the company's claim primarily on the ground that this expense was of a capital nature because the tour to Japan was undertaken with a yiew to enter into a collaboration agreement with a Japanese firm for the setting up of a unit for the manufacture of cement machinery. The AAC upheld the ITO's finding on this point. On further appeal, the Income-tax Appellate Tribunal found on facts that the company had already manufactured and sold cement machinery worth a little less than a lakh of rupees and that the tour of the managing director was not undertaken for the purpose of entering into a collaboration agreement for setting up a new venture, but it was for the purpose of improving upon the working of a venture already in existence, and for increasing its efficiency and output. The Tribunal, therefore, accepted the contention of the company that the amount claimed was a revenue expenditure. From these facts, the following question has been formulated :

'Whether, on the facts and in the circumstances of the case, the amount of Rs. 11,922 representing travelling expenses of the managing director is allowable as a revenue expenditure ?'

4. Mr. D. N. Awasthy, on behalf of the appellant-revenue, primarily contended that the tour of the managing director was solely for the purpose of signing the collaboration agreement and it was after this had been done that a new venture for the manufacture of cement machinery was set up. On these premises, he contended that the expense was of a capital nature.

5. I am unable to find any adequate factual basis for the appellant-revenue's claim that the tour was primarily or solely for the signing of thecollaboration agreement. Indeed, the facts found by the Tribunal point entirely to the contrary. It has been in terms found by the Tribunal that the business activity of manufacturing cement machinery was already in existence before the tour was undertaken. Not only that, in fact, substantial quantities of such machinery had been manufactured and marketed. Even prior to the 18th July, 1963, which is the date of the collaboration agreement, admittedly, two sales of about Rs. 60,622 on the 23rd of April, 1963, and Rs. 38,821 on the 3rd of June, 1963, had already been made by the company. There is no challenge to the date or the fact of these transactions. From this it is manifest that the manufacture of cement machinery was not the result or the consequence of the collaboration agreement. The Tribunal has, in terms, found that the object and purpose of the tour was to improve upon the working of the venture already in existence. It is the admitted case that no machinery whatsoever was ever purchased by the company from the collaborating firm in Japan, nor was this even an ancillary purpose of the tour. The object and the purpose of the tour is obviously a finding of fact which has been duly arrived at by the Tribunal and I find no reason whatsoever to go beyond the same. It is manifest from the facts found that the tour of the managing director was directed to the acquisition of the technical know-how to improve the efficiency and the working of its plant already engaged in the manufacture of cement machinery. It was, therefore, directly related to the company's profit-making activities. Once that is so, the case of the assessee is clearly within the ratio of Sayaji Iron & Engineering Works Pvt. Ltd. v. CIT : [1974]96ITR240(Guj) upon which reliance has been rightly placed by Mr. Sibal. Therein the Division Bench, on analogous facts, had concluded in the following terms (as p. 248):

'In that view of the matter, therefore, we are of the opinion that the Tribunal was not justified in disallowing the proportionate claim of the assessee-company for the expenses incurred in connection with the trip abroad by its two directors and the production manager in connection with acquainting themselves with the technical know-how for manufacturing electric hoists on the ground that it was in the nature of capital expenses.'

6. I, therefore, return the answer to the question in the affirmative, that is, in favour of the assessee and against the revenue.

7. The facts relevant to the second question claimed by the revenue may now be noticed. There was a company named the Indian Sugar and General Engineering Corporation Ltd., carrying on the business of manufacture and sale of sugar and repair of machinery and machinery parts, particularly sugar machinery. By an order dated the 28th September, 1962 (annex. A) of the Punjab and Haryana High Court, this company wasamalgamated with the assessee-company, the Saraswati Industrial Syndicate Ltd. It deserves recollection that the assessee-company was also carrying on the business of manufacturing machinery parts required for the purpose of running its own sugar mills. The object, inter alia, of the amalgamation of the two companies was that because of the similarity of business, the same could be conveniently and advantageously combined. The pooling of the financial and technical resources of the two would facilitate the expansion of the undertaking. Also the amalgamation would result in substantial savings in overhead expenses and would be conducive to economy and improve the efficiency in the working of the concerns.

