JUDGMENT [ENTITY], J.
1. The following questions of law arising out of [CASE NUMBER] in [CASE NUMBER] for the asst. yrs. 1978-79, 1979-80 and 1980-81, have been referred to This court under [SECTION] of the [ACT] by the Tribunal:
(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in directing the ITO to allow investment allowance on calculators for asst, yr. 1979-80 and factory cleaning machines for asst. yr. 1980-81?
(2) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee-company was entitled to claim investment allowance on Rs. 1,39,85,955 at Rs. 34,96,489 for the asst. yr. 1978-79 and on Rs. 1,16,46,083 at Rs. 29,11,521 for the asst, yr. 1980-81 which was the actual cost to the assessee as at the date of purchase without taking into account the variations in the liability of the assessee on account of fluctuations in exchange rate and the provisions of [SECTION] of the Act?
(3) Whether on the facts and in the circumstances of the case, the Tribunal erred in holding that the investment allowance was not allowable on the increase in the original cost of imported assets due to increase in the assessee's loan liability consequent to the depreciation in the value of Indian currency in foreign exchange market?
(4) Whether on the facts and in the circumstances of the case, the Tribunal erred in not accepting the claim of the assessee that canteen equipment and water coolers are a part of plant and machinery and that, therefore, the assessee was entitled to investment allowance on the same?
2. The first issue raised is whether the Tribunal was right in law in allowing investment allowance under [SECTION] of the [ACT], on calculators for the year 1979-80 and factory cleaning machines for the asst. yr. 1980-81. The AO had held that the calculators could by no means be termed as plant and machinery and did not allow depreciation at 100 per cent as claimed by the assessee. The CIT(A) held that in view of the circumstances in which the calculators were used, the assessee was entitled to investment allowance. The Tribunal upheld the finding of the CIT(A) and noted that calculators are plant and machinery since they are tools of the assessee's trade which in this case was the manufacturer of ball bearings.
3. It is well settled that the word 'plant' must be given a very wide meaning as held by the Supreme Court in [PRECEDENT] and that 'plant' includes whatever apparatus is used by a person for carrying on his business. [See [PRECEDENT] and [PRECEDENT] ]. It may be noted that data processing machines, computers, weighing scales and cranes and items of similar nature are held to be plant in [PRECEDENT]. , [PRECEDENT] and [PRECEDENT], respectively. So far as factory cleaning machines are concerned, the Tribunal has upheld the view of the CIT(A) and also noted that the investment allowance had been granted on such items in the earlier years. The AO's order has not discussed this issue.
4. In this view of the matter, the reasons given by the Department for not granting investment allowance is clearly erroneous and the Tribunal was right in directing the ITO to allow investment allowance on calculators for the year 1979-80 and factory cleaning machines for the asst. yr. 1980-81. The said issue is, therefore, answered in the affirmative and in favour of the assessee.
5. The issue raised by question No. 4 is whether the Tribunal was right in law in failing to allow investment under [SECTION] of the Act on canteen equipment and water coolers having failed to appreciate that these items are also plant and machinery. The AO has held that water coolers are in the nature of furniture and fixture as opposed to plant, therefore, cannot be considered as plant and machinery for the purpose of investment allowance. The CIT(A) records that water coolers are a part of the production department for the sustenance of the workers as required under the [ACT] and supplying drinking water to the workers/employees is, therefore, part of the plant and machinery required for its business. It may be further noted that the assessee in the present case is engaged in the activity of manufacturing of ball bearings, taper bearings and textile machinery components. Water cooler supplying drinking water cannot be called apparatus, appliance or fitting. No doubt the Tribunal noted that the water cooler is an amenity that the assessee-employer has to provide for its workers, however, the Tribunal upheld the view of the CIT(A) that as the water cooler is not directly involved in the manufacturing process of ball bearings, it is not entitled to investment allowance.
