COMMISSIONER OF INCOME TAX Vs. PANDYAN BANK LIMITED

JUDGEMENT

(1.) THIS matter pertains to the assessment year 1960-61 and involves the question whether development rebate allowed by the Tribunal, differing from the revenue, is correct. The assessee, the Pandyan Bank Limited, Madurai, a public limited company carrying on banking business, owned a building with a total floor space of 34,398 sq. ft. The whole of it was air-conditioned. The total cost of the machineries for air-conditioning was Rs. 2,31,279. The assessee in its return claimed both depreciation and also development rebate in respect thereof. The income returned by the assessee was under the three heads, interest, business and property. In a part of the premises of an extent of 1,300 sq. ft. there were two tenants, one the Airlines Corporation Ltd., and the other the standard Vacuum Oil Company Limited, both of which were, under the terms of the tenancy, entitled to air-condition facilities. The claim for development rebate was disallowed by the Income-tax Officer with whom the Appellate Assistant Commissioner of Income-tax agreed, on the ground that the assessee had let out portions of the premises and that, therefore, the air-conditioning machinery or plant was not wholly used for the purpose of the business carried on by the assessee. The Tribunal reversed that order. In its view, the plant was one whole serving the entire premises, that it would not be possible to make it serve portions separately and that if the plant was to serve the bank, it would naturally have to serve other portions had been let out. On that basis it considered that the plant had been used wholly for the purpose of the business. At the instance or the Commissioner of Income-tax, this reference come before us under section 66(1) of the Indian Income-tax Act, 1922, on the following question :

(2.) THE assessee is not represented before us. But Mr. V Balasubrahmanyan, for the revenue, has in his usual way, presented to us almost all aspects of the question in order to enable us to come to a proper conclusion. THE statutory provision which governs the matter, and as it stood at the relevant time, says that the Profits or gains of business shall be computed after making, among other allowances, allowance in respect of machinery or Plant being new, which has been installed after the 31st day of March, 1954, and which is wholly used for the purposes of the business carried on by the assessee, sum by way of development rebate in respect of the year of installation equivalent to twenty-five per cent. of the actual cost of such machinery or plant to the assessee. THE proviso to this Provision is to the effect that allowance should not be granted unless the particulars prescribed for the purpose of section 10(2)(vi) have been furnished by the assessee in respect of such machinery. Clause(vi) has reference to allowance in respect of depreciation of machinery or plant among other things. For the revenue the approach is that the conditions for allowance of development rebate ought to be strictly compiled with, that unless the words employed by the legislature for the purpose are squarely met by facts on which the claim for rebate is founded, no allowance can be made and that, therefore, their is no room for extraneous considerations like equity or reasonableness or even justice form any point of view. Learned counsel says that, in a matter of allowance of rebate, strict construction, rather than liberal, ought to be applied, and this more especially so because of the legislative object and policy in providing for allowance of rebate for machinery. From this point of view it is said that it suffice not that the plant is used in respect of the entire premises but what is required is that it should be used and wholly used for the purposes of the business which the assessee carried on. Applying that proposition to the facts, we are told that letting a portion of the premises - be it only a small portion when it is compared with the total area - is not and cannot be said to be a business which the assessee carried on.

(3.) WITH respect, whatever may be said in favour of that view in the context of the particular facts, we are unable to hold that the ratio of that case is applicable to the situation before us. There is nothing in the record to show that the use of the air-conditioning plant could not be confined wholly to the area occupied by the assessee excluding the portion under tenancy. Quite apart from that, we are of opinion that the words "wholly used" must be given their full scope as a condition to an allowance of development rebate. The words do not appear to mean that, when not required for particular business purposes, they can or have to be used for other purposes having regard to continuance or nature of their structural built in set up, and still development rebate can be claimed. If that were the position, we fail to understand the significance of the word "wholly". It dose not mean wholly but qualified by circumstances. Obviously, when the machinery or plant is used for business, what is contemplated is, it would be used wholly for the purpose to the extent such user was made. "wholly" has no reference to the extent or nature of the business but to the extent of the user must be with reference to and only for the purposes of the business carried on by the assessee.