1. The learned judgment set out the statement of case which ran as follow :
By this application, the assessee requires the Appellate Tribunal to refer to the high Court, a question of law, which is said to arise out of the Tribunal's order dated 15th December, 1961, in I.T.A. No. 11868 of 1959-60. Inasmuch as, in our opinion, a question of law does arise out of the aforesaid order, we hereby draw up a statement of the case and refer it to the high Court of Mysore at Bangalore, under section 66(1) of the Indian Income-tax Act.
2. The assessee is a registered firm deriving income from the manufacture and sale of beedies. In the year of account pertaining to the assessment year 1958-59, it purchased (i) a new electric stove; and (ii) a new Mercedes Benz lorry engine.
3. The first was used for boiling gum powder in hot water for preparing pastes used in packing beedies in labels and wrappers. The second was fitted to the Dodge lorry used for the transport of the beedies and the raw materials.
4. The assessee claimed development rebate on these items among many others. The Income-tax Officer refused to allow it. The Appellate Assistant Commissioner agreed with the Income-tax Officer. Aggrieved with this, the assessee preferred an appeal to the Tribunal and contended that these two articles were purchased and used in the relevant accounting year wholly for business purposes. He referred to the decision of the Madras high Court in Mir Mohd. Ali v. Commissioner of Income-tax. They held that the electric stove could not be considered as 'plant', especially for the assessee's business, which was that of manufacture of beedies.
5. The Tribunal following the decision of the Bombay high Court in Maneklal Vallabhadas Parekh v. Commissioner of Income-tax, in preference to the decision of the Madras high Court, cited by the assessee, refused to grant the development rebate.
6. On these facts, the question of law that arises i :
'Whether, on the facts and in the circumstances of the case, the assessees are entitled to development rebate under section 10(2)(vib) in respect of (a) the new Tata Mercedes Benz Diesel Engine fitting to their lorry and (b) the new Electric Stove, both used wholly for business purposes?'
7. There is conflict of judicial opinion on the question of law debated before this court. The main question for decision is as to what is the meaning of the expression 'machinery' found in section 10(2)(vib) of the Indian Income-tax Act, 1922, which will be hereinafter referred to as the 'Act'.
8. Section 10(2) provides for the computation of profits or gains. Section 10(2)(vi) provides for making allowances for depreciation. Section 10(2)(vib) say :
'In respect of machinery or plant being new, which has bene installed after the 31st day of March, 1954, and which is wholly used for the purposes of the business carried on by the assessee, a sum by way of development rebate in respect of the year of installation equivalent to twenty five per cent. of the actual cost of such machinery or plant to the assesse :....'
9. The word 'plant' is defined in section 10(5) as including :
'Vehicles, books, scientific apparatus and surgical equipment purchased for the purposes of the business, profession or vocation........'
10. The word 'machinery' is not defined in the Act. The Privy Council in Corporation of Calcutta v. Chairman, Cossipur and Chitpore Municipality observed that it is very hazardous to define that word. Dealing with the connotation of the word 'machinery' this is what is observed in that decision :
'The word 'machinery' must mean something more than a collection of ordinary tools. It must mean something more than a solid structure built upon the ground, whose parts either do not move at all, or, if they do move, do not move the one with or upon the other in interdependent action with the object of producing a specific and definite result.
Their Lordships concur with Lord Davey in thinking that there is great danger in attempting to give a definition of the word 'machinery' which will be applicable in all case. It may be impossible to succeed in such an attempt. If their Lordships were obliged to run the hazard of the attempt they would be inclined to say that the word 'machinery' when used in ordinary language, prima facie, means some mechanical contrivances which by themselves or in combination with one or more other mechanical contrivances, by the combined movement and interdependent operation of their respective parts generate power, or evoke, modify, apply or direct natural forces with the object in each case of effecting so definite and specific a result. The tank and its supporting structure do not satisfy this definition.
But their Lordships think that however skillful definitions of 'machinery' may be framed, the determination in any given case of what is or is not 'machinery' must, to a large extent, depend upon the special facts of that case.......'
11. But one thing appears to me to be quite plain and that i : When the legislature used two different expressions, namely, 'machinery' or 'plant' it could not have meant the same thing. It must be presumed that the legislature intended to convey by those two words two alternative concepts. Coming to the facts of the present case, there is no difficulty about the electric stove. It can be held to be a 'plant'. The learned Assistant Advocate-General agrees with me in that regard. Under any circumstance, it can certainly be held to be machinery. But when we come to 'Diesel Engine' we are faced with a controversy. They can be no doubt that it is not a 'plant'. The question is whether it is a 'machinery'. On behalf of the assessee it was said that it is a machinery. But it is contended on behalf of the revenue that it is only a part of the machinery and not machinery as such.
12. In ordinary parlance - if I am correctly informed on that point - a 'Diesel Engine' is considered as a machinery. I think it is in the sense that the word 'machinery' has been used in section 10(2)(vi) as well as in rule 8 of the Rules framed under the Act.
