1968-VIL-226-MAD-DT

Equivalent Citation: [1969] 71 ITR 587

MADRAS HIGH COURT

Date: 25.01.1968

SUNDARAM MOTORS PRIVATE LIMITED AND OTHERS

Vs

COMMISSIONER OF INCOME-TAX, MADRAS.

BENCH

Judge(s)  : VEERASWAMI., RAMAPRASADA RAO.

JUDGMENT

The judgment of the court was delivered by

RAMAPRASADA RAO J.- As similar questions of law are involved in the above three tax cases they have been heard together, though the applicants are different. In Tax Case No. 80 of 1964, the applicant, a private limited company, is a dealer in motor cars, trucks, jeeps, motor parts and accessories, tractors, etc. In Tax Case No. 81 of 1964 the applicant is a private limited company dealing in the purchase and sale of motor spare parts. In Tax Case No. 129 of 1964, the applicant is an engineering contractor. During the year previous to the assessment year 1957-58 the applicants have purchased plants of varied description and claimed development rebate under section 10(2)(vib) of the Income-tax Act, 1922, as amended by the Finance Act, 1955 (XV of 1955). In particular, the claim for rebate was made by the respective applicants as under : Applicant in Tax Case No. 80 of 1964 in respect of (1) electric fans, (2) bicycles, (3) motor cycles, (4) office cars, (5) jeeps, (6) tractors, (7) typewriters and office appliances, and (8) electric installation. Applicant in Tax Case No. 81 of 1964 in respect of (1) motor cars, (2) typewriters, (3) office appliances and (4) bicycles. Applicant in Tax Case No. 129 of 1964 in respect of (1) adometers, (2) typewriters, (3) electric fans, (4) refrigerators, (5) jeeps, (6) cars, (7) survey instruments and (8) cycles. The Income-tax Officer rejected the claim of each of the applicants for development rebate, but the Appellate Assistant Commissioner allowed such a claim of the applicant in Tax Case No. 80 of 1964 for electric fans and electric installations, and in respect of the jeeps of the applicant in Tax Case No. 129 of 1964, but otherwise sustained the order of the Income-tax Officer. The revenue having thus dealt with their respective claims, the applicants approached the Tribunal for relief but with no success. On their requirement to the Tribunal to state a case to this court under section 66(1) of the Indian Income-tax Act, 1922, the following questions have been referred for us to render our answers thereto :

Tax Case No. 80 of 1964.--Whether, on the facts and in the circumstances of the case, the assessee is entitled to the allowance of Rs. 23,899 under section 10(2)(vib) of the Indian Income-tax Act, 1922 ?

Tax Case No. 81 of 1964.-1. Whether, on the facts and in the circumstances of the case, the disallowance of development rebate on motor cars, typewriters and office appliances and bicycles amounting to Rs. 10,605 is lawful ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the applicant company is not entitled to the development rebate provided under section 10(2)(vib) of the Act ?

Tax Case No. 129 of 1964.--Whether the claim for development rebate is not admissible for adometers, electric fans, cars, cycles, typewriters and survey instruments within the meaning of section 10(2)(vib) ?

The Tribunal, while disposing of the appeals separately, were of the view that the word "instal" in section 10(2)(vib) of the Act should be understood in the sense of placing in position for service or use, though the machinery or plant may be mobile, and ultimately held that development rebate should be restricted, " having regard to the circumstances in which this clause came to be put on the statute, to industries which derive income by the direct use of plant or machinery like a textile manufacturer or a road operator ". In this view, the applicants' claims were rejected.

The Tribunal, having correctly posed the problem before them, ultimately fell into an error in iron-jacketing the scope and application of the beneficial rule of law enabling assessees to gain the concession contemplated therein. It is indisputable that in these days of advanced commercial enterprise it is difficult to draw a line as to which of the plant or machinery engaged in trade by a businessman could with reasonable certainty be said to be not for carrying on its trade or for purposes of its business or intended to earn income therefrom. The conservative view expressed by the Tribunal that such plant or machinery should be such that income can be deemed to be derived by the direct use of such plant or machinery is, to our minds, a proposition which cannot be warranted having regard to the historic development of law in the grant of such concessions to industries with a view to afford an impetus and an encouragement to them to secure more and more of such machinery and plant so that they could be an aid to the developing economy of our country.

