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Petitioner: COMMISSIONER OF INCOME-TAX VS Respondent: KIRAN CRIMPERS
Court Name: Gujarat High Court Judge(s): R. K. Abichandani, R. Balla Title: COMMISSIONER OF INCOME-TAX vs KIRAN CRIMPERS Case No.: Income-tax Reference No, 346 of 1983 Date of Judgment:1996-12-04 Reported As: 1999 PTD 156 Result: Reference answered
JUDGMENT
JUDGMENT ' R. BALIA, J.---The Income-tax Tribunal, Ahmedabad Bench "A", vide its order dated August 9, 1983, at the instance of the Commissioner of Income-tax had drawn up a statement of case and submitted to this Court for opinion the following question of law said to be arising out of its order in I.T.A. No,833/Ahd of 1982 relating to the assessment year 1978-79: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the assessee was entitled to extra shift allowance on air-conditioning machinery used for crimping yam." ' As is apparent from the question , the issue relates to allowability of additional deduction by way of depreciation termed as "extra shift allowance" in respect of air-conditioning machinery, which are used for crimping yarn in its factory premises, which is run for more than one shift. ' The facts as appear from the statement of case are that the assessee has claimed extra shift allowance in respect of air-conditioners used by it for its unit of crimping yarn. The air-conditioners were fitted separately to the wall of the room. The Tribunal also found that the air-conditioners were necessary for crimping yarn. On this finding the Tribunal by applying the decision of the Gujarat High Court in Industrial Machinery Manufacturers Pvt. Ltd. v. State of Gujarat (1965) 16 STC 380, held that air-conditioners are plant and being essential for running crimping unit it fell in item III of sub-item (ii)B of Appendix (Part-I) and the assessee was entitled to extra shift allowance in respect of air-conditioners. ' It has been urged by Mr. Thakore, learned counsel for the Revenue, that air-conditioners of all types including room air-conditioners are subjected to a specific entry in the same Appendix (Part I), item III, sub-item (ii)B(2) just above the item on which the assessee relies. Item (2) is followed by
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an inscription "N.E.S.A." the import of this inscription has been stated in sub-item(iv) of item III which deals with depreciation on machinery and plant not being a ship, of the same Appendix. ' Placing reliance on these two specific provisions, learned counsel urged that extra shift allowance for additional shifts worked by a factory for the purposes of computing additional depreciation is not available in the case of a specific entry air-conditioning machinery by reference to another entry providing for rate of depreciation generally used in that business. He placed reliance on a decision of this Court in Bharat Suryadaya Mills v. CIT (1995) 212 ITR 6. ' It has been countered by Mr. Divetia that the Tribunal has accepted the assessee's contention on the basis of certificates issued by the South Gujarat Textile Processors Association and Manmade Textile Research Association that air-conditioners are a part of the crimping machinery and this being a finding of fact not challenged by the Revenue as a finding of fact ought to have been challenged, the air-conditioners ought to be treated as a part of the plant or machinery falling in item III of sub-item (ii)B of Appendix I referred to above and item (3) being not suffixed by inscription "N.E.S.A.". Sub-item (iv) of Part III has no application so as to deny the petitioner the claim for extra shift allowance in respect of the machinery in question. He strongly placed reliance on Industrial Machinery Manufacturers' Pvt Ltd.'s case (1965) 16 STC 380 (Guj.), referred to above and another decision of this Court in CIT v. Tarun Commercial Mills Ltd. (1985) 151 ITR 75 (Guj.). ' Before proceeding further, we may deal with the preliminary objection raised by learned counsel for the assessee. It was urged that since the Tribunal has found that air-conditioners are part of crimping machinery and that finding has not been challenged by raising a specific question, no further question for considering air-conditioners as not crimping machinery but some other machinery can arise for consideration. Having carefully read the order of the Tribunal, we are of the opinion that this reading of the finding as such is not an appropriate reading of the order. The context of the two certificates which have been produced by the assessee in support of his case that air-conditioners are necessary for use of crimping machinery and that the crimping yarn plant cannot function without air-conditioners as such air-conditioners as are installed in a crimping yarn unit must necessarily be treated as an artificial art silk plant. In the light of this plea, the two certificates reproduced in the order itself read in no unmistakable terms that what is meant by this finding is that use of air conditioners are necessary and essential for the process of crimping of nylon yarn or for the functioning of crimping machinery. The certificate from the South Gujarat Textile Processors Association reads that "air-conditioners (apparatus) is part and parcel for the working of crimping machine in a crimping unit and without the simultaneous working of air-conditioning machine, no crimping machinery can work. Therefore, in a crimping unit which works for 24 hours, the air-conditioning machinery must work for 24 hours. ' The other certificate reads "This is to certify that crimping of nylon yarn on a crimping machine is always done in an air-conditioned atmosphere. ' It is on the basis of these two certificates that the finding of the Tribunal has been recorded. The true meaning of the finding has to be read in the context in which the contention about such fact has been raised. In the light of the assessee's own case, the finding is acceptance of his plea that air-conditioners are necessary for the use of crimping machinery for carrying on the process of crimping of nylon yarn. ' We will now proceed to examine the issue before us in the light of the finding recorded by the Tribunal, as explained and suggested by learned counsel for the assessee that air-conditioners are necessary for the use of the crimping machine at the petitioner's factory for manufacture of crimping yarn. This is also to be taken into consideration that at no point of time there is any dispute between the parties that but for the use to which it is being put the machinery in question is and falls in the category of air-conditioning machinery. They are described throughout as air- conditioners used for crimping yarn machinery. Therefore, the question which requires to be