6. Learned advocate Mr. [ENTITY] for the assessee submitted that [SECTION] lays down conditions for grant of investment allowance in respect of new machinery or plant and only requires that the plant be installed in an industrial undertaking for the purpose of business of manufacture or production of an article or thing. The Act nowhere provides that each item of the plant should be directly involved in the manufacture or production. It is sufficient that the plant is for the purpose of business and the business must be of manufacture or production of some article. It is further pointed out that various High Courts in the following Judgments have held that similar items not actually used in the manufacturing process are plant and entitled to investment allowance. In [PRECEDENT] (internal telephone system), in [PRECEDENT] (a storage tank), in [PRECEDENT] (trailers for transport of tea leaves), in Mehsana District Co-op. [PRECEDENT] (wireless equipment), in the case of [PRECEDENT] (ground water tank) and in [PRECEDENT] (tubewell and weighing machine) were held to be plant entitled to investment allowance.
7. The reasoning of the Department for not granting investment allowance is clearly erroneous and issue No. 4 must, therefore, be answered in the affirmative in favour of the assessee and against the Revenue.
8. Question No. 3 raises the issue whether investment allowance cannot be allowed on increase in the original cost of the imported assets on account of increase in the assessee's loan liability consequent upon depreciation in the value of the Indian currency in the foreign exchange market. The Tribunal has held that the investment allowance should be based on the cost as on the date of purchase. The Tribunal was of the opinion that the most natural way to determine the cost is with reference to exchange rate at the time of purchase and in support thereof, the Tribunal has relied upon the decision of the Calcutta High Court in the case of [PRECEDENT] . In the said case, the assessee, a non-resident company maintained accounts in pound sterling and computed the value and depreciation in terms of sterling only. On account of devaluation of Indian rupee on 6th June, 1966, such a computation gave the assessee a larger depreciation than what was allowable had the computation been in Indian currency. The CIT by its order under [SECTION] reduced the depreciation allowable. On a reference, the Calcutta High Court held as follows:
Assessment under the [ACT], must always be made in Indian rupees according to the [ACT]. The Act contemplates a determination of every allowance and every item of income in terms of Indian currency. Therefore, the words 'WDV and the actual cost to the assessee in [SECTION] contemplates costs of assets in rupees and not any other currency, Depreciation is a kind of loss suffered by the assessee. The loss is determined in terms of money by applying the prescribed percentage on the written down value of the assets in accordance with [SECTION] of the [ACT].
9. Referring to the said decision, the Tribunal observed that the value of the fixed assets required in any particular currency can be converted into different currency only at the rate of exchange which prevailed at the time of purchase. The Tribunal also referred to Karnataka High Court ruling in the case of [PRECEDENT] . In that case, the assessee-company had deposited sterling in the foreign branch of Indian bank for purchase of machinery. Revaluation took place consequent (sic-subsequent) to the deposit and before the purchase and question was for determination of the actual cost of the machinery. The High Court held that the actual cost be fixed by applying the exchange rate at the time of purchase.
10. It is the contention of Mr. [ENTITY], learned advocate for the assessee that the question raised has to be answered taking into account the purport and meaning of "actual cost" as defined in [SECTION] of the Act for the purpose of [SECTION] of the Act. It is submitted that in a case where the assessee has acquired assets by incurring liability which were to be discharged in foreign currency, the cost of the assets to the assessee would change depending upon the rate of foreign exchange on the date the liability was repaid. It is appreciated that the Revenue may contend that all allowances based on costs such as depreciation and investment allowance should be based on the figure of cost arrived at by translating the outstanding foreign currency liability into Indian rupees on the date the assets was acquired. Such a contention would result in an assessee being granted incentives/allowances based on figures which do not reflect the real cost incurred by him. It is precisely to meet such contention by the Revenue that the legislature had inserted [SECTION] in the said Act.
