Extra depreciation for installation of machinery.

JAGADISAN J.

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 contemplated 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" *

Whether, on the facts and in the circumstances of the case, the disallowances of the development rebate and the extra depreciation in respect of the new diesel engines are correct in law ?

"It is this question which we have now to answer. The provisions of sections 10(2)(vi), 10(2)(via) and 10(2)(vib) deal with allowances for depreciation and "development rebate" in respect of machinery or plant. An assessee is entitled to depreciation allowance under section 10(2)(vic) in the case of machinery or plant of twenty per cent. on its cost. He is also entitled to extra depreciation allowance deductible in determining the written down value under rule 8. In respect of plant or machinery not entitled to development rebate under clause (vib), he is entitled to initial depreciation allowance in the first year in respect of machinery and plant. He is further entitled to extra depreciation allowance for not more than the first five years even in respect of machinery and plant entitled to development rebate under clause (vib) deductible in determining the written down value. These benefits by way of depreciation allowance follow from the language of section 10(2)(vi) and section 10(2)(via). Section 10(2)(via) reads as follows" *

In respect of depreciation of buildings newly erected, or of machinery or plant being new which has been installed, after the 31st 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 not more than five successive assessments for the financial years next following the previous year in which such buildings are erected and such machinery and plant installed and falling within the period commencing on the 1st day of April, 1949, and ending on the 31st day of March, 1959. "Section 10(2)(vib) is in these words

" In respect of machinery or plant