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Commissioner of Income-tax Vs. Chandra Litho Press - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 1091 to 1093 of 1979 (References Nos. 690 to 692 of 1979)
Judge
Reported in[1986]159ITR670(Mad)
ActsIncome Tax Act, 1961 - Sections 32; Income Tax Rules, 1962
AppellantCommissioner of Income-tax
RespondentChandra Litho Press
Advocates:J. Jayaraman, Adv.
Excerpt:
- .....tribunal was right in holding that the assessee was entitled to depreciation at 10% in respect of offset machinery used in its business (2) whether, on the facts and in the circumstances of the case, the tribunal's view that any machinery which runs on electricity would constitute 'other electrical machinery' found in item iii(iii) e-3(b) of column i, part i of appendix i to the income-tax rules, 1962, is sustainable in law ?' 2. from the questions referred to above, it will be clear that the dispute between the parties is as to whether the offset machinery which runs on electricity, used by the assessee in the course of its business, would constitute 'other electrical machinery' occurring in item iii(iii) e-3(b) of column i, part i of appendix i to the income-tax rules, 1962, so as to.....
Judgment:

Ramanujam, J.

1. The following two questions have been referred to this court for its opinion by the Income-tax Appellate Tribunal at the instance of the Revenue :

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to depreciation at 10% in respect of offset machinery used in its business

(2) Whether, on the facts and in the circumstances of the case, the Tribunal's view that any machinery which runs on electricity would constitute 'other electrical machinery' found in item III(iii) E-3(b) of column I, Part I of Appendix I to the Income-tax Rules, 1962, is sustainable in law ?'

2. From the questions referred to above, it will be clear that the dispute between the parties is as to whether the offset machinery which runs on electricity, used by the assessee in the course of its business, would constitute 'other electrical machinery' occurring in item III(iii) E-3(b) of column I, Part I of Appendix I to the Income-tax Rules, 1962, so as to enable the assessee to claim depreciation at the rate of 10%. The Income-tax Officer has proceeded on the basis' that since the offset machinery cannot generate electricity, it will not fall within the expression 'other electrical machinery' and, therefore, the assessee is not entitled to claim depreciation at 10%, while the assessee's claim was that since the use of the offset machinery cannot be had without the use of electricity, it should be taken to fall within the expression' other electrical machinery'. The Tribunal agreed with the contention of the assessee that since the use of the offset machinery cannot be had except with the use of electricity, it should be taken to fall within the expression 'other electrical machinery'. The question is whether the view taken by the Tribunal in this case could be accepted as tenable. This view taken by the Tribunal was the subject matter of a batch of tax cases before this court in CIT v. M. S. Sahadevan : [1980]123ITR820(Mad) and this court has disagreed with the view taken by the Tribunal. As a matter of fact, in that case this court did not accept either the contention of the Revenue or the contention of the assessee, but has chosen to take the view that the nature of the machinery should decide as to whether it falls within 'other electrical machinery' or not. The learned judges have expressed the view thus (p. 824) :

'In our opinion, the correct way in which the entry is to be understood lies in between these two extremes. Wherever the machinery is such that in-built into it is the electric motor, then it would be electrical machinery. For instance, taking a mono-bloc, it is possible to have a motor pump separately and an electric motor separately. In such a case, it would not be electrical machinery. But the mono-bloc is worked electrically because it cannot be operated except with the aid of electricity, as the electric motor is in-built into it. Other examples may also be thought of. Therefore, the nature of the enquiry in order to find out whether it is electrical machinery or not is to investigate whether the electric motor is in-built into the machinery and whether it forms vital and inseparable part and parcel of the machinery. The fact that electrical devices are put into the machinery would not by itself determine the character of the machinery. The electrical devices would only be for the purpose of allowing electricity to pass through the particular item to produce the desired results. Such machinery cannot be taken to be electrical machinery. However, where the machinery itself is a single unit with the electric motor forming a vital and inseparable part of it, then the machinery would be electrical machinery.'

3. Thus, the court has taken the view that the fact that the machinery cannot be used without electricity cannot make the machinery' electrical machinery', that the fact that the machinery itself did not generate the motive power may not take it out of 'electrical machinery' and that whenever the machinery is such that in-built into it is the electrical motor, then it would be electrical machinery.

4. In this case, as there has been no investigation on the lines suggested by this court in the above case for the purpose of determining whether the offset machinery in question falls within the entry 'other electrical machinery', the questions have to be returned unanswered with a direction to the Tribunal to get necessary materials from the assessee and proceed to decide the question de novo in the light of what is indicated in the judgment rendered in the above case and decide the question as to whether the offset machinery used by the assessee in his business falls within the entry 'other electrical machinery' so as to enable him to claim depreciation at 10%. There will be no order as to costs.


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