11. [SECTION] provides that in the circumstances set out the amount by which the liability is increased or reduced by a change in the rate of exchange at any time after the acquisition of the assets shall be added or deducted from the actual cost of the assets as defined in [SECTION]. In drafting the provision in this manner, the section automatically applied to all allowances based on actual cost as defined in [SECTION] of the Act. It is pointed out that there was therefore no need to specify all the allowances individually and no such specification of allowances has been made. For example, even depreciation granted under [SECTION] has not individually been mentioned. This view is supported by the fact that where the legislature intended to exclude the allowance based on actual costs such as development rebate under [SECTION], a specific exclusion had to be made by [SECTION]. In contradistinction, [SECTION] mentions other allowances intended to be varied which were not based on actual cost such as [SECTION], [SECTION], [SECTION] or for the purposes of [SECTION]. It is pointed out that it was necessary to individually mention these allowances only because they were not automatically varied since they were not based on actual cost as defined under [SECTION].
12. It is submitted that [SECTION] commences with a non obstante clause which overrides all the other provisions of the Act and must therefore, be given full and proper effect to by inter alia altering actual cost for the purposes of [SECTION] as well. If the legislature had intended that [SECTION] was not to apply to [SECTION], when introducing [SECTION] it would have introduced a non obstante clause or added to the exclusions in [SECTION]. It is submitted that there is nothing to suggest that [SECTION] is not to apply to [SECTION] and in fact every canon of interpretation demands that [SECTION] is applicable to [SECTION] [[PRECEDENT] ].
13. The only argument of the Revenue is that investment allowance under [SECTION] is a one time allowance which had been allowed in the earlier year and therefore, no further investment allowance can be granted by applying [SECTION] The Revenue's stand is clearly untenable as had the legislature intended to exclude one time allowances, [SECTION] would become redundant, Further, the legislature has expressly referred to the one time allowance in [SECTION] itself such as [SECTION], [SECTION], etc. There is, therefore, nothing to suggest that one time allowances are to be excluded. In fact, there are several reasons to show that one time allowances are to be included. For instance, [SECTION] itself provides that investment allowance may be availed of during the period of eight years [[PRECEDENT] (supra)].
14. [SECTION] in express terms applies whenever there is an increase or decrease in liability due to a change in the rate of exchange at any time after the acquisition of the asset. The section expressly provides that such variation during the previous year shall be added to or reduced from inter alia the actual cost. [[PRECEDENT] (supra)]. In fact it is suggested that [SECTION] could apply as a result of variation in the rate of exchange at any time and not merely during the eight years within which investment allowance must be availed of.
15. [SECTION] is a beneficial provision which should be liberally construed so as to further its object and should be given full effect to. The interpretation suggested by the Department would nullify its object and render the same otiose. The depreciation under [SECTION] is also based upon actual cost as defined under [SECTION] of the Act and the Department has accepted in this very case that the depreciation can be varied by applying [SECTION]. There is no reason why [SECTION] should be applied to vary depreciation but not investment allowance [[PRECEDENT] , [PRECEDENT] , [PRECEDENT] and [PRECEDENT] ].
16. The decision of the Bombay High Court in [ENTITY] Spinning and Weaving Co. Ltd. v. CIT referred by the Revenue can be distinguished since there was no consideration of the issues arising and the said judgments set out no reason whatsoever for arriving at its conclusion. Further, the latest decision of the Supreme Court in [PRECEDENT] , wherein the Supreme Court approved the Gujarat High Court's view on the merits of that case supersedes decision of the Bombay High Court in [ENTITY] case (cited supra) supra). The said decision in [ENTITY] case, (cited supra) being a judgment per incuriam, [PRECEDENT] and passed sub silentio and being inconsistent with the earlier decisions of This court and of the Supreme Court is erroneous and cannot be used by the Revenue to deprive the assessee of the benefit of investment allowance on the increased loan liability consequent upon the depreciation of the Indian currency in the foreign exchange market.
17. In the light of the above discussion, it must be held that the Revenue erred in holding that the said investment allowance was not available in respect of the enhanced liability due to the fluctuation in the foreign exchange market. The issue must accordingly be answered in the affirmative in favour of the assessee and against the Revenue.
18. In view of the finding on issue No. 3 above, issue No. 2 which is akin to issue No. 3, is also answered in negative, in favour of the assessee and against the Revenue.
The reference accordingly stands disposed of with no order as to costs.