# MIS. SARASWATI INDUSTRIAL SYNDICATE LTD v. THE COMMISSIONER OF INCOME TAX, HARYANA,ROHTAK

- **Citation:** [1999] 1 S.C.R. 974
- **Court:** Supreme Court of India
- **Decided:** 1999-03-10
- **Case number:** Civil Appeal Nos. 1804-06 ~ L of 1981
- **Bench:** S.P. Bharucha, S.S. Mohammed Quadri, R.C. Lahoti
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-saraswati-industrial-syndicate-ltd-v-the-commissioner-of-income-tax-haryana-16606
- **Pages:** 6

## Headnote

Income Tax Rules, 1962 :
Appe11dix-l, Part I, Para Ill Item 3(ii) B(7}-Machinery and plant used
in manufacture of sugar-Claim for special rate of depreciation as c01rosive
chemicals were being used in the process-Expert opinion filed in support-Income Tax officer declining to consider expe1t opinion on ground that expert
was not produced-Claim rejected-Held, neither the Income Tax Officer nor
D the High Court entitled to make stateme11t on technical matters for which no
basis had been laid on record-High Court should have asked the Tribunal
to take further evidence and draw up a supplemental statement of
case-Under the relevant ent1y it is not intended that machinery must come
into contact with a pure corrosive chemicaHt is enough that what passes
E through the machinery contains chemicals which are corrosive-Tribunal
shall take further evidence and prepare a supplemental statement of case on
the basis whereof matter shall be re-heard by High Court.
Practice and Procedure-Intervention application-Held, only purpose
of granting the application is to entitle intervenor to address arguments in
F support of one or the other side.
The assessee, a manufacturer of sugar, claimed before the Income
Tax Officer depreciation of higher rate of 15% on machinery it used in the
manufacture of sugar, contending that the machinery was covered under
Item 3(ii) 8(7) of Para III of Part I of Appendix I to the Income Tax Rules,
G 1962; and in support of his claim, filed the opinion of an expert. The
Income Tax Officer declined to consider the expert opinion on the ground
that the expert was not produced for cross-examination. He rejected the
assessee's claim holding that the corrosive chemicals were used in insignificant quantity to treat the cane juice and it was not those acids, but the
H cane juice which was the main substance that came .into contact with the
974
SARASWATI INDUS1RIALSYNDICATE LTD. v. C.I.T.
975
machinery. The appeal filed by the assessee was dismissed by the Appellate A
Assistant Commissioner holding that depreciation was allowable at the
higher rate on such plant and machinery in which chemicals with high
corrosive potential were used for manufacturing purpose and manufacture
of sugar did not fall in such category. The Income Tax Appellate Tribunal
disagreed with the view taken by the authorities below and held that the
corrosive chemicals contemplated in the relevant entry were not only free
chemicals but also non-free ch~micals provided they were corrosive in
effect so far as metals were concerned. The reference made to the High
Court was answered against the assessee. Aggrieved, the assessee filed the
present appeals.
Allowing the appeals and remitting the matter to the Tribunal, this
Court
HELD : 1.1. Neither the Income Tax Officer nor the High Court was
B
c
entitled to make statement on technical matters for which no basis had D
been laid on the record by either the Revenue or the assessee. It can be
understood that the authorities declin~d to rely upon the expert's opinion
because he was not produced for cross-examination. But in case the High
Court was of the view that further material was required, the appropriate
course was to require the Tribunal to take further evidence and draw up
a Supplemental Statement of case. (978-E]
E
1.2. This apart, there appears to be some misunderstanding of what
entry at Item 3(ii) B (7) of Para III of Part I of Appendix I to Income Tax
Rules, 1962 is intended to convey. Depreciation at a higher rate is allowed
to machinery that comes into contact with corrosive chemicals. Corrosive
F
chemicals corrode the machinery. They erode and, by reason of such
erosion, the life of the machinery is truncated. To compensate, depreciation is allowed at a higher rate. It is not intended that the machinery must
come into contact With a pure corrosive chemical. It is enough that what
passes through the machinery contains chemicals which are corrosive and
which, therefore, have the effect of wearing it

## Text

A
B
c
MIS. SARASWATI INDUSTRIAL SYNDICATE LTD.
v.
