# SUPRE:ME COURT REPORTS [1964] COMMISSIONER OF INCOME-TAX, MADRAS v. MIR MOHD. ALI, BUS OWNER, VELLORE

- **Citation:** [1964] 7 S.C.R. 846
- **Court:** Supreme Court of India
- **Decided:** 1964-04-24
- **Case number:** Civil Appeal No. 145 of 1963
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/supre-me-court-reports-1964-commissioner-of-income-tax-madras-v-mir-mohd-ali-3130
- **Pages:** 12

## Headnote

1964
April 24
846
SUPRE:ME COURT REPORTS
[1964]
COMMISSIONER OF INCOME-TAX, MADRAS
v.
MIR MOHD. ALI, BUS OWNER, VELLORE
IK. SUBBA RAO, J. C. SHA!-1 AND s. M. StKRI, JJ.]
Income
Tax-Depreciation
allowance-Replacement
of
petrol engine in a bus by new Diesel engine-If amounts to
installation of machin.ery-"Installation of mJchinery" Meaning of-Indian Income-tax Act, 1922 (11 of 1922), ss. 10(2)(vi).
10(2)(vial.
The assessee, who was the owner of a fleet of buses, replaced the petrol engines in two of his buses by new Diesel
engines incurring an expenditure of Rs. 18,544/- in this connection, during the year of account ending with March 31,
1950. For the relevant assessment year he claimed depreciation allowance under the second para of cl. (vi) and cl. (via)
of s. 10(2) of the Indian Income-tax Act, 1922, apart from the
normal depreciation under the first para of cl. (vi), but he
was allowed only 25 per cent depreciation under the first para
of cl. (vi) on the ground that he was not entitled to extra
depredation under s. 10(2) (vi) or s. 10(2)(via) because the
engine was only part of an equipment and could not by itself
become machinery and that when an engine was fixed in a
motor vehicle it could not be said to be installed within the
meaning of those sub-sections.
Held: (per Subba Rao and Sikri, JJ.) (i) The assessee
was entitled to extra depreciatiLon under ss. 10(2)(vi) and 10(2)
(via) of the Indian Income-tax Act, 1922, in respect of the
diesel oil engine fitted to the motor vehicles in replacement
of the e~sting engines.
(ii) The definition of "machinery" given by the Privy
Council in the case of Corporation of Calcutta v. Chairman,
Cossipore and Chitpore Municipality \1922) L.R. 48 I.A. 435, is
applicable, and according to that definition a diesel engine
is clearly "machinery". And when an engine is fixed in a
vehicle it is installed within the meaning of the expression
in els. (vi) and (via).
Per Shah, J. (dissenting)-Replacement of a petrol engine
by a new diesel engine in a 1notor car cannot be said to be
installation of machinery. To be installed, the machinery
must for the purpose of the business be. brought into service
as a self-contained unit, and it would be difficult to regard
the introduction of a mere part, which has no independent
use in the business conducted by the assessee, as machinery
installed for the purpose of the second para of cl. (vi) of
s. 10(2).

## Text

1964
April 24
846
SUPRE:ME COURT REPORTS
[1964]
COMMISSIONER OF INCOME-TAX, MADRAS
v.
MIR MOHD. ALI, BUS OWNER, VELLORE
IK. SUBBA RAO, J. C. SHA!-1 AND s. M. StKRI, JJ.]
Income
Tax-Depreciation
allowance-Replacement
of
petrol engine in a bus by new Diesel engine-If amounts to
installation of machin.ery-"Installation of mJchinery" Meaning of-Indian Income-tax Act, 1922 (11 of 1922), ss. 10(2)(vi).
10(2)(vial.
The assessee, who was the owner of a fleet of buses, replaced the petrol engines in two of his buses by new Diesel
engines incurring an expenditure of Rs. 18,544/- in this connection, during the year of account ending with March 31,
1950. For the relevant assessment year he claimed depreciation allowance under the second para of cl. (vi) and cl. (via)
of s. 10(2) of the Indian Income-tax Act, 1922, apart from the
normal depreciation under the first para of cl. (vi), but he
was allowed only 25 per cent depreciation under the first para
of cl. (vi) on the ground that he was not entitled to extra
depredation under s. 10(2) (vi) or s. 10(2)(via) because the
engine was only part of an equipment and could not by itself
become machinery and that when an engine was fixed in a
motor vehicle it could not be said to be installed within the
meaning of those sub-sections.
