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Commissioner of Income-tax Vs. J. Thomas and Co. Pvt. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 339 of 1969
Judge
Reported in[1977]110ITR566(Cal)
ActsIncome Tax Act, 1961 - Section 22, 33 and 33(1)
AppellantCommissioner of Income-tax
RespondentJ. Thomas and Co. Pvt. Ltd.
Appellant AdvocateS.C. Sen and ;A. Sengupta, Advs.
Respondent AdvocateP.P. Ginwalla and ;S. Bhattacharyya, Advs.
Cases ReferredNew Savan Sugar & Gur Refining Co. Ltd. v. Commissioner of Income
Excerpt:
- .....be allowed when such machinery or plant is new and has been ' used wholly for the purpose of the assessee's business '.10. the submission of mr. sengupta is that the question before us is fully covered by the above decisions of the patna high court, the madras high court and of the supreme court. it is also his submission that the meaning of the words ' wholly ' and ' exclusively ' arc practically the same as stated in oxford dictionary compact. he argued that in interpreting section 33(1)(a) of the income-tax act, 1961, rules of grammar relied on by mr. ginwala should not be applied. it is his final contention that the facts in the madras case and also in the instant case before us are the same and in view of the decision of the supreme court in the case of new savan sugar & gur.....
Judgment:

Deb, J.

1. The following question is involved in this reference under Section 256(1) of the Income-tax Act, 1961 :

' Whether, on the facts and in the circumstances of the case, the asses-see is eligible for development rebate under Section 33 of the Income-tax Act, 1961, with reference to the lifts and the central air-conditioning plant in Nilhat House '

2. The facts stated by the Tribunal may be briefly stated as follows :

3. The assessee carries on business as a tea broker. It constructed a multi-storied building with lifts and central air-conditioning system. The assessee occupied certain portion of this building and let out its remaining portions to several tenants, who paid monthly rents and also separate sums for using the lifts and for enjoying the benefits of the air-conditioning system. 'The rental income was assessed in the hands of the assessee under Section 22 of the Act which was confirmed by the appellate authorities. The assessee claimed deductions for development rebate under Section 33(1) of the Act in respect of the airconditioning plant and the lifts. The Income-tax Officer disallowed the said claim but it was ultimately allowed by the Tribunal by following the judgment of the Kerala High Court in the case of Commissioner of Income-tax v. Ouchtertony Valley Estates Ltd. : [1965]58ITR618(Ker) . The Tribunal also rejected the contention of the department that the case was fully covered in its favour by the decision of the Patna High Court in the case of Commissioner of Income-tax v. Dalmia Cement Ltd. : [1945]13ITR415(Patna) .

4. Section 33(1)(a) of the Act, inter alia, reads as follows :

' In respect of a new ship or new machinery or plant (other than office appliances or road transport vehicles) which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section and of Section 34, be allowed a deduction, in respect of the previous year in which the ship was acquired or the machinery or plant was installed or, if the ship, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, a sum by way of development rebate as specified in Clause (b).'

5. Mr. Ajit Sengupta, the learned counsel for the revenue, contended before us that the assessee was not entitled to the benefit of this section and cited several decisions to which reference will be made later on. Mr. P. P. Ginwalla, the learned counsel for the assessee, adopted the reasons given by the Kerala High Court and also relied on the meaning of the words ' wholly ' and ' exclusively ' from Oxford Dictionary Compact. Mr. Ginwalla also drew our attention to certain sections of the Act and contended that the meaning of these two words are different. It is his submission that this section contemplates the user of the machinery or the plant in its entirety and in view of the rules of grammar it should be held that the word 'wholly' used in this section refers to the word 'plant' and not to the words 'for the purpose of business carried on' by the assessee and, therefore, it should also be held that since the assessee had used the plant or machinery in its entirety the development rebate should be allowed under this section as opined by the Tribunal. Mr. Ginwalla also cited the case of Bentleys, Stokes and Lawless v. Beeson (H.M. Inspector of Taxes) [1952] 33 TC 491 but it was not a case of development rebate and was decided on different facts.

6. We are also not impressed by the contentions of Mr. Ginwalla. This section is not a charging section. It was introduced as a concession to the assessee See Indian Overseas Bank Ltd. v. Commissioner of Income-tax : [1970]77ITR512(SC) . Therefore, to get the benefit of the section the assessee must strictly comply with it. This section and Section 10(2)(vib) of the Indian Income-tax; Act, 1922, are in pari materia. The case of Dalmia Cement Ltd. : [1945]13ITR415(Patna) was decided in 1945 under Section 10(2)(vi) of the Indian Income-tax Act, 1922. The assessee was the owner of cement factories one of which worked only for 2 months during the relevant year. The assessee claimed depreciationallowance for 12 months in respect of that factory and it was allowed by the High Court. At page 419 of the report, Fazl Ali C.J. (as he then was) observed :

' The words ' not wholly used for the purposes of the business, profession ', etc., do not mean not used throughout the year or during the whole of the year in question. They mean that the building, machinery, etc., have not been used exclusively for the purposes of the profession or vocation, that is to say, they have been used for other purposes also.'

7. The Patna High Court followed the above observation in the case of Commissioner of Income-tax v. S. K. Sahana & Sons : [1946]14ITR106(Patna) . The attention of the learned judges of the Kerala High Court in the case of Ouchterlony Valley Estates (1938) Ltd. : [1965]58ITR618(Ker) was not drawn to the above decisions of the Patna High Court. In the Keralacase the assessee used some assets in the cultivation of both tea and coffee.