It is in this perspective that the background and the circumstances in which clause (vib) of section 10(2) was put on the anvil has a bearing and a consideration. Historical setting can sometimes be invoked in the construction of statutes and their provisions. It is necessary in such circumstances for the well-instructed judge to put himself in the position of those responsible for the introduction of such words so as to ultimately interpret them in the real popular sense. As pointed out by Jessel M.R. in Holme v. Guy :

" The court is not to be oblivious....of the history of law and legislation. Although the court is not at liberty to construe an Act of Parliament by the motives which influenced the legislature, yet when the history of law and legislation tells the court, and prior judgments tell this present court, what the object of the legislature was, the court is to see whether the terms of the section are such as fairly to carry out that object and no other......

As pointed out by Venkatarama Ayyar J., speaking for the Supreme Court in R. M. D. Chamarbaugwalla v. Unoin of India :

" To decide the true scope of the present Act, therefore, we must have regard to all such factors as can legitimately be taken into account in ascertaining the intention of the legislature, such as the history of the legislation and the purposes thereof....... "

With this background and in order to ascertain the historical setting and the circumstances, in which clause (vib) of section 10(2) came to be put on the statute book, it is necessary to refer to the primary cause which prompted the Taxation Enquiry Commission appointed by the Government of India in 1953, inter alia, to recommend a development rebate to the entrepreneurs of industry. The enquiry was instituted to study the practice of industry in providing for depreciation and the character and magnitude of the problem of replacement of old assets in the industrial sector. Their recommendations, however, centred on new enterprises or, in the alternative, to selective industries. The Finance Minister in his budget speech for the year 1955-56, reviewing the recommendations of the Commission as above, observed :

" The Commission have examined this matter in considerable detail and have come to the conclusion that the principle of revalorisation or continuous revaluation of an asset for purposes of depreciation is not merely defective in theory but certainly unworkable in practice. Instead, they have suggested that while the existing system of initial and double depreciation allowances may be retained with certain modifications for all industries, certain other new industries might be given a 'development rebate' equivalent to 25% of the cost of new fixed assets in the year of installation. For certain special industries of national importance, they have suggested a tax holiday for six years. These Proposals require further detailed consideration. Meanwhile I propose to allow a development rebate of 25% of the cost of all new plant and machinery installed for business purposes instead of the present initial depreciation allowance of 20%." (The underlining is ours).

Thus, therefore, it is seen that when clause (vib) of section 10(2) was sought to be introduced in the Act by the Finance Act, 1955 (XV of 1955), it was thought that the Commission's proposals require further consideration. The fair inference, therefore, is that the allowances recommended by the Commission to selective industries were not fully implemented. On the other hand, clause (vib) was put in so as to give full and true effect to the proposal of the Government to allow a development rebate of 25 per cent. of the cost of all now plant and machinery installed for business purposes.

We may at once consider the argument of the learned counsel for the revenue that, if any additional concession was intended or adumbrated in clause (vib) of section 10(2), it should be only to selective industries and cannot be extended to all industries. This contention invoking a dichotomy in the grant of such a rebate to a particular set of industries cannot be deduced while glancing at the historical development of this clause introduced for the first time by the Finance Act of 1955. In fact, this was adverted to by the Finance Minister and he was of the view that such a dichotomy deserves further consideration. He expressly opined that a development rebate has to be given to all industries in respect of plant and machinery inducted by them for their business purposes. We are, therefore, unable to agree with the contention of Sri Balasubrahmanyan, learned counsel for the revenue, that the applicants in question being ordinary traders and dealers and not being persons engaged in selective industries of importance cannot claim the benefit of clause (vib) of section 10(2) of the Indian Income-tax Act.