Held: (per Subba Rao and Sikri, JJ.) (i) The assessee
was entitled to extra depreciatiLon under ss. 10(2)(vi) and 10(2)
(via) of the Indian Income-tax Act, 1922, in respect of the
diesel oil engine fitted to the motor vehicles in replacement
of the e~sting engines.
(ii) The definition of "machinery" given by the Privy
Council in the case of Corporation of Calcutta v. Chairman,
Cossipore and Chitpore Municipality \1922) L.R. 48 I.A. 435, is
applicable, and according to that definition a diesel engine
is clearly "machinery". And when an engine is fixed in a
vehicle it is installed within the meaning of the expression
in els. (vi) and (via).
Per Shah, J. (dissenting)-Replacement of a petrol engine
by a new diesel engine in a 1notor car cannot be said to be
installation of machinery. To be installed, the machinery
must for the purpose of the business be. brought into service
as a self-contained unit, and it would be difficult to regard
the introduction of a mere part, which has no independent
use in the business conducted by the assessee, as machinery
installed for the purpose of the second para of cl. (vi) of
s. 10(2).
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 145
of 1963. Appeal from the judgment and order dated November 16. '1959, of the Madras High Court in Case Reference
No. 82 of'1956.
·
S. K. Kapur and R. N. Sachthey, for the appellant.
S. Swaminathan and R. Gopa/akrishnan, for the respondent.
I
7 S.C.R.
SUPREME COURT REPORTS
847
S. T. Desai, J. B. Dadachanji, 0. C. Mathur and Ravin1961
der Narain, for the intervenor.
Cammi.,ioner
of
lncome-t<n. JJ!adra•
April 24, 1964. The judgment of SUBBA RAO and SJKRI
v.
.
JJ was delivered by S1KRI J. SHAH J. delivered a dissentingMir Molid.Afi, n ••
· . .
0u'11er,
1 rllort
Op1mon.
·
Sikri,
J,
SJKRI, J .-This is an appeal by the Commissioner of
Income Tax, Madras, against the judgment of the High
Court, dated November 16, 1959, on a certificate granted
by the High 0'ourt under s. 66A(2) of the Indian Income Tax
Act, 1922.
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 cl. (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 held that "the
assessee is not entitled to extra depreciation under s. 10(2>
(vi) or s. 10(2)(via) because however important the engfoe
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 he claims". The Income Tax Appellate Tribunal, on
the application of the assessee, referred the following question to the High Court:
"Whether extra 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 existing engine."
We may 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.
848
SUPREME COURT REPORTS
(1964]
1964
As the High Court felt that there had been an acciCommt .. ion<r of dental slip in framing the question, it amended the questian
Income-ta.•, Mad,.. and the amended question reads:
...
Jlir .11/oii.d.A.li, Bu"
Owner,
VeUore
"Whether extra depreciation i:s 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".
8ikri, J.
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.
Before attempting to answer the question, it is necessary to set out the relevant provisions of the Inoome Tax
Act. The relevant provisions, as in force at the relevant time,
were:
"s. 10(2) Such profits or gains shall be computed
after making the following allowances, namely: -
(iv) in respect of insurance against risk of damage
or destruction of buildings, machinery, plant, furniture, stocks or stores, used for the purposes of
the business, profession or vocation, the amount
of any premium paid;
(v) in respect of current ·repairs to such buildings,
machinery, plant or furniture, the amount paid
on account thereof;
(vi) in respect of depreciation of such buildings,
machinery, plant, or furniture being the property
of the assessee, a sum equivalent, where the
assets are ships other than ships ordinarily plying on inland waters, to such percentage on the
original cost thereof to the assessee as may in
any case or class of cases be prescribed· and in
any other case, to such percentage on the written
down value thereof as may in any case or class
of cases be prescribed;
and where the buildings have been newly erected,
or the machinery or plant being new has been
installed, after the 31st day of March, 1945, a
further sum (which shall however not be deductible in determining the written down value for
the purposes of this clause) in respect of the year
of erection or installation equivalent,-
(a) in the case of buildings the erection of which
is begun and completed between the !st day
-·
"
'1 S.C.R.
&UPREME COURT REPORTS
849
of April 1946 and the 31st day of March 1952
1964
(both dates inclusive), to fifteen per cent of Commiasioner of
the cost thereof to the assessee;
Income-tax, Madraa ·
y.