THE COMMISSIONER OF INCOME TAX,
HARYANA,ROHTAK
MARCH 10, 1999
(S.P. BHARUCHA, S.S. MOHAMMED QUADRI AND
R.C. LAHOTI, JJ.]
Income Tax Rules, 1962 :
Appe11dix-l, Part I, Para Ill Item 3(ii) B(7}-Machinery and plant used
in manufacture of sugar-Claim for special rate of depreciation as c01rosive
chemicals were being used in the process-Expert opinion filed in support-Income Tax officer declining to consider expe1t opinion on ground that expert
was not produced-Claim rejected-Held, neither the Income Tax Officer nor
D the High Court entitled to make stateme11t on technical matters for which no
basis had been laid on record-High Court should have asked the Tribunal
to take further evidence and draw up a supplemental statement of
case-Under the relevant ent1y it is not intended that machinery must come
into contact with a pure corrosive chemicaHt is enough that what passes
E through the machinery contains chemicals which are corrosive-Tribunal
shall take further evidence and prepare a supplemental statement of case on
the basis whereof matter shall be re-heard by High Court.
Practice and Procedure-Intervention application-Held, only purpose
of granting the application is to entitle intervenor to address arguments in
F support of one or the other side.
The assessee, a manufacturer of sugar, claimed before the Income
Tax Officer depreciation of higher rate of 15% on machinery it used in the
manufacture of sugar, contending that the machinery was covered under
Item 3(ii) 8(7) of Para III of Part I of Appendix I to the Income Tax Rules,
G 1962; and in support of his claim, filed the opinion of an expert. The
Income Tax Officer declined to consider the expert opinion on the ground
that the expert was not produced for cross-examination. He rejected the
assessee's claim holding that the corrosive chemicals were used in insignificant quantity to treat the cane juice and it was not those acids, but the
H cane juice which was the main substance that came .into contact with the
974
SARASWATI INDUS1RIALSYNDICATE LTD. v. C.I.T.
975
machinery. The appeal filed by the assessee was dismissed by the Appellate A
Assistant Commissioner holding that depreciation was allowable at the
higher rate on such plant and machinery in which chemicals with high
corrosive potential were used for manufacturing purpose and manufacture
of sugar did not fall in such category. The Income Tax Appellate Tribunal
disagreed with the view taken by the authorities below and held that the
corrosive chemicals contemplated in the relevant entry were not only free
chemicals but also non-free ch~micals provided they were corrosive in
effect so far as metals were concerned. The reference made to the High
Court was answered against the assessee. Aggrieved, the assessee filed the
present appeals.
Allowing the appeals and remitting the matter to the Tribunal, this
Court
HELD : 1.1. Neither the Income Tax Officer nor the High Court was
B
c
entitled to make statement on technical matters for which no basis had D
been laid on the record by either the Revenue or the assessee. It can be
understood that the authorities declin~d to rely upon the expert's opinion
because he was not produced for cross-examination. But in case the High
Court was of the view that further material was required, the appropriate
course was to require the Tribunal to take further evidence and draw up
a Supplemental Statement of case. (978-E]
E
1.2. This apart, there appears to be some misunderstanding of what
entry at Item 3(ii) B (7) of Para III of Part I of Appendix I to Income Tax
Rules, 1962 is intended to convey. Depreciation at a higher rate is allowed
to machinery that comes into contact with corrosive chemicals. Corrosive
F
chemicals corrode the machinery. They erode and, by reason of such
erosion, the life of the machinery is truncated. To compensate, depreciation is allowed at a higher rate. It is not intended that the machinery must
come into contact With a pure corrosive chemical. It is enough that what
passes through the machinery contains chemicals which are corrosive and
which, therefore, have the effect of wearing it down. Keeping this in mind G
the Tribunal shall give both the assessee and the Revenue the opportunity
of producing further evidence, and, based thereon, shall decide whether
.>
the machinery for which the assessee claims depreciation at the higher rate
is entitled to it. It shall then draw up a Supplemental Statement of Case
and the matter shall be re-heard by the High Court, having regard to what H
976
SUPREME COURT REPORTS
[1999] 1 S.C.R.