13. As mentioned earlier, there is no unanimity of judicial opinion as regards the scope of the expression 'machinery'. A Bench of the Bombay high Court in Maneklal Vallabhadas Parekh v. Commissioner of Income-tax held tha :
'...in order that initial depreciation should be allowable on machinery, the machinery must be a self-contained unit capable of being put to use in the business for the benefit of which it is installed.'
14. In their Lordships' view before any article could be considered as a 'machinery', it must be a self-contained unit. The judgment of the court is a brief one. Therein much of the discussion relates to the scope of the expression 'plant'. This is all that their Lordships stated while dealing with the scope of the expression 'machinery'.
'We are also unable to agree with the alternative contention of Mr. Mehta that these diesel engines constitute 'machinery being new which has been installed'. In our view, in order that initial depreciation should be allowable on machinery, it must be a self-contained unit capable of being put to use is the business, profession or vocation for the benefit of which it is installed. In the present case, the diesel engines installed by the assessee do not satisfy that test.'
15. The above decision of the Bombay high Court was accepted as correct by the Andhra Pradesh high Court in B. Srikantiah v. Commissioner of Income-tax. Therein their Lordships held tha :
'In order to sustain a claim for the allowances of initial depreciation under the second paragraph of section 10(2)(vi) of the Indian Income-tax Act, and additional depreciation under section 10(2)(via), machinery must be regarded as a unit; spare parts, however costly they may be, should not be regarded as objects of claim in that behalf. The definition of 'plant' in section 10(5) indicates that, for the purposes of clauses (vi) and (via) of section 10(2), 'plant' should be viewed as a unit. Component parts thereof are excluded from its purview. The expression 'machinery' should also be considered in the same light and denotes 'machinery as a unit'.'
16. If the view of the Bombay and Andhra Pradesh high Courts is correct then there is no difference between a 'plant' and a 'machinery' - a view which hardly accords with well accepted canons of interpretation. From the language of section 10(2)(vib) it is clear that a 'machinery' must be something different from a 'plant', which means that it need not be a self-contained unit. I agree that it is hazardous to define that expression. I shall be content to borrow the explanation given by the Privy Council in Corporation of Calcutta v. Chairman, Cossipore and Chitpore Municipality, i.e., 'the word 'machinery' when used in ordinary language, prima facie, means some mechanical contrivances which, by themselves or in combination with one or more other mechanical contrivances, by the combined movement and interdependent operation, of their respective parts generate power, or evoke, modify, apply, or direct natural forces with the object in each case, of effecting so definite and specific a result.' Tested by these observations 'Diesel Engine' is undoubtedly a 'machinery'.
17. For the view taken by me, support is available from the decision of the Madras high Court in Mir Mohd. Ali v. Commissioner of Income-tax. Therein their Lordships laid down tha :
'The word 'machinery' must be given the same meaning with reference to each of the provisions, namely, the first and second paragraphs of section 10(2)(vi) and section 10(2)(via) of the Income-tax Ac : what is machinery for the purpose of normal depreciation under the first paragraph of section 10(2)(vi) should continue to be machinery also for the additional allowances under the second paragraph of section 10(2)(vi) and section 10(2)(via).'
they further laid down tha :
'Machinery does not cease to be machinery merely because it has to be used in conjunction with one or more machines, nor merely because it is installed as part of a manufacturing or industrial plant.'
18. Further, it was hel :
'The statutory provision for depreciation is in the alternative : whether it is plant or whether it is machinery without its being itself a plant, the assessee is entitled to claim the allowance for depreciation.
In the year of account ending March 31, 1950, the assessee replaced the petrol driven engines in two of his buses by new diesel engines. He claimed in relation to the new diesel engine : (i) normal depreciation under the first paragraph of section 10(2)(iv) of the Income-tax Act, (ii) initial depreciation under the second paragraph of section 10(2)(vi), and (iii) special depreciation under section 10(2)(via). the department allowed the normal depreciation but did not allow the other two claims. On a reference : Held, (i) that a diesel engine was by itself 'machinery' within the meaning of section 10(2)(vi) and (via) of the Income-tax Act and continued to be machinery even after it was made an integral part of the assessee's bus and the assessee was therefore entitled to all the three classes of depreciation under paragraphs (1) and (2) of section 10(2)(vi) and section 10(2)(via) of the Act.'
19. The Kerala high Court adopted the Madras view in Mrs. George Mathew v. Commissioner of Income-tax. Therein their Lordships laid down tha :
'The expression 'plant' has a far wider connotation than the expression 'machinery'. These two expressions are used in the alternative in section 10(2)(vi) and (via) of the Income-tax Act so that 'machinery', if it is new, though it does not constitute 'plant', is entitled to initial and extra depreciations. The term 'machinery' has not been defined in the Income-tax Act and in the absence of a statutory definition the word has to be given the ordinary meaning. Further, the term 'machinery' should be given the same meaning throughout section 10(2)(vi) and (via). The term 'machinery' is not restricted in its application only to a self-contained unit capable of being put to use in the business.'
20. I need hardly say that I am in respectful agreement with the view taken by the Madras and Kerala high Court.
'Total payments amount to Rs. 82,000. Assessee's counsel has argued that margin of profit in such cases is not as high as taken last year but in view of the nature of the contract I cannot accept the contention of the assessee's counsel more so when there are no accounts maintained by him. However after discussion with him profit at 15% as last year on total payment of Rs. 82,000 comes to Rs. 12,300....'