8. Prior to its amalgamation, the Indian Sugar and General Engineering Corporation Ltd. was allowed an expenditure to the extent of Rs. 58,735 on accrued basis in its assessments. This amount had been shown as a trading liability and, on the amalgamation of the two companies, these liabilities were taken over by the assessee-company. In its return for the assessment year 1965-66, the assessee showed the aforesaid sum as being unclaimed balances written back to the profit and loss account in Section 'F' of the return and claimed that it was exempt from income-tax. The assessee-company claimed that under Section 41(1) of the I.T. Act, the abovesaid amount was not liable to tax because the expenditure was allowed in the case of the Indian Sugar and General Engineering Corporation Ltd., which was a different entity from the assessee-company. However, this claim was rejected by the ITO and he included the amount of Rs. 58,735 as the assessee's income under Section 41(1). The AAC upheld the order of the ITO. The Tribunal, however, agreed with the assessee-company's assertion that the Indian Sugar and General Engineering Corporation Ltd. was a distinct entity, and, therefore, it was not correct to import and apply Section 41(1) to the case of the assessee. Consequently, the amount of Rs. 58,735 was deleted from the income of the assessee-company for the purposes of tax assessment. From these facts, the question arising for determination is in the following terms:

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the amount of Rs. 58,735 was not chargeable to tax under Sub-section (1) of Section 41 of the Income-tax Act, 1961, for the assessment year 1965-66 ?'

9. Inevitably, the controversy has to revolve around the provision of Section 41(1) and for facility of reference this may first be set down :

'41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year theassessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not.'

10. Now, the question that arises on the language of the abovesaid provision is whether the present assessee, Saraswati Industrial Syndicate Ltd., is chargeable to income-tax on the sum of Rs. 58,735, which, during the previous year, was allowed as an expenditure of the nature of a trading liability to the Indian Sugar and General Engineering Corporation Ltd.

11. To determine the above, the crux of the matter is as to the legal results that flow from the amalgamation of the two companies. Now, the word 'amalgamation' does not have any definite legal meaning. Indeed, it is not a legal term or a term of art but is essentially a commercial term. Even as such, it does not seem to have an exact or definite connotation. The issue, therefore, arises whether on the amalgamation of two companies, the amalgamating company becomes totally non-existent or extinct in the eye of law Or is it that the amalgamating company blends itself and continues its existence in the amalgamated company We are inclined to the view that the latter is the correct enunciation of the legal result of amalgamation. By virtue of the court's order and the consequent valid amalgamation, the two companies merge and are absorbed into each other as one. They indeed both blend together to form one company. The end result, therefore, is that neither one nor the other becomes extinct but they continue their entities in a blended form together. We derive support for this view from the observation of Justice Buckley in Wild v. South African Supply and Cold Storage Company [1904] 2 Ch 268, wherein the learned judge was drawing the distinction between 'reconstruction' and 'amalgamation' and has lucidly observed as follows (p. 287):

'Now what is an amalgamation? An amalgamation involves, I think, a different idea. There you must have the rolling, somehow or other, of two concerns into one. You must weld two things together and arrive at an amalgam--a blending of two undertakings. If does not necessarily follow that the whole of the two undertakings should pass--substantially they must pass--nor need all the corporators be parties, although substantially all must be parties. The difference between reconstruction and amalgamation is that in the latter is involved the blending of two concerns one with the other, but not merely the continuance of one concern.'

12. The above-said enunciation has received repeated approval and affirmance in the English courts. In Corporation of the Royal Exchange Assurance v. Walker [1935] 1 Ch 567, Lord Justice Romer, whilst agreeing with the abovesaid view of Buckley J., quoted with approval the following proposition :

'...The word 'amalgamation' has no definite legal meaning. It contemplates a state of things under which two companies are so joined as to form a third entity, or one company is absorbed into and blended with another company.'

