RAJU AND MANNAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) -

(2.) MESSRS. Raju and Mannar, Salem, is a registered firm carrying on the business of transport, by plying lorries for hire. It owned a fleet of ten lorries. In the accounting year - year ended March 31, 1955, relevant to the assessment year 1955-56 - some of these lorries were fitted with new engines capable of being run on diesel oil replacing the old petrol driven engines. In the assessment proceedings under the Indian Income-tax Act for the year of assessment 1955-56, the firm claimed "development rebate" under section 10(2)(vib) of the Act and extra depreciation on these engines newly fitted to the vehicles. The Income-tax Officer rejected the claim. On appeal by the assessee to the Appellate Assistant Commissioner the decision of the Income-tax Officer was affirmed. The Appellate authority held that "development rebate" was permissible only in respect of plant or machinery which was "installed" and that fitting of new diesel engines to old lorries did not amount to any installation of plant or machinery. The assessee preferred a further appeal before the Income-tax Appellate Tribunal, Madras. The assessee again failed and the Tribunal dismissed the appeal in the following words : "In order to attract the operation of clause (vi) of sub-section (2) of section 10 of the Act, the machinery itself and not a part thereof should have been installed. The new diesel engine forms only a part of the old lorry into which it is fitted. The engine cannot rightly be regarded as the machinery cotemplated under clause (vi) of section 10(2) of the Act. Nor can the process of fitting it into lorry be correctly described as "the installation" within the meaning of the said clause. On an application under section 66(1) of the Act made to the Tribunal for reference to this court, the following question of law was referred :

(3.) THE real question for consideration in the present case is whether the fitting of the diesel engines into the motor vehicles constitute installation of machinery or plant. Construing the words of section 10(2)(via), which also require the installation of machinery or plant before the depreciation allowance can be claimed, this court held in Mir Mohd. Ali v. Commissioner of Income-tax, 1960 38 ITR 413., that a diesel engine was machinery within the meaning of section 10(2)(vi) and section 10(2)(via) of the Act and continued to be machinery even after it was made an integral part of the bus into which it was fitted. At page 422, the learned judges observed :