A is found by the Tribunal and to this judgment. [978-F -H]
r
3. As regards the intervention application, the same order cannot be
passed on it. The only purpose of granting an intervention application is
t
to entitle the intervenor to address &rgument in support of the one of the
!
B
the other side. The intervenors may take advantage of the order passed in
the appeals. [979-D]
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1804-06
~
L
of 1981.
c
From the Judgment and Order dated 21.4. 81 of the Punjab &
Haryana High Court in I.T.R. Nos. 130, 98 and 100 of 1976.
With
Civil Appeal Nos. 4975-78/93 and 5671of1985.
D
From the Judgment and Order dated 17.11.88, 19.9.89 and 4.3.85 of
the Punjab & Haryana High Court in I.T.R. Nos. 157, 114n9, 23- 24/84 and
96 of 1984.
G.C. Sharma, R.K. Ragavan, S. Chaudhary, B.V. Desai and S.K.
E Agarwal for the Appellant.
Ranbir Chandra, Rajiv Nanda, C.V.S. Rao, B.K. Prasad and (S.K.
Gambhir) (NP) for the Respondent.
F
The Judgment of the Court was delivered by
BHARUCHA, J. Under appeal are the judgments and orders of
Division Benches of the Punjab and Haryana High Court. The assessment
years involved are Assessment Years 1970-71to-1977-78. The High Court
answered in the negative and in favour of the Revenue the following
G question:
"Whether on the facts and in the circumstances of the case, the
Tribunal was right in law in holding that the words 'corrosive
chemicals' employed in entry (ii)B(7) of Para III of Part I of
~
Appendix I to the Income-tax Rules, 1962, contemplates not only
H
free chemicals but also non-free chemicals of corrosive effect.';
.
_,
J
SARASWATIINDUSTRIALSYNDICATELTD. v. C.l.T. [BHARUCHA,J.)
977
The assessee is in appeal.
A
The assessee manufacturers, among other things, sugar. It claimed
depreciation at the higher rate of 15% on machinery it used in the
manufacture'. of sugar, which was detailed in a statement placed before the
Income tax Officer. It did so having regard to Item 3(ii)B(7) of Para III of
Part I of Appendix I to the Income Tax Rules, 1962, which reads thus :
"Machinery and plant coming
into contact with corrosive
chemicals."
rate of depreciation 15%
The assessee filed in support of its case the opinion of an expert. The
Income Tax Officer rejected the assessee's claim of higher depreciation at
the rate of 15% on such machinery. He declined to consider the expert
opinion on the ground that the assessee was unable to produce the expert
for cross-examination. He referred to the meaning of the word "chemical"
B
c
and concluded that cane juice was not something which was obtained D
through a chemical process nor was it used for chemical effect. The
contention of the assessee that, during the manufacture of sugar, the juice
was treated with corrosive chemicals like sulphuric and phosphoric acid,
which had corrosive effect on the sugar machinery, could not be given any
importance as the quantity used was quite small and it was not those acids
which came into contact with the machinery. They formed a very small part
and their use was confined to a particular stage. It was the cane juice which
was the main substance that came into contact with the machinery. The
Appellate Assistant Commissioner dismissed the asses~e's appeal. His
view was that depreciation was allowable at the higher rate on such plant
and machinery in which chemicals with high corrosive potentials were used
for manufacturing purposes and the manufacture of sugar did not fall in
such category.