Income arising out of plantation of coffee was not taxable. The assessee claimed proportionate development rebate in respect of these assets under Section 10(2)(vib) of Indian Income-tax Act, 1922. The High Court opined that the expression ' wholly used for the purpose of the business carried on ' by the assessee in Section 10(2)(vib) of the Act does not mean ' exclusively used for the purpose of the business carried on by the assessee ' but means ' exclusively used in their entirety ' and accordingly allowed the assessee's claim for proportionate development rebate under that section. It is to be noted here that those assets were used in its two businesses, namely, the coffee and the tea businesses. It is also to be noted that this case was decided in 1965, whereas the present Income-tax Act was passed in 1961.

8. The Kerala case : [1965]58ITR618(Ker) was considered by the Madras High Court in the case of Commissioner of Income-tax v. Pandyan Bank Ltd. : [1969]71ITR707(Mad) . The facts of that case and the facts of the instant case before us are substantially the same. It was held by the Madras High Court at pages 711-12 of the report as follows :

'......the letting of a portion of its premises by the assessee cannot beregarded as part of the business carried on by the assessee so that the air-conditioning plant could be regarded as having been wholly used for the purpose of such business. It may be that the machinery or plant has been so deigned that its working could not be compartmentalised but would extend to the entire premises. We do not think that on that ground we can legitimately reach a different result, for, the requirement always is that the plant, in order that it may be eligible for development rebate, should wholly be used for purposes of the business which the assessee carries on. The test is not whether the plant is one whole and as such is serving the entire premises. The test, if we may repeat, is whether, even as such awhole, the machinery is used wholly for the business which the assessee is carrying on......

Assets ' wholly used ' do not mean ' exclusively used '. The meaning that can be attributed to the expression ' wholly used' is ' used in their entirety'...... we are of opinion that the words 'wholly used:'must be given their full scope as a condition to an allowance of development rebate. The words do not appear to mean that, when not required for particular business purposes, they can or have to be used for other purposes having regard to continuance or nature of their structural built-in set up, and still development rebate can be claimed. If that were the position, we fail to understand the significance of the word ' wholly '. It does not mean wholly but qualified by circumstances. Obviously, when the machinery or plant is used for business, what is contemplated is, it would be used wholly for the purpose to the extent such user was made. ' Wholly ' has no reference to the extent or nature of the business but to the extent of the user ; but such user must be with reference to and only for the purposes of the business carried on by the assessee.'

9. It has been held by the Supreme Court in the case of New Savan Sugar & Gur Refining Co. Ltd. v. Commissioner of Income-tax : [1969]74ITR7(SC) that development rebate in respect of machinery or plant can only be allowed when such machinery or plant is new and has been ' used wholly for the purpose of the assessee's business '.

10. The submission of Mr. Sengupta is that the question before us is fully covered by the above decisions of the Patna High Court, the Madras High Court and of the Supreme Court. It is also his submission that the meaning of the words ' wholly ' and ' exclusively ' arc practically the same as stated in Oxford Dictionary Compact. He argued that in interpreting Section 33(1)(a) of the Income-tax Act, 1961, rules of grammar relied on by Mr. Ginwala should not be applied. It is his final contention that the facts in the Madras case and also in the instant case before us are the same and in view of the decision of the Supreme Court in the case of New Savan Sugar & Gur Refining Co. Ltd. : [1969]74ITR7(SC) , development rebate cannot be allowed inasmuch as the rental income has been assessed under the head ' other sources '.

11. In our opiniop, there is much force in the contentions of Mr. Sengupta. It shall be presumed that Parliament knew the judgment of the learned Chief Justice in Dalmia Cement Ltd.'s case : [1945]13ITR415(Patna) at the time of enacting the Income-tax Act, 1961. Therefore, it must be held that Parliament has accepted the meaning of the word ' wholly ' which means 'exclusively' as stated by the learned Ch^ef Jusitce and, therefore, the rules of grammar must give way to this real intention of the legislature as stated in Maxwell on the Interpretation Statutes, 11th edition,at page 78. The Madras High Court has also distinguished the Kerala case, reported in : [1965]58ITR618(Ker) , in which the Patua cases reported in : [1945]13ITR415(Patna) and : [1946]14ITR106(Patna) were not cited. Moreover, the Kerala case reported in : [1965]58ITR618(Ker) is on different facts, whereas facts of the Madras case reported in : [1969]71ITR707(Mad) and the facts of the instant case before us, as already stated, are substantially the same. Therefore, the instant case is covered by the Madras case reported in : [1969]71ITR707(Mad) . And that apart, we do not find any reason to differ from the Madras High Court on the interpretation of the corresponding section of the Indian Income-tax Act, 1922, which is in pari rnateria with the present section of the Income-lax Act, 1961.

12. We are also of opinion that unless the machinery or plant is used exclusively for the purpose of the assessee's business no development rebate under Section 33(1)(a) of the Income-tax Act, 1961, can ba allowed. Accordingly, we return our answer to the question in the negative and in favour of the revenue.

13. The parties shall pay and bear their own costs nf this reference.

Dipak Kumar Sen, J.

14. I agree.


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