13. The learned members of the Tribunal appear to me to have slipped into an error by importing into the concept of amalgamation, the nuances of the dissolution of a company by its winding-up. There is no manner of doubt that a winding-up order and a formal dissolution would put the corporate personality of a company to an end and from that point onwards it would become extinct. That, however, is not the necessary result of the amalgamation of two companies with each other under the court's order, as in the present case. The distinction between 'dissolution by winding-up' and 'amalgamation', therefore, is one of substance. Whilst in the former, there is a complete destruction of the corporate personality, in the latter there is a blending of the corporate personality of one with another corporate body and the continuance as such with the other. To equate a winding-up and consequent dissolution and their legal results with those of an amalgamation is, therefore, neither warranted on principle nor on authority.

14. The Tribunal seems to have arrived at its conclusion by a process of rather strained and technical reasoning. It was so fully conscious of the severity of the construction of Section 41 proposed by it that it was stated:

'We need not stress or recapitulate the principle, that in taxation, there is no such thing as a logical or equitable construction. The Act has to be read as it is, its plain meaning ascertained, then effect given to it whatever the consequences may be.'

15. I am unable to hold that the principles of logic are inapplicable to the Indian I.T. Act or where two constructions are open, then the preference for the better one may not be reinforced by the anomalous consequences that may follow from adopting the other. The interpretation placed on Section 41(1) of the Act by the Tribunal appears to me to be so hypertechnical that it rises to the point of being patently erroneous.

16. To my mind, startling and anomalous results would flow from the construction that the learned Tribunal had sought to adopt. If the results of amalgamation are deemed to be an extinction of the corporate personality of the amalgamating company, then it would equally follow that no benefits, which could accrue to the amalgamating company, could be taken advantage of by the amalgamated company. In terms we posed the question to the learned counsel for the respondent that if a substantial tax rebate was due to the Indian Sugar & General Engineering Corporation Ltd., before its amalgamation then would the amalgamated company (Saraswati Industrial Syndicate Ltd.) be not entitled to claim the same later To my mind, the answer patently would be in the affirmative and the learned counsel also could point to nothing which would lead to a contrary result. If that is so, that the benefit of a tax rebate of the Indian Sugar and General Engineering Corporation Ltd. would be available to the present assessee-company, then by the same force of logic, as a reverse case, the tax liability of the said company must also necessarily be discharged by the assessee-company. Again, on the view adopted by the Tribunal, the results of an amalgamation would be that if the amalgamating company had tax liabilities or tax assessments pending for five or seven years, then the moment it amalgamated with another company, it would lose its corporate personality and there would remain no entity to discharge those liabilities and the amalgamated company would not be liable for the same. It is an elementary rule of general law and equity of the construction of statutes that the benefit and the burden of a legal result must go together. To me, it does not appear to stand to reason that the assessee-amalgamated-company can have the benefit of the amount of Rs. 58,735 coming into its hands but not bear corresponding burden of the liability to pay tax thereon. The same results would flow from the concept that the amalgamated company indeed is a successor-in-interest of the amalgamating company and, therefore, entitled to both the assets and the liabilities thereof. Since the assets of both the companies merge and blend together to constitute the new company, it is both logical and equitable that the-benefits and liabilities attacking thereto must, therefore, be saddled on the amalgamated company, that is, in the present case, the assessee.

17. Learned counsel for the respondent-assessee had first placed reliance on CIT v. Hukumchand Mohanlal : [1971]82ITR624(SC) , for the contention that the assessce now is not the same as the former Indian Sugar and General Engineering Corporation Ltd. The case cited is one of natural persons and it is patent that on the death of a human being, his personality becomes extinct. It is obvious that the concept of corporate personality and the amalgamation of companies has no analogy or relevance to the actual physical death of human beings. This case, therefore, is of no aid to the assessee. The same is true in regard to CIT v. V.T. Kuttappu & Sons : [1974]96ITR327(Ker) . Therein it was found as a fact that there were two distict and separate entities, namely, the assessee-firm and an HUF. On those facts, it was held that deductions allowed to the HUFcould not be brought to tax in the hands of an altogether distinct and separately taxable entity, like the business partnership. That obviously is not the case here.

18. I, therefore, hold that Section 41(1) must be construed broadly to imply that in the eye of law the corporate personality of the amalgamating company is blended and continued in the amalgamated company. The result would be that the assessee-company would be liable to pay tax on the amount of Rs. 58,735 coining iato its hands from the assets of the Indian Sugar and General Engineering Corporation Ltd.