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answered is whether air-conditioners which are necessary for the use of crimping yarn machine are eligible for extra shift allowance by treating them to be a machinery or plant falling in the category of artificial silk manufacturing plant/machinery or it should be treated as air-conditioning machinery used for artificial silk manufacturing machinery/plant. ' At the outset, we may notice that depreciation on certain fixed assets owned by an assessee is required to be allowed as deduction under section 32 of the Income Tax Act, 1961, since subsection (1) of which opens with the words: "In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deduction shall, subject to the provisions of section 34, be allowed--- (i) in the case of ships other than ships ordinarily plying on inland waters, such percentage on the actual cost thereof to the assessee as may, in any case or class of cases or in respect of any period or periods, be prescribed: ' Provided that different percentages may be prescribed for different periods having regard to the date of acquisition of the ship; (ii) in the case of buildings, machinery, plant or furniture, other than ships covered by clause (i), such percentage on the written down value thereof as may in any case or class of cases be prescribed: ' Provided that where the actual cost of any machinery or plant does not exceed seven hundred and fifty rupees, the actual cost thereof shall be allowed as a deduction in respect of the previous year in which such machinery or plant is first put to use by the assessee for the purposes of his business or profession: ' Provided further that no deduction shall be allowed under this clause or clause (iii) in respect of any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975, and is used otherwise than in a business of running it on hire for tourists...." ' In the four expressions used under section 32, the word "plant" can be of the widest import, though it has different shades of meaning. In the Concise Oxford Dictionary, different shades of meaning have been assigned to the word "plant". One meaning falls in the realm of botanical expression pertaining to vegetation; as a noun it has been defined to a small organism of this kind as distinguished from a shrub or tree. Obviously we are not concerned with this meaning. Amongst other meanings which have been assigned to it in one sense it means "machinery, fixtures, etc., used in industrial process", in another sense it means "a factory itself". ' In Webster's Third New International Dictionary, the meaning of the word "plant" has been stated to be, which may be relevant for the present consideration, " and " , "building " , machinery " , apparatus " , fixtures employed in carrying on a trade or a mechanical or other industrial business. It has also been stated to mean "a factory", "work of a particular product for example an automobile plant or an ice-cream plant" and yet greater import has been given to mean the "total facilities available for production or the service in a particular country or place". In another shade it has been defined to mean "a piece of equipment or a set of machine/parts functioning together for the performance of a particular operation". ' We may also usefully refer to the meaning of "plant" as given in Words and Phrases Legally Defined (Butterworth) which states that "in the context of an Act which deals with what goes on in factories, "plant" is an ordinary English word in common usage whose meaning is well-understood. To quote the Shorter Oxford English Dictionary it means "the fixtures, implements and apparatus used in carrying on any industrial process". ' In this connection, the decision in Benson (Inspector of Taxes) v. Yard Arm Club Ltd. (1979) 2 All ER 336, 346 (CA), per Shaw, L.J., may also be referred to wherein considering the question of "plant", the
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Court said "the characteristic of plant appears to be that it is an adjunct to the carrying on of a business and not the essential site or core of the business itself". ' We may in this connection also refer to the meaning of plant in the context of the activity of carrying on business assigned to plant and machinery in Stroud's Judicial Dictionary, wherein it has been stated "plant" and "machinery" are two quite different things, speaking generally machinery includes everything which by its action produces or assists in production; and that "plant" might be regarded as that without which production could not go on...And included such things reference was made to as brewer's pipes, vats, and the like"; and reference was made a to opinion of Kekewich, J., in Re Brooke, 64 L.J. Ch.27. ' Reading the dictionary meaning of "machine", as given in the Concise Oxford Dictionary, it means "an apparatus using or applying mechanical power having several parts each with the definite function and together performing certain kinds of work and that an instrument transmits or directs a force on apparatus, machines collectively known as machinery the components of a machine or a mechanism of machine also conveys the same meaning. ' Stroud's Judicial Dictionary. While giving meaning to "machinery" reads, "Machinery" implies the application of mechanical means to the attainment of some particular end by the help of natural forces; "operative machinery" means machinery with the potentiality of operating or doing work. ' According to the plain dictionary meaning in its widest connotation in the context of trade or business, the expression plant may sometimes mean the factory itself as one composite unit including all buildings, machinery and apparatus