BOARD OF REVENUE Vs. SRMARRAMANADHAN CHETTIAR

JUDGEMENT

(1.) The question referred for the opinion of the Court is whether the assessee is entitled to the deduction from the annual profits of what in fact is a loss made by him by the sale of certain machinery or plant. He carried on various businesses, two of which consisted of rice mills. He sold those mills and wishes to bring into account the difference between the purchase price of the machinery at those mills and the sale price, giving credit for amounts, if any, allowed to him in any previous year for depreciation. Whether he can do so or not turns on the proper interpretation of Section 9 of the Income Tax, Act, VII of 1918, Sub-section (2), (sic) 6 and 7. Certain specified allowances at6 thereby made, which may betaken into account in arriving at the profits of the business. While the machinery is being used, Clause 6 allows a certain annual depreciation on such machinery, the practice being, we are told, to consider that the machinery has a life of 15 years, and therefore to allow an annual depreciation as a general Rule of 61 per cent. Clause 7 deals with cases where the machinery has been sold or discarded as obsolete and in that ease, the assessee is entitled to deduct from his profits the difference between the original cost reduced by the annual allowances for depreciation added together, and the amount for which the machinery is actually sold or its scrap value. It was contended in this case that the assessee, who had got rid of these two mills by sale had sold them as obsolete. There was no finding of fact as to this in the original case referred to back to the Commissioner. Evidence has been taken before him and he has found as a fact that the machinery was sold as not obsolete. It appears that, so far as one of the mills is concerned, the machinery had been allowed to get into a very bad state of repair, and required the expenditure of a considerable sum to put it in proper working order. Evidence has also been given that it had been put in proper working order by the purchaser and is being used for its proper purposes, namely, the milling operations. On that, the Commissioner has found the fact that the machinery was not obsolete, and I cannot see how we can say that he was wrong in so finding.

(2.) It is then argued that, on the true construction of Clause (7), all sales of machinery are included, irrespective of whether they are sold by reason of their being obsolete. In other words, that the words "as obsolete" "govern the word discarded appearing immediately before them, and not the word sold. The phraseology of this Clause is not very happy, because it is obvious that the words could bear either meaning; but the statute has been punctuated, and we must take the punctuation marks, as part of the statute. If it was intended to read the words as obsolete as governing sold one would expect to find a comma after the word sold. There is none, the comma being put after the word obsolete . Further it does not seem probable that the legislature meant to provide a deduction for losses, on sales of machinery by manufacturing concerns, without at the same time providing for the bringing into account as profits any profits that might be made on such sales. Sales of machinery are sales of part of the capital of a concern of this kind, and thus resulting waits or losses on such sales are dealt with quite apart from this section. Without this Clause at all, the Commissioner, can and does consider, whether or not realised profit or realised loss on such a sale lie to be brought into account or not, and the answer depends on whether the sale is in fact part of the ordinary business operations of the concern.

(3.) On these grounds, I think the answer to the question referred to us is that the assessee is not entitled to the deduction claimed.