(b) in the case of other buildings, to ten per cent Mir Mohd-Ali, B ..
of the cost thereof to the assessee;
Owner_:_!<llore
(c) in the case of machinery or plant, to twenty
per cent of the cost thereof to the assessee:
Provided that-
(via) in respect of depreciation of buildings newly
erected, or of machinery or plant being new
which has been installed, after the 3 lst day of
March, 1948, a further sum (which shall be deductible in determining the written down value)
equal to the amount admissible under clause (vi)
(exclusive of the extra allowance for double or
multiple shift working of the machinery or plant
and the initial depreciation allowance admissible
under that clause for the first year of erection of
the building or the installation of the machinery
or plant) in the assessments for such of the five
years commencing on the !st day of April, 1949,
and ending with the 31st day of Mar9h, 1954:
Provided that where, in respect of such machinery
or plant, the assessee establishes that the market
value of similar machinery or plant on the 3 lst
day of March, 1953, is lower than the original
cost, then, subject to the provisions of clause
(vi), there shall be made in the assessment for
the year commencing next after that date a further allowance (which shall be deductible in determining the written down value) of an amount
by which the written down value of the machinery or plant as on that date (without deduction of the initial depreciation admissible in
the first year) would have exceeded the corresponding written down value thereof as on the
same date -if the market price of the machinery
or plant had been taken as the actual cost of the
assessee;
(vii) in respect of any such building, machinery or
plant which has been sold or discarded or demolished or destroyed, the amount by which the
written · down value thereof exceeds the amount
Sikri, J.
850
SUPRI<.£IE COURT REPORTS
[1964]
l!J6J
l'oJ1nui&>ci11111 r of
/t1t'OJ1tt-lf/.r, Jl11dr1t"
v.
for which the building, machinery or plant. as
the case may be. is actually sold or its scrap
value:
Jlir Aloltd. A.ti: JJ11 . ..,
Ot1wtr.
rdlor•
Provided that.. ......... .
Sikri.
.f.
(51 In sub-section (2) ........ .'plant' includes vehicles,
books. scientific apparatus and ·surgical equipment purchased for the purpose of the business,
profession or vocation; ...... "
The point at issue before us has been considered by
three High Courts. The Bombay and Andhra Pradesh High
Courts have held against the assessee while in the judgment
under appeal. the Madras High Court has held in favour
of the assessee. The High Court of Andhra Pradesh, in the
case of B. Srika11tiah v. Commissioner of Income-Tax
Andhra Prades/1\'l. followed the Bombay case and expressly
dissented from the Madras case.
In the judgment under appeal (reported as Mr. Mo/id.
Ali v. Commissioner of Income-Tax, Madrm('), the High
Court arrived at the conclusion by the following steps:
(al Machinery must be given the same meaning with
reference to each of the statutory provisions, in
s. I0(2)(vi) and s. I 0(2)(vial;
(b) A diesel engine is machinery by the test laid
down in the case of Corporation of Calcutta v.
Chairma11,
Cossipore
and
Chitpore
Municipality(');
(c) Machinery does not cease to be machinery merely
because it )las to be used in conjunction with
one or more machines. Nor does it cease to be
machinery merely bec.ause it is, for instance, installed as part of a manufacturing or industrial
plant;
(d) The statutory provision for depreciation is in the
alternative. Whether it is plant or whether it
is machinery without its being itself a plant, the
assessee is entitled to claim the statutory allowance for depreciation.
The question then is: Which is the correct view? First.
the history of para two of cl. (vi) may be noticed. The object of the Income Tax (Amendment) Act. 1946 (VIII of
1946), which first inserted the provisions regarding extra
depreciation. was to encourage the modernisation and .rehabilitation of industry and trade. The Second World War
(') (1961) 41 I.T.R. 518.
(') (1960l 38 I.T.R. 413.
( 3 ) (1922) LL.R. 49 Cal. 190.
.:
'1 S.C.R.
SUPREME COURT REPORTS
851
·•
nad ended recently and during the long war machinery and
:!_Ii.!_
plant had not only not been replaced or modernised but CmnmisM<>n"
of
had been subjected to excessive wear and tear and needed Income-tax, Madras
rehabilitation. During the War. there had also been great .~fir Mo/J. Ali, Bus
advance in technology.
Owner,
I' ellote
It is then pertinent to point out that the word 'ma·
chinery'. occurs in els. (iv), (v), (vi) and (via) of s. 10(2).