E
F
The Income Tax Appellate Tribunal disagreed. It noted that the only
criticism directed against the statement which had been tendered by the
assessee before the Income Tax Officer was that it included machinery that G
came in contact, not with corrosive chemicals, but with cane juice and
molasses, which were not corrosive chemicals but, at best, corrosive
materials. The Tribunal found no force in this criticism for the reason that
the corrosive chemicals contemplated in the said entry were not only free
chemicals but also non-free chemicals provided they were corrosive in H
978
SUPREME COURT REPOJ,lTS
. [1999] 1 S,CR.
A effect so far as metals are concerned.
Out of the order of the Tribunal the question, quoted above, was
referred to the High Court. The High Court disagreed with the Tribunal
for the reason that, according to it, lime and sulphuric acid were mixed
:
~
.
. with the ~ugarcane juice to filter and purify the juice but, by their mixture,
B the juice itself was not converted into a chemical. Reference was made to
the dictionary meaning of the word "chemical" and it was said that it was
obvious therefrom that sugarcane juice could not be covered by the. term
simply because some acid has been mixed with it for its filtration. The acid
and the lime were mixed in the sugarcane juice for the purpose of its
C filtration and once the chemical reaction had been caused, most of its effect
was lost. Whatever remained settled down along with the sediments at the
bottom. Thereafter, the filtered sugarcane juice which came into contact
with the machinery before it was converted into crystallised sugar could
not be said to be a corrosive chemical.
D
We can understand that the authorities declined to rely upon the
experts' opinion because he was not produced for cross-examination. But
neither the Income Tax Officer nor, indeed, the High Court were entitled
to make statements on technical matters for which no basis had been laid
on the record by either the Revenue or the ass~ssee. If the High Court was
E of the view that further material was req,uired, the appropriate course was
to require the Tribunal to take further evidence and draw up a Supplemental Statement of Case.
This apart, there appears to be some misunderstanding of what the
said entry is intended to convey. Depreciation at a higher rate is allowed
F to machinery that comes into contact with corrosive chemicals. Corrosive
chemicals corrode the machinery. They erode and, by reason of such
erosion; the life of the machinery is truncated. To compensate, depreciation is allowed at a higher rate. It is not intended that ~he machinery must
come into contact with a pure corrosive chemical. It is enough that what
G passes through the machinery contains chemicals which are corrosive and
which, therefore, have the effect of wearing it down.
In the instant case, with this understanding of the said entry in mind,
the Tribunal shall take further evidence, giving both the assessee and the
Revenue the opportunity of producing it, and, based thereon, shall decide
H whether the machinery for which the assessee claims depreciation at the
,..
SARASWATI INDUSIRIAL SYNDICA1ELTD. v. C.I.T. [BHARUCHA, J.]
979
higher rate is entitled to it. It shall then draw up a Supplemental Statement A
of Case and the matter shall be re-heard by the High Court, having regard
to what is found by the Tribunal and to this judgment.
The appeals are allowed. The judgments and orders under appeal
are set aside. The matters are remanded to the Tribunal to be proceeded
with as set out ~ereinabove.
B
This order shall also govern Appeal No.5671/85 where reference of
the question of law aforementioned was declined. Even in this matter the
T.ribunal shall conduct a further enquiry as indicated above and draw up
a Supplemental Statement of Case and it shall then refer the question
aforementioned to the High Court.
No order as to costs.
c
Learned counsel for the intervenors submits that he is entitled to the
same order as we have just passed. We cannot pass such an order in an
intervention application. The only purpose of graating an intervention D
application is to entitle the intervenor to address arguments in support of
one or the other side. Having heard the arguments, we have decided in the
assessee's favour. The intervenors may take advantage of that order.
Order on the intervention application accordingly.
R.P.
Appeals allowed.
E