19. I, accordingly, return an answer to this question in the negative, that is, in favour of the revenue and against the assessee.

20. I may now advert to the four questions raised at the instance of the assessee. The issues of law herein are identical and would govern the assessments for both the years in these cases. For convenience, the facts therefor are noticed from Income-tax Reference No. 30 of 1971.

21. The assessee-company is the owner of certain buildings and property in which it carries on business and also a part whereof is occupied by its workmen. In respect thereof the company paid a sum of Rs. 2,431 on account of the State property tax. The ITO disallowed this payment, claimed as an allowable revenue expense, on the ground that the tax had been paid by the company not in its capacity as a trader, but in its capacity as the owner of the property. The AAC and the Tribunal upheld the view of the ITO. From these facts the question arising is as follows :

'Whether, on the facts and in the circumstances of the case, the amount of Rs. 2,431 paid as property tax on the land and buildings used for purposes of the company was allowable as a revenue expenditure ?'

22. The Tribunal in disallowing the amount had relied on the decision of the Calcutta High Court reported as CIT v. Kawasaki Risen Kaisha Ltd. : [1970]75ITR537(Cal) . Mr. Awasthy conceded that in the light of the Supreme Court decision reported in Indian Aluminium Co. Ltd. v. CIT : [1972]84ITR735(SC) , the view of the Tribunal cannot now be upheld. It, therefore, becomes the admitted position that so far as the property used for the factory and the business premises of the company are concerned, the property tax would be allowable as a revenue expense.

23. An argument has, however, been raised by Mr. D. N. Awasthy that as regards the property which is occupied by the workmen of the factory, the property tax in regard thereto cannot be allowed as a revenue expense. It was suggested that the provision of housing as quarters for the workers was not intimately connected with the carrying on of the business and, therefore, expenses in regard thereto cannot be claimed as a permissible deduction.

24. I am unable to agree. Perhaps in the early nineteenth century, when the doctrine of laissez-faire was at its height, it might have been possible to contend that the running of industry and the construction of housing for its labour were divorced from each other. However, in the present day, it appears clearly anomalous to contend that the provision of so basic an amenity, like shelter and housing to the workers of an industry, would not be directly and intimately connected with the running thereof. Indeed, in certain cases, it may be imperative that part of the labour force lives on or near the factory premises. In other cases, it may be a sizable attraction extended by the industry to attract the labour force. This apart, modern business practices involve, if not require, that adequate accommodation and housing should be provided to a substantial part of its labour force and the same is obviously conducive to the advancement of the business. In any case, it is something which is directly incidental to the running of the business and is either necessary or at least patently justified by commercial expediency. The legal issue here is whether housing for the labour of an industry on or near the premises is for the purposes of business or not and my answer to the same would be clearly in the affirmative.

25. Support for the above view can equally be derived from the statutory provisions of the I.T. Act, 1961, itself. Section 32(1) of the Act relating to depreciation uses language, which is in pari materia with Section 37(1) of the Act and the test common to both is that the expense must be directly related to the purposes of business or profession. Now, Sub-clause (ii) of Sub-section (1) of Section 32 provides for depreciation in case of buildings at such percentage on the written down value thereof as may, in any case, or class of cases be prescribed. The word 'prescribed' herein, by virtue of Sub-clause (33) of Section 2, means prescribed by the Rules made under the Act. Reference to the relevant rule, therefore, is to Rule 5, which has been framed in relation to Section 32(1) of the Act. This rule lays down that in respect of the depreciation of the building, the same shall be calculated at a percentage specified in the second column of the Table in Pt. I of App. I to the Rules. Now, a reference to serial No. 1 in Pt. I of App. I, above referred to, would show that included in the buildings, on which depreciation would be allowed, are also the employees' quarters. This would leave no manner of doubt that so far as the depreciation is concerned, 'employees' quarters' are in terms accepted by the statute, as being used for the purposes of the business and profession of the assessee. Once that is so, one fails to see why the same employees' quarters would not be within the ambit of being wholly or exclusively for the purposes of the business or profession under Section 37(1) of the Act. It deserves high-lighting that in the case of the present assessee itself, the revenue has throughout allowed depreciation on these very employees' quarters. A reference to the assessment order itself would showthat rateable deduction has been given depending on the fact whether the employees' quarters were of the first, second or third class, apart from depreciation on the factory buildings and the offices and godowns attached thereto.