Prima facie the same meaning must be given to the word
'machinery' in all these clauses. If a machine is machinery
for purposes of giving an allowance in respect of insurance
or for repairs or in respect of normal depreciation or for the
purpose of para one of cl. (vi), it must also be machinery
for the purpose of second para of cl. (vi) and cl. (via).
But it is said that the scheme of para two of cl. (vi) and
cl. (via) is different from that of para one of cl. (vi)
inasmuch as before it can qualify for extra depreciation, the
machinery must be new and must be installed, and the rate
of depreciation is provided in the Act itself. Keeping in
view this scheme, it is urged that the word 'machinery' must
be given a restricted meaning in para two of cl. (vi) and
cl. (via), and the meaning suggested is that it must be a
"self contained unit capable of being put to use in the busi·
· ness, profession or vocation for the benefit of which it was
installed". That this is the true meaning, it is further said,
is evidenced by the definition of the word 'plant' in s. 10(5). It
is argued that this definition indicates that for purposes of
para two of cl. (vi) and cl. (via), 'plant', including a vehicle
should be viewed as a unit and component parts thereof
are excluded from its purview, and 'machinery' should also
be considered in the same light
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 construe·
tion 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 the 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 instals a
secondhand 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
in~talled. it has ceased to be machinery. Suppose a new machmery 1s purch~S:d but not installed, it would not qualify
for extra deprecmtmn on the ground that it has not been
S-ikri, ,/.
852
SUPREME COURT REPORTS
[1964]
1964
installed and not because it has ceased to be machinery due
OommiBrion" of to its non-installation. The fact that. the rate of depreciation
Inc.,,.._iax, MadrM is provided for in the Act has also no bearing on the quesMir Mo;:;: Ali, s., tion of the construction of the word 'machinery'. This fact
Owner,
Vellore only indicates that the legislature had made up its mind as
Bikri, J.
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.
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
a·nd surgical equipment are not 'plant' in all businesses, professim,is and vocations. The legislature settled this possible
contr<'iversy, 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
Corporation of Calcutta v. Chairman, Cossipore and Chitpore Municipality(') hazarded the following definition of
'machinerv':
"The word '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 a result."
They had 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 word
'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.
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, -,vhich are
machinery, can be treated separately.
(') (1922) IL.R. 49 Cal. 190.
'1 S.C.R.
SUPRE:ME COURT REPORTS
853
Further, when the assessee purchased the diesel engines,
1964
they were not 'plant' or part of a plant, because the>' had
Oomm;88;0,.., of
not been installed in any vehicle. They were, accordmg tOJncomc-tax. Madras
the definition given by the Privy Council, machinery. TheyM_ M, v1. Al•- B
,
ir
Ori'.
,
us
were not yet part of a plant, and, accordmg to the Act, 20
Owner, rel/ore
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 was machinery.
The learned counsel next contended that the assessee
is not entitled to extra depreciation because a diesel engine
cannot be said to be installed. He urges that the word 'installed' is wholly inappropriate to cover the fixing of a diesel
engine in a motor vehicle. We are of the opinion that there
is no force in this contention_ As observed by the Bombay
Hi£h Court in the case of Commissioner of Income-Tax v.
Sa;mpur Mills Ltd.(') the expression 'installed' did not neces-
~ariiy 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 IncomeTax, Jfatlras v. Sri Ram Vilas Services (Pvt) Ltd.('), 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 els. (vi) and (via)_
Accordingly, we hold that the High Court was correct
in answering the question referred to it in the affirmative.
The appeal, therefore fails and is dismissed with costs.
SHAH, J.- I am unable to hold that the respondent is
entitled to the allowance under s. 10(2)(vi) paragraph 2. in
respect of the diesel engines claimed by him.
S~ction 10 of the Indian Income-tax Act prov·ides that
tax shall be payable on the profits and gains of an assessee
under the h~ad 'profits and gain of business, profession or
vocation". By sub-s. (2) in the computation of taxable profits certain allowances prescribed therein are permissible. We
are primarily concerned in this appeal with the initial allow-
:mce permissible under the second paragraph of cl. (vi) of
~
sub-s. (2). But els. (iv). (v), (vi). (vi)(a) and (vii) are inter-related and it may be necessary briefly to refer to those provisioris By cL (iv) allowance for premium paid in respect of
insurance against risk of damage or destruction of buildings,
machinery. plant. furniture. stocks or stores, used for the
purposes of the business. profession or vocation is admissible. Under cL (v) an amounr paid on account of any current
repairs to such buildings, .machinery, plant or furniture is
('), (1959) 36 LT.R 580.
