COMMISSIONER OF INCOME TAX Vs. MAZAGAON DOCK LIMITED

JUDGEMENT

(1.) IN this Departmental reference relating to the assessee's assessment for the asst. yrs. 1968 69 to 1970 71, the Tribunal has referred to this Court the following questions of law under section 256 (1) of the IT Act, 1961, for opinion :

(2.) FOR the sake of convenience, we propose to deal with the second question first. The assessee incurred expenditure of Rs. 1,76,35,639 in all on the Kasara Basin Wet Dock. It claimed that the entire expenditure represented the cost of plant and machinery and that it was entitled to depreciation and development rebate on that basis. The ITO held that the assessee was entitled to development rebate on the expenditure amounting to Rs. 17,22,639 only as that amount alone represented the cost of plant and machinery. According to him, the remaining amount represented the cost of excavation and masonry including R. C. C. work, etc. For this purpose, he derived support from our Court's decision in the case of Jayasing rao Piraji Rao Ghatge vs. CIT (1962) 46 ITR 1160 ; the decision in the case of Dumbarton Harbour Board vs. Cox (1918) 7 TC 147 (C. Sess) and the House of Lords decision in the case of Barclay, Curle and Co. Ltd. (1970) 76 ITR 62. The AAC found that an impounded wet dock is used in the fitting out work on ships. It is essentially an enclosure which impounds sea water and consists of walls on three sides and a flap gate at the entrance. The walls are reinforced concrete walls of cellular construction. The flap gate is operated by a powerful winch for docking and undocking of ships in the basin. The dock is equipped with all equipment necessary for the supply of compressed air, salt water, etc. A pump house with powerful pumps is also provided so as to maintaining the water level in the basin. Cranes are also positioned on either side of the basin for easy fitting out work. The new ships under construction are berthed alongside the quarry walls of the basin for the fitting out work. He concluded that an impounded wet dock was, as a whole, a plant by itself used in the construction of new ships. The AAC, accordingly, held that the assessee was entitled to depreciation as well as development rebate on the entire cost of the Kasara Basin Wet Dock amounting to Rs. 1,76,35,639.

(3.) IT is submitted before us by Shri Jetley, learned counsel for the Revenue, that the Tribunal wrongly followed the Gujarat High Court decision in CIT vs. Elecon Engineering Co. Ltd. (supra). The House of Lords decision in IRC vs. Barclay, Curle and Co. Ltd. (supra) he pointed out, was based on the fact that there was no definition of the word "plant" in the British Act and, in any event, the dry dock under consideration of the House of Lords is materially different from the wet dock involved in the present case. He then referred to the inclusive definition of the word "plant" in s. 43(3) to show that the word "plant", though not defined as such, has to take colour from the subsequent items included in its definition. This is what is required to be done in view of the principle of interpretation ejusdem generis. In particular, he pointed out that all items included in the definition are movable items. That would indicate that only movable items are to be included in the expression "plant". Lastly, he pointed out that the House of Lords decision was rendered on the basis of certain facts found by the CITs in the light of evidence led before the CITs. Similar facts have not been found by the Tribunal in the present case and, therefore, even if it is assumed that the principle laid down by the House of Lords in that case is applicable, it cannot be applied to this case. In this context, Shri Jetley submitted that the place where a plant is located can never be a part of the plant because it is only a location where it is housed. In this regard, he placed strong reliance on our Court's judgment in Jayasingrao Piraji Rao Ghatge vs. CIT (supra). He also relied on our Court's decision in the case of CIT vs. Sandvik Asia Ltd. (1983) 33 CTR (Bom) 128 : (1983) 144 ITR 585 where our Court held that roads within the factory premises were not plant. Shri Dastur, learned counsel for the assessee on the other hand, stated that the House of Lords decision is squarely applicable to the facts of the case before us. He invited our attention to the assessment order in which the ITO himself had stated that the case in IRC vs. Barclay, Curle and Co. Ltd. (1970) 76 ITR 62 (HL) was similar to the assessee's case. Shri Dastur then pointed out that the House of Lords decision has been quoted with approval both by the Supreme Court and by our Court. The Supreme Court has, in the case of Scientific Engineering House P. Ltd. vs. CIT (1985) 49 CTR (SC) 386 : (1986) 157 ITR 86, it was pointed out, after referring to a number of decisions including the aforesaid House of Lords decision, observed at page 96 :