VEERASWAMI J. - The question referred to us, as to whether the assessee is entitled to depreciation at 10% turns on the interpretation of rule 8 of the Indian Income-tax Rules, 1922. On that matter, the Income-tax Officer and the Tribunal have taken one view differing from the Appellate Assistant Commissioner, who had held that the assessee would be entitled to depreciation only at 5%. The assessee is an electric supply corporation in Tiruchirapalli District and is a supply undertaking. For the assessment years 1950-51 to 1953-54, 1955-56 and 1956-57, the assessee claimed 10% depreciation on house-service connections and post which was allowed by the Income-tax Officer. This the Income-tax Officer did on the view that it fall under rule 8-III(3)E, which relates to electric supply undertaking - (i) electric plant, machinery, boilders. This is the view which found acceptance with the Tribunal. But the Appellate Assistant Commissioner felt that depreciation would be allowable only at 5% under rule 8-III(3)(C)(v), which is in respect of electrical machinery - overhead cables and wires (N.E.S.A.). The Appellate Assistant Commissioner considered that 'electric plant, machinery, boilers' would not include overheads cables and wires. The Tribunal however was of the following opinion :
'We consider that there is validities in contention on behalf of the assessee that as it (assessee) is an electric supply undertaking, clause E would apply. The overhead cables and wires referred to in item (v) in clause C would, in our opinion, refer to such cables and wires as are connected with electric machinery. So long as 'overhead cables and wires' could also come under electric plant and/or machinery, it would be more appropriate to classify them as under E.
We consider that the Tribunal took the correct view as to the scope of clasue E as including overlooked cables and wires. Rule 8 which has been framed under section 10(2)(vi) makes allowance in respect of depreciation of machinery and plant besides buildings or furniture at a certain percentage of the written down value or original cost, and the case may be, equal to one-twelfth the number shown in the corresponding entry in the second column of the statement following the rule. The columns which follow the rule are classified under three heads : I - buildings of various classification; II - furniture and fitting; and III - machinery and plant. Under the heading of machinery and plant, we have a general ate provided as also special rates to be applied to the whole of the machinery land plant used in certain specified concerns. Clause III makes provision for further special rates under clause (3) of this entry. This applies to special rates to be applied to other machinery and plant. Under this category, clause C pertains to electric machinery and this entry mentions six items o which the fifth is 'overhead cables and wires.' Clause E, as we mentioned, relates to electric supply undertaking - (i) electric plant, machinery, boilders.
The contention for the department is that machinery in clause E does not include overhead cables and wires and, therefore, only sub-clause (v) of clause C in the column n would apply. On the other hand, the assessee would any that it being an electric supply undertaking, machinery in clause E is used in a wide sense so as to include overhead cables and wires.
It is clear from clause C that electric machinery in general would include overhead cables and wires. It is true that in clause E no specific mention of overhead cables or wires is made. But, in our opinion, on that account it cannot be said that electric machinery in clause E should be read as excluding from its scope overhead cables and wires. The use of the expression 'electric plant, machinery, boilers' in clause E appears to have been made in a comprehensive sense so as to include parts of the plant as well as electric machinery. Clause E seems to be in the nature of an exception to clause C and where it concerns electric supply undertaking, a consolidated rate is fixed for electric plant, machinery, boilers, without reference to the various parts which go to make up the plant, machinery or boilers.
It follows therefore the Tribunal was right in allowing 10% depreciation and restoring the order of the Income-tax Officer on that matter. The reference is answered in favour of the assessee and against the department. Counsels fee Rs. 250.
Reference answered in favour of the assessee.