Mr. Swaminathan, appearing for the applicants, would maintain that the plant in question admittedly purchased and used by the applicants in their respective trades and businesses cannot be treated as something which are unconnected with their businesses and, therefore, disentitled to the benefit of the rebate provided for in clause (vib) of section 10(2). The Appellate Assistant Commissioner as well as the Tribunal accepted the view that electric fans and electric installations as regards the applicant in Tax Case No. 80 of 1964, and jeeps in respect of the applicant in Tax Case No. 129 of 1964 are entitled to such a rebate. We are unable to appreciate that when electric fans and electric installations can be deemed to be plant for a dealer in motor cars, trucks, jeeps, etc., and if a jeep could be so construed in respect of an engineering contractor, why should appliances and apparatus like bicycles, motor-cycles, office cars, office appliances, etc., should not equally be dealt with on the same par. Even the reasoning of the Tribunal ought to have prompted them to allow the rebate as claimed by the applicants in these cases. We are unable to see how by the use of bicycles, motorcycles, office cars, office appliances, adometers, survey instruments, it cannot be said that no income is derived by the respective applicants by the induction of such plant. It is not seriously disputed by the department that the apparatus or appliances are reused by the respective applicants in their trade and commerce. It cannot also be seriously disputed that they are sufficient means to the accredited end of the applicants to carry on their business and earn profits. Stroud in his Judicial Dictionary refers to the meaning of " plant " as attributed by Lindley L.J. in Yarmouth v. France as follows : the word " plant ", which has not been defined in the Act has to be understood in its ordinary sense and " it includes whatever apparatus is used by a business man for carrying on his business,--not his stock-in-trade which he buys or makes for sale ; but all goods and chattels, fixed or moveable, live or dead, which he keeps for permanent employment in his business ". Bearing in mind, therefore, the genesis for the introduction of this concession for the first time by the Finance Act of 1955, the scope of the concession as expressly spoken to by the Finance Minister, as also the ordinary and popular concept of the word " plant ", we are of the view that each of the applicants in the tax cases under review is entitled to the development rebate claimed by each of them before the revenue.

The Tribunal was apparently guided by the word " instal " appearing in clause (vib) of section 10(2). The Supreme Court had occasion to interpret the words " machinery " and " instal " appearing in a similar clause in Commissioner of Income-tax v. Mir Mohammad Ali. While considering the meaning of the word " machinery ", their Lordships would say :

" ......the definition of 'machinery' adopted by the Privy Council in Corporation of Calcutta v. Chairman, Cossipore and Chitpore Municipality, namely, 'machinery means some mechanical contrivances which by themselves or in combination with one or more contrivances by the joint 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', although not given in a tax case, should prevail under the Income-tax Act also, as the word 'machinery' was an ordinary and not a technical word. According to this definition a diesel engine was clearly machinery. "

While dealing with the expression " instal " in clause (via) of section 10(2), the Supreme Court observed as follows :

" ........the expression 'installed' in the second paragraph of clause (vi) and clause (via) did not necessarily mean fixed in position but was also used in the sense of 'induct' or 'introduce' or 'placing an apparatus in position for service or use'. "

Thus understood, the word " plant " also should be given the same popular meaning as " machinery ". If the plant in combination with other appliances in the business effectuate and perpetuate the trade or commerce in question, then such induction or introduction of such plant should be deemed to be such that they are placed in a position for service or use in the business. The principle in the above Supreme Court case was applied with equal force in Commissioner of Income-tax v. Raju and Mannar to development rebate appearing in clause (vib) of section 10(2). We have, therefore, no hesitation in coming to the conclusion that the applicants, by the introduction of the apparatus or appliance or the plant as enumerated above, are entitled to claim development rebate thereto as put forward by them before the revenue. We are unable to agree that such allowance has to be restricted to textile manufacturers or road operators. There cannot be any straining of the language if it is said that the appliances like typewriters, office accessories, bicycles, motor cars and adometers, etc., used for the purpose of expansion of their trade or marketing their products are not entitled to the development rebate contemplated in clause (vib) of section 10(2). We, therefore, answer the question referred to us in T.C. No. 80 of 1964 in the affirmative and in favour of the assessee. We answer the first question in T.C. No. 81 of 1964 in the negative and in favour of the assessee, the second question also is answered in the negative and in favour of the assessee. We answer the question in T.C. No. 129 of 1964 in the negative and in favour of the assessee.

As these tax cases were heard together, we allow only one set of costs. Advocate's fee Rs. 250.

 

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