26. As noticed above, both on principle and in the light of the statutory provision, it appears manifest that the provision of housing for the labour of the industry must be viewed as directly and intimately connected with the carrying on of the same and is, therefore, exclusively for the purposes of the business or profession carried on by the assessee. Nevertheless if precedent is needed for the proposition, it is available in the authoritative exposition by Subba Rao J. (as his Lordship then was) after an exhaustive discussion in CIT v. Malayalam Plantations Ltd. : [1964]53ITR140(SC) in the following terms (p. 150):

'The aforesaid discussion leads to the following result: The expression 'for the purpose of the business' is wider in scope than the expression 'for the purpose of earning profits'. Its range is wide: it may take in not only the day to day running of a business but also the rationalization of its administration and modernization of its machinery ; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business; it may comprehend many other acts incidental to the carrying on of a business.'

27. More directly in point is the Division Bench judgment reported as Jamshedpur Engineering and Machine . v. CIT : [1957]32ITR41(Patna) . The issue therein was whether substantial sums spent for the repairs of quarters for the factory workers were business expenditure and deductible as such. After adverting to a string of English authorities, the Bench answered the question in unequivocal terms as follows (p. 55):

'For these reasons we hold that the expenditure of Rs. 6,005 and Rs. 5,542 incurred by the assessee for the repair and maintenance of residential quarters in the assessment years 1949-50 and 1950-51 should be allowed as business expenditure to the assessee under Section 10(2)(xv) of the Indian Income-tax Act.'

28. In view of the above, I would hold that the provision of accommodation and housing for the workers of the assessee is clearly for the purpose of business and, therefore, the taxes in regard thereto are a permissible deduction as revenue expenditure. My answer to the question posed is, therefore, dearly in the affirmative, that is, in favour of the assessee and against the revenue.

29. Briefly the facts relating to the next question are that during the course of its sugar manufacturing business, the assessee-company realised a sum of Rs. 83,317 as penalty from such growers whose supply of cane to its sugar factory fell short of 85 per cent. of the quantity contracted to be supplied by them. The ITO treated this amount as income of the assessee and his decision was upheld by the AAC. The Tribunal also agreed with them by holding that such receipts were trading receipts. From these facts, the following question has been formulated :

'Whether, on the facts and in the circumstances of the case, the amount of Rs. 83,317 recovered as bond penalty from the cultivators and shown on the liabilities side of the balance-sheet was a trading receipt liable to be. included in the assessable income ?'

30. Learned counsel for the assessee has been unable to show any flaw in the reasoning of the Tribunal or the authority below it. Indeed, the matter was not very seriously pressed on behalf of the assessee on this question. I, accordingly, return the answer to the question in the negative, that is, in favour of the revenue and against the assessee.

31. The assessee-company had Claimed extra shift allowance on plant and machinery on the basis of its working an engineering unit for 210 days as double shift and for 94 days as triple shift. In respect of its sugar factory, the claim was for working triple shift for 118 days. In allowing extra shift allowance on additions to plant and machinery, the ITO allowed it in the ratio of 30/300 in respect of additions for more than 30 days but less than 180 days.

32. The claim of the company was that the remarks in this regard in Pt. I of App. I to the I.T. Rules, 1962, referred to the working of the concern, as a whole, and not to the working of an individual item of machinery and it was, therefore, claimed that the full extra shift allowance for the entire plant and machinery including the additions on this basis should be allow, ed. This claim was negatived by the ITO and this order was upheld by the AAC and also by the Tribunal. The question raised is in the following terms:

'Whether, under the relevant provisions of the Income-tax Rules, the extra shift allowance on additions to plant and machinery was allowable on the basis of the number of days for which the concern worked as a whole even though the number of extra shift working days of the particular machinery was smaller ?'