21. Stress is laid on the words 'nature of the contract' which according to the petitioner goes to indicate that the question of the receipts attributable to the quantum of driage must have been brought to the notice of the then Income-tax Officer. I will advert to this aspect a little later when considering whether all the primary facts had been duly disclosed by the petitioner at the time of the original assessment and as such notice under section 34 was not justified. To continue with the narration of facts, for the assessment year 1959-60, the Income-tax Officer considered for the first time the question of the nature of the receipt in respect of driage. He applied a rate of 12 1/2% on the labour or commission receipts but in respect of the receipts on account of shortage due to driage he was only prepared to allow the actual shortage that had been proved to have ensued. He therefore added back the balance of the receipts on account of driage and treated it as the income of the petition. Against the said assessment order dated January 29, 1960, the petitioner went up in appeal to the Appellate Assistant Commissioner who upheld the principle on which the Income-tax Officer had made the assessment for the year 1959-60, but granted some small reduction in the quantum of the assessment. The petitioner did not file any appeal to the Tribunal. In the meanwhile, the petitioner filed a return for the assessment year 1961-62 wherein he appended a note to the effect that the firm of which he was a partner had been dissolved on the 22nd June, 1959. No notice as required by section 25(2) within the statutory period stipulated therein was ever given by the petitioner. Pursuant to the assessment made for 1959-60 the Income-tax Officer issued notices under section 34 on the 11th January, 1962, in the name of the firm although it was within the knowledge of the Income-tax Officer that the firm was dissolved. The notices were for the assessment years 1953-54 to 1958-59. These were served on the petitioner on the 3rd of February, 1962. No notice was served on the other ex-partner, Manchand. The petitioner filed a return under protest on the 7th of May, 1962. Notices under section 22(4) and section 23(2) were also issued on the 14th March, 1962, and 11th September, 1962, respectively but no compliance has yet been made. The petitioner filed the writ petitions challenging the issue of the notice under section 34 on the ground, inter alia, (1) that all the primary facts were disclosed at the time of the original assessment, (2) that the notice issued under section 34 was misleading, (3) that if all the primary facts were disclosed and the notice under section 34(1) was invalid then the notice if treated as one under section 34(1)(b) would be barred by limitation and (4) that the firm having been dissolved, notice could not be issued in the name of the firm but had to be issued to both the erstwhile partners and served upon them before joint and several liability could be enforced.
22. I do not propose to enter into an elaborate discussion of the contentions raised for the reason that I have come to the conclusion that on the materials on record it is not possible to say positively all the primary facts were disclosed at the time of the original assessment. The facts are disputed, as noticed hereinabove, and from the words in the original assessment order 'in view of the nature of contract' it is not possible to infer that the receipts on account of driage were specifically brought to the notice of the then Income-tax Officer. The admitted fact only is that the certificate was produced from the mill showing the total receipt of Rs. 82,000. The break-up of this receipt was not shown in the certificate. This will, therefore, be a matter of proof based on evidence which cannot be undertaken in these proceedings and will fall to be considered in the course of the regular reassessment proceedings which are still pending.
23. On the question whether a notice under section 34 can be issued in the name of the dissolved firm and served on only one of the erstwhile partners is a again a matter which cannot be said to be free from all doubt. To put it at its lowest, the question of law that is raised thereby is not one on which it can be said that two opinions are not possible. In this connection see the case : Narayana Chetty v. Income-tax Officer, Nellore, Lakshminarain Bhadani v. Commissioner of Income-tax, Commissioner of Income-tax v. S.V. Angidi Chettiar, Maharaj Kumar Kamal Singh v. Commissioner of Income-tax, Bhawani Prasad Girdhar Lal v. Income-tax Officer (Miscellaneous case No. 224 of 1960, decided on 31st October, 1962 (unreported decision of a Division Bench of this court)) and Ram Niwas Hanuman Bux Somani v. S. Venkataraman.
24. Lastly, even if it can be said that the issue of the notice under section 34 was misleading because at one place the date by which the return had to be filed was given as the 16th February, 1962, yet as, in the very next sentence it had been made clear that the return could also be filed within 35 days of the receipt of the notice, no prejudice can be said to have been caused to the petitioner. The position is similar with regard to the other connected objection that in the notice under section 34, the Income-tax Officer had only mentioned that there had been an 'escapement' of assessment but not that there had been an 'under assessment' as was in fact the case. The petitioner knew full well that the notices under section 34 were issued as a result of the assessment which was made for the assessment year 1959-60. The notice, therefore, cannot be said to be misleading and even if it was misleading no prejudice having been shown to have been caused to the petitioner any interference under article 226 of the Constitution would be wholly unjustified, particularly, as the petitioner has all his remedies open to him under the Income-tax Act, in respect of reassessment proceedings which have yet to take place.
25. For the reasons given above the petition is dismissed. In the circumstances of the case the parties are left to bear their own costs.
26. Petition dismissed.