(') (]960) 38 I.T.R 25.
Sikri, J.
S!wli, J.
854
SUPUE:ME COURT REPORTS
(196lJ
l!!tU
an admissible allowance. Oause (vi) recognises by the first
0.,,,,,.,,.,;,,,.,, of paragraph a right to normal depreciation of a percentage on
lnco.,,.1,,x, Mwlrn• the prescribed valuation of such buildings, machinery, plant
11. M ,.;· 41' B
or furniture, which are the property of the assessees. The
"o:,.,.: ·v,~ion,,., second paragraph at the material time stood as follows:
Shah, J.
"and where the buildings have been neY<lY erected,
or the machinery or plant being new has been
installed. after the 31st day of March, 1945. a
further sum (which shall however not be deductible in determining the written down value for
the purposes of this clause) in respect of the year
of erection or installation equivalent, etc. etc."
Clause (vi)(a) which was inserted by Act 67 of 1949 permitted a further depreciation allowance in respect of buildings
newly erected or of machinery or plant being new which had
been erected or installed after March 31, 1948, in not more
than five successive assessments, for the financial years next
following the previous year in which such buildings were
erected; or machinery or plant installed. Clause (vii) permitted as an allowance the difference betY<een the written down
value and the sale price or scrap value of such buildings,
machinery or plant which had been sold, discarded, demolished or destroyed.
All these clauses dealt with allowances in respect of
assets of the specified description and used for the purpose
of business, profession or vocation. The· depreciation aTiowance permitted under the first paragraph of cl. (vi) which may
be called the normal allowance is in respect of all buildings,
machinery, plant and furniture of the assessee used for the
purpose of his business. By the second paragraph of cl. (vi)
an initial allowance in the year in which buildings have been
newly erected or the machinery or plant being new has been
installed after March 31, 1945, is allowable. Use of the
definite article "the" in the second paragraph indicates that
the buildings, machinery or plant referred to in that paragraph must also be used for the purpose of the busine~s. profession or vocation of the assessec. However to qualify for
the initial allowance under paragraph two, the buildings
must be newly erected or the machinery or plant being new
must have been installed, after March 31, 1945.
Two rival views are pressed upon us in support of the
respective cases of the Commissioner and the assesse~ '.'s to
the meaning of the second paragraph. The Comm1ss10ner
contends that the buildings, machinery or plant for which
the initial allowance is admissible must be a self-contained
unit capable of being put to use in the business, profession
or vocation for the benefit of which it is erected or installed.
It is submitted that the second paragraph of cl. (vi) was en-
...
..
7 S.C.R.
SUPREME COURT REPORTS
855
acted with the object of giving a fillip to industry which had
1961
be7n . starved _during the war_ y~rs of ne:-v machinery and
Cumn•i«•i,,.,r of
bu!ldmg act1V1ty. But the buildmgs, machinery, or plant to focomda.r. Madr,,.
qualify for the initial allowances were not intended to be in .
'"·
.
f
I'
dd. ·
·
· ·
Mir Mohd. Al'- Bv•
the nature o rep acement, a
1t10n, or repair to extstmg
0""'" Ve/lore
units : they had to be buildings newly erected or machinery
'
or plant being new installed. On behalf of the assessee it
Shah, J.
was contended that the Legislature has not put any restriction of the nature suggested on behalf of the Commissioner
and, therefore, any building or a part thereof newly erected
or any new machinery or plant or a part thereof installed,
qualified for the benefit of the initial allowance.
The question to be decided is one about the intention
of the Legislature. Can it be said that when to an existing
building a room even a floor is added, that the additional
construction is a building newly erected? In my view, that
does not appear to be the intention. Such an addition to an
existing structure, becomes a part of the structure, and cannot be said to be a building newly erected. If every alteration or addition in an existing building is covered by the second
paragraph of cl. (vi) mere repairs falling within the words of
cl. (vi) may also qualify for initial allowance. If a mere addition to a building cannot be regarded as such an erection
as is contemplated by the second paragraph of cl. (vi), it
would be difficult to hold that the machinery or plant would
include part of machinery or plant.
