1. This is a reference under Sections 66(1) of the Indian Income-tax Act by the Income-tax Appellate Tribunal, Madras 'A' Bench and the question of law referred is whether the assessees are entitled to development rebate on certain motor vehicles under Sections 10(2)(vi)(b).
2. The assessees are a private limited company owning a fleet of motor vehicles and doing transport business. In the year of account 1954-55 the assesses;; purchased four buses at a cost of Rs. 74,327/- for use in their business and in the return submitted by them for the assessment year 1955-56 they claimed either development rebate or initiul depreciation on the cost of these vehicles, whichever was applicable. The Income-tax Officer allowed initial depreciation of 20 per cent of the cost under Sections 10(2)(vi) but disallowed development rebate of 25 per cent under Sections 10(2)(vi)(b). The reasoning of the Income-tax Officer was that motor vehicles were not 'plant installed/'
3. The assesses appealed to the Appellate Assistant Commissioner who concurred with the decision of the Income-tax Officer and dismissed the appeal. On further appeal to the Income-tax Appellate Tribunal, the Tribunal reversed the decision of the Appellate Assistant Commissioner and allowed development rebate of 25 per cent on the cost of the motor vehicles. The Tribunal held that the word 'installed' occurred in Sections 10(2)(vi) and since the Income-tax Officer interpreted the word as to apply to motor vehicles when he allowed initial depreciation, he ought to have given the same interpretation to the same word occurring in Sections 10(2)(vi)(b) also.
4. On application by the Commissioner of Income-tax to the Income-tax Appellate Tribunal the above question has been referred to us for decision.
5. Two decisions of the Bombay High Court are placed before us on this question. The first is Commr. of Income-tax (Central) Bombay v. Saraspur Mills Ltd., : 36ITR580(Bom) . In that case the Saraspur Milk Ltd. : 36ITR580(Bom) , purchased certain motor cars and bicycles in the year of account 1954-55 for use in their business and claimed in the year of assessment 1955-56 development rebate under Sections 10(2)(vi)(b) on the cost of these motor cars and bicycles. The Income-tax authorities allowed the assessees the normal depreciation under Sections 10(2)(vi) but they did not allow any development rebate. On appeal the Tribunal allowed development rebate as claimed by the assessees holding that motor cars and bicycles were 'plant installed' under Sections 10(2)(vi)(b). On reference to the Bombay High Court under Sections 66(1) of the Act their Lordships of the Bombay High Court observed as follows:
'The expression 'installed' is also used in the sense of 'inducted or introduced' and if that be the sense in which that expression is used, there is nothing inconsistent in the context in which that word is used which will justify us in holding that the word 'plant' in Sections 10, Sub-section (2) Clause (vi)(b) of the Income-tax Act was not intended to include vehicles'.
6. The second decision is Commr. of Income-tax, Bombay City v. Lever Brothers (India) Ltd. : 37ITR140(Bom) . The same learned Judges who decided the former case decided this case also. It was held in this case that motor lorries and motor cars were 'plant or machinery installed' and it was further held that even office appliances would come within the term 'plant or machinery installed'.
7. Wo are in agreement with this view expressed by their Lordships of the Bombay High Court in the two decisions referred to above. Under Section 10(5) of the Act 'plant' includes vehicles. In the case before us the assessees are doing transport business and the plant or machinery which are wholly used by them for the purposes ot the business carried on by them are the motor vehicles run by them and by their very nature these vehicles are incapable of being fixed in position when they are worked or used. Hence we hold that the term 'plant installed' applies to motor vehicles which are 'inducted or introduced' into the business.
8. We therefore answer the question, referred to us in the affirmative, that the assessees are entitled to development rebate on the cost of the vehicles under Sections 10(2)(vi)(b) of the Act.
9. The Commissioner will pay the costs of theassessees which is fixed at Rs. 100/-.