Case: Commissioner Of Income-Tax, Madras Vs. Mir Mohd. Ali, Bus Owner, Vellore

2. The respondent, Mir Mohd. Ali hereinafter referred to as the assessee, is a bus owner and transport operator at Vellore, North Arcot District. He had a fleet of buses, and during the year of account ending with March 31, 1950 (relevant to assessment year (1950-51) he replaced the petrol engines in two of his buses (MDJ 583 and MDJ 723) by new Diesel engines, incurring an expenditure of Rs. 18,544/- in this connection. Before the Income Tax Officer, apart from claiming normal depreciation under the first Paragraph of cl. (vi) of S. 10(2), he also claimed depreciation under the second paragraph of cls. (vi) and cl. (via) of the Indian Income-tax Act, 1922. The Income Tax Officer only allowed 25 per cent depreciation under the first paragraph of cl. (vi). The assessee appealed unsuccessfully to the Appellate Assistant Commissioner on this point. There were other points involved in the appeal but as we are not concerned with them in this appeal, they are not being mentioned. On further appeal, the Appellate Tribunal heldassessee is not entitled to extra depreciation under S. 10(2) (vi) or S. 10 (2) (via) because however important the engine might be for running of a motor, it is after all part of an equipment and it cannot by itself become "machinery" for the purpose of claiming extra depreciation, as envisaged in these sub-sections. We have to hold that the installation of the new engines is only a capital addition, for the above reasons the assessee was rightly refused the extra depreciation heIncome Tax Appellate Tribunal, on the application of the assessee, referred the following question to the Highextra depreciation is admissible under the provisions of section 10(2) (via) of the Income Tax Act, in respect of a diesel oil engine fitted to a motor vehicle in replacement of the existingmay mention that another question regarding disallowance of interest had also been referred to the High Court but we are not concerned with that in the present appeal.3. As the High Court felt that there had been an accidental slip in framing the question, it amended the question and the amended question readsextra depreciation is admissible under the provisions of S. 10(2) (vi) and section 10(2)(via) of the Income Tax Act in respect of the diesel oil engines fitted to the motor vehicles in replacement of the existing engines.The High Court answered this question in the affirmative, i.e., in favour of the assessee. The commissioner of Income Tax, on obtaining a certificate under S. 66A(2) of the Income Tax Act, has filed this appeal.

Reasoning:
11. Let us now examine these contentions. First, we do not think that there is anything in the scheme of the second para of cl. (vi) and cl. (via) that throws any light on the construction of the word machinery in these clauses. It is true that the machinery must be new and it must be installed and the rate of allowance is prescribed in the Act itself. But the requirement that machinery must be new does not tell us what is machinery. Assuming for the present that a diesel engine is machinery, if an assessee buys and installs a second hand diesel engine, he will not be given the extra allowance under the second para of cl. (vi), and the ground would be that the engine is not new and not that because it is second-hand, it is not machinery. Similarly, if it is purchased but not installed, the ground of refusal would be that it has not been installed and not that because it has not been installed it has ceased to be machinery. Suppose a new machinery is purchased but not installed, it would not qualify for extra depreciation on the ground that it has not been installed and not because it has ceased to be machinery due to its non-installation. The fact that the rate of depreciation is provided for in the Act has also no bearing on the question of the construction of the word machinery. This fact only indicates that the legislature had made up its mind as to the extent of encouragement to be given to industry and, therefore, it did not consider it necessary to delegate this to the rule-making authority.12. The definition of the word plant in S. 10(5) equally does not throw any light on the meaning of the word machinery. The word plant is of wide import, but even so it may be argued that vehicles, books, scientific apparatus and surgical equipment are not plant in all businesses, professions and vocations. The legislature settled this possible controversy, but without throwing any light on the true meaning of the word machinery.What then is the test for determining whether a mechanical contrivance is machinery for the purposes of second para of cl. (vi) and cl.(via)? The Privy Council in the case of ILR 49 Cal 190 : (AIR 1922 PC 27) hazarded the following definition ofword 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 inter-dependent 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 ahad already observed that the word machinery must mean more than a collection of ordinary tools. The Privy Council case was not a tax case but prima facie the ordinary meaning of the word machinery - and the work machinery is an ordinary and not a technical word-must, unless there is something in the context, prevail in the Indian Income-tax Act also.14. According to the above definition, a diesel engine is clearly machinery Indeed. R. 8 of the Income-tax Rules treats aero-engines separately from aircraft. It is true that this rule cannot be used to interpret the clauses in the Act but it does show that components of an aircraft, which are machinery, can be treated separately.15. Further, when the assessee purchased the diesel engines, they were not plant or part of a plant: because they had not been installed in any vehicle. They were, according to the definition given by the Privy Council, machinery. They were not yet part of a plant, and, according to the Act, 20 per cent of the cost thereof was allowable to the assessee. All the conditions required by the Act are satisfied. If we look at the point of time of purchase and installation, what was purchased and installed wasare of the opinion that there is no force in this contention. As observed by the Bombay High Court in the case of Commissioner of Income-tax v. Saraspur Mills Ltd. 1959-36 ITR 580  : (AIR 1960 Bom 218  ) the expression installed did not necessarily mean fixed in position but was also used in the sense of  inducted or introduced; or to use the language of the Madras High Court in the case of Commissioner of Income-tax, Madras v. Sri Rama Vilas Service (Pvt.) Ltd., 1960-38 ITR 25  : (AIR 1960 Mad 224  ) installed would certainly mean to place an apparatus in position for service or use. We are of the opinion that when an engine is fixed in a vehicle it is installed within the meaning of the expression in cls. (vi) and (vi) (a).