Counsel for the assessee concedes that replacement of
a petrol engine by a diesel engine in a motor transport vehicle is not installation of plant. The question is whether it
is installation of machine. In my view replacement. of a petrol engine by a new diesel engine in a motor-car cannot be
said to be installation of machinery within the meaning of
the relevant clause. To be installed the machinery being new
must for the purpose of the business be brought into service
as a self-contained unit. If the argument of the assessee is
sound. every bolt, nut, rod or flywheel which constitute a
part of machinery would qualify for the initial allowance and
the difference between the allowance for repairs and initial
allowance may be obliterated. Counsel for the assessee also
did not, as I understood him, contend that replacement of
a mere part of machinery was installation of machinery
within the meaning of the second paragraph of cl. (vi). The
Legislature has not given any definition for that expression,
and the expressi.gn "machinery" is otherwise somewhat difficult to define. The Judicial Committee in Corporation of
Calcutta v. Cossipore and Chitpore Municipality(') when it
was called upon to consider whether a tank supported on
(.;\ L. R. 48 I.A. 435.
856
SUPREME COURT REPORTS
[1964)
JVGl
columns, and which could be filled by pumping from a rec0,,.,,;.,,fow, of
servo~r belo~gi~g to the C:orporation could be regarded as
'"""""·'""· Jfodms machinery w1thm the meanmg of the Bengal Municipal Act,
JI . ,, ;;· ,1. B
1884, observed at p. 445:
ir ..t.tOti(v. ~"1 t,
US
Own•,, Vdlo"
"If their Lordships were obliged to run the hazard
st.,•h, .1.
of the attempt (to define machinery) they would
be inclined to say that the word 'machinery'
when used in ordinary language, prima facie
means some m.~chanical contrivances which, by
themselves or in combination with one or more
other mechanical contrivance, 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 a result."
But we 11re n.ot called upon in this case to decide whether a diesel engine is in the abstract machinery: the question
is whether a diesel engine, which is used for replacing a petrol engine, in a vehicle used by a transport operator for the
purpose of his business is machinery installed within the
meaning of s. I 0(2)(vi) paragraph 2. Whether "machinery"
is some contrivance for supplying motive power to another
contrivance which directly produces an article or is a
mechanical contrivance which produces or assists in the production of an article, it would be difficult to regard introduction
of a mere part, which has no independent use in the business
conducted by the assessee, as machinery installed for the
purpose of the second paragraph oi cl. (vi). The Legislature
has provided for the normal depreciatiqn by paragraph 1 of
cl. (vi) and in respect of newly installed machinery it has
provided for the initial allowance, the object being to induce
i.ndustrialists to start new industries or to extend their existing industries by erecting new buildings, or installing new
machinery or plant.
A diesel engine by itself may undoubtedly be used in a
business other than that of a transport operator, for instance.
for working a pump to draw underground water and may
for that purpose be regarded as a self-contained unit But
that is not decisive of the question whether in the business
"'
of a transport operator a diesel engine used to replace a
petrol engine may be regarded as machinery installed. Machinery installed within the meaning of paragraph 2 of
s !0(2)(vi) is qualified by the expression "used for the purposes of the business'', and therefore un~ss as a self-contained unit the machinery is used for the purposes of the
business, initial _depreciation would not be admissible in respect thereof. That it may be capable of being used in another
-.
. 7 S.C.R.
SUPRE:'.IIE GOURT UEPORTS
857
business by th~ same or another assessee as a self-contained
1964 -
unit is irrelevant in considering its admissibility for initial
Cummi."i""" of
allowance in the business in which it is actually used.
Income.tux, Mudras
v.
It would be fruitless to refer to the schedule under rule 8 ~fir Mohd. Ali, Buo
of the Income-tax Rules for computing the allowance in resOu·na, Vtllore
pect of the depreciation under s. 10(2)(vi). The schedule
Sha/•, J.
catalogues different items in respect of which depreciation is
admissible at the rates prescribed. But whether a particular
item is admissible for initial allowance in the second paragraph must depend upon two factors-(i) that it is in respect
of the year of erection or installation that the initial allowance is permissible; and (ii) the building or the machinery
is used for the purposes of the business. If it is a predicate
of admissibility to initial allowance that the machinery must
be new and a self-contained unit in the particular business
in the carrying on of which the initial allowance is claimed,
the fact that in certain conditions that machinery may be
regarded as self-contained for the purpose of another business in which it is used, would furnish no guide in ascertaining whether initial allowance is permissible as a deduction
in the assessment of taxable income of the business in which
it is actually used.
In my view the appeal should be allowed and the question referred for opinion should be answered in the negative.
ORDER
In accordance with the opinion of the majority the appeal
is dismissed with costs.
Appeal dismissed.