33. Mr. Sibal, on behalf of the assessee, has taken us through the relevant provision and also into the details of the extra shift allowance allowed by the ITO. We are unable to find any conflict between the statutory provisions and the shift allowance granted in favour of the assessee. The reasoning of the Tribunal on the point appears to me to be unexception-able. Affirming the same, I return an answer to the question in favour of the revenue and against the assessee.

34. During the assessment year, the company acquired loose tools worth Rs. 24,401 (apart from other equipment) for the running of its industrial establishment. The ITO disallowed the rebate thereon on the ground that the items being loose tools were not machinery or plant and, therefore, the company was entitled only to replacement and no depreciation on the value thereof. Similarly, the claim for development rebate in respect of these items was also disallowed. The AAC upheld the disallowance of these items. The company appealed to the Tribunal which also agreed with the authorities below and rejected its claim that even these loose tools and implements were plant or machinery and, therefore, the asses-see-company was entitled to depreciation, extra shift allowance and development rebate on the value thereof. The question raised is now in these terms:

'Whether tools and implements and works instruments costing Rs. 24,401 are plant or machinery on which depreciation, extra shift allowance and development rebate were admissible ?'

35. Now, there is no dispute here that the relevant equipment purchased by the company is directly and intimately connected with the running of its factory, A reference to the enumerated loose tools and implements in this context would show that these are obviously required for the working, maintenance and repair of the industrial establishment. The sole issue that, therefore, arises is whether these loose tools and implements are within the ambit of the word 'plant or machinery', as used in the statute. Mr. Sibal, on behalf of the assessee, did not contend that these loose tools could appropriately come within the ambit of the word 'machinery'. The matter is thus put in a narrower compass and it is only to be determined whether the word 'plant' would adequately cover this equipment.

36. It is unnecessary and indeed inappropriate to go back to the dictionary meaning of the word 'plant'. This is so because the statute had given an extended meaning to the same by virtue of the definition in Section 43(3) of the Act which is in the following terms:

'43. (3) 'Plant' includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession.'

37. It is evident from the above that the intention of the Act was to give a wider amplitude to this term. Principle apart, there is high authority for the proposition that the term is not to be given any restricted meaning. In Yarmouth v. France [1887] 19 QBD 647 , Lord Justice Lindley had this to say (p. 658):

'The next question is whether the horse which injured the plaintiff is 'plant' within the meaning of Section 1, Sub-section (1), of the Act. There is no definition of plant in the Act: but, in its ordinary sense, it includes whatever apparatus is used by a businessman for carrying on his business, not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business.'

38. As is evident from the above, the issue in that case was whether a horse used by a warfinger and warehouseman for pulling a trolley would fall within the term 'plant'. Both Lord Justice Lindley and Lord Esher M.R. answered this question in the affirmative and it was reiterated that the word 'plant' need not be confined necessarily to inanimate things but may well include an animal. The above-quoted observations of Lord Justice Lindley have been in terms approved by Lord Reid in the House of Lords judgment in Hinton v. Maden & Ireland Ltd. [1959] 38 TC 391; [1960] 39 ITR 357.

39. It deserves highlighting that the abovesaid view has been arrived at in the English courts even in the absence of any extended definition. The case of the assessee is obviously on a stronger footing in view of the definition of Section 43(3) of the Act. Reliance has also rightly been placed on the following observations in CIT v. Indian Turpentine and Rosin Co. Ltd. : [1970]75ITR533(All) :

'This definition of plant contained in Sub-section (5) of Section 10 is very wide. The term 'plant' includes such articles as books and scientific apparatus. There should, therefore, be no difficulty in treating poles, cables, conductors and switch-boards for distribution of electricity as plant within the meaning of clause (vib) of Section 10(2) of the Act.'

40. In view of the provisions of Section 43(3), on principle, and in the light of of the abovesaid authorities, we are clearly of the view that loose tools and implements in the present case would be 'plant', on which depreciation, extra shift allowance and development rebate would become admissible. I answer the question in the affirmative and in favour of the asses-see.

41. Parties to bear their own costs in the references.

Bal Raj Tuli, J.

42. I entirely agree.


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