therein which are required for the purposes of the factory. Obviously, the term "plant" has not been used under section 32 of the Act or for that matter under the Rules framed thereunder in that wide meaning. The very fact that four different terms have been used, namely, building, machinery, plant and furniture, the term "plants" has been used in a narrow sense to mean that it includes whatever apparatus is used by a person carrying on his business which is not as a stock-in-trade which buys or makes or sells and which may not fall in the category of the building, machinery or the furniture as such. Thus, in principle the argument that the unit as a whole must be treated as a plant manufacturing artificial silk without identifying the individual apparatus installed therein or used therein for the purposes of carrying on business of the, assessee in order to compute allowable deduction a depreciation under section 32 of the Act cannot be accepted. ' The clearer distinction in the context of the provision with which we are concerned has to be borne in mind that exists between different meanings which the expression "plant" may convey. In its broadest sense it may mean the whole gamut of a business organization owned by the assessee. In a different context it may mean a factory which may include buildings, roads, sheds, machinery and all apparatus which are necessary for its functioning as a whole and in yet another sense it may mean each apparatus by itself which may properly be termed as fixture, implement and apparatus used in carrying on any industrial activity. Keeping in view the broad meaning which can be assigned to plant so as to mean organization itself or to include within itself of apparatus, which may be machinery as well and keeping in view the use of separate expressions in the Act and the prescription of different rates on written down value of each building, machinery and plant used in carrying on business of the assessee, whether of manufacture or not, it must be held that what is required to be considered for the purpose of computing depreciation which can be allowed as deduction is each building, machinery or plant falling within the narrower description of the term. In view of the aforesaid, we are unable to accept the contention of learned counsel for the assessee that "plant" for the purposes of computation of allowable deduction as depreciation under. The Income Tax Act should be taken to mean the entire organization or unit as a whole comprising all the apparatus installed therein which are necessary for its function but it will have to be seen that for the purposes of carrying on business of the assessee what apparatuses are
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owned by the assessee at one or more places of business where his activity of business is being carried on whether of manufacture or trading and whether they are being used for the purposes of carrying on business generally. Once these tests are satisfied, the question for computation of deduction arise in respect of written down value of each asset machinery or plant on the basis of rates which have been prescribed by the Rules. ' So far as the present case is concerned, the controversy whether the air-conditioners are machinery or plant or whether the same are used for the purposes of carrying on business by the assessee who owns in question does not arise as the same are accepted premises. The question, therefore, which really arises taking air-conditioners individually, can it be said to be a plant of machinery conforming to the description of artificial silk manufacturing plant or an air- conditioning machine. It is also not in dispute that the assets in question are primarily air- conditioning machinery and do fall within the description of item(2) under sub-item(ii) "B" of item III of Appendix I (Part-I) providing for different rates of depreciation on machinery and plant other than ships. It is also not in dispute that the said air-conditioners are necessary for the purpose of functioning of yarn crimping machine for the end-product of the factory. So, can it be said that because the air-conditioners are necessarily used for the functioning of the factory, it becomes an artificial silk manufacturing machinery or plant? On a close reading of the scheme of the Act and the Rules, our answer to the question is in the negative. As we have discussed above, under the very scheme of the statutory provision, each apparatus conforming to the definition for machinery or the plant, as the case may be, has to be taken individually for the purposes of considering the computation of depreciation and not the organization or the unit as a whole by treating each and every apparatus which is necessary for the function of the factory as forming integral part of the factory, known as artificial silk manufacturing plant. Once that premise is reached, the further conclusion does not pose much difficulty. ' Earlier, we have seen that depreciation has to be calculated at the rate prescribed. Under the definition clause of the Act prescribed means, prescribed by the Rules. Rule 5 of the Income Tax Rules provides that depreciation is to be calculated at the percentage specified in the second column of the Table in Part I of Appendix 1 to the Rules on the actual cost or, as the case may be, the written down value of such of the assets as are used for the purposes of the business or profession of the assessee at any time during the previous year. Pausing here, the use of the words "such of the assets" in rule 5(1) further fortifies our conclusion that each of the assets owned by the assessee for the purpose of his business is to be taken individually and independent of each other, though one may be necessary for the functioning of the other if it is not an integral part of the other asset itself. Once an apparatus becomes an integral part of another asset as such, it loses its independent identity as an asset and the asset of which it becomes an integral part is only to be considered as an asset. For example, when the assessee owns a motor car for the purposes of his business, necessarily it includes all the parts which go into the making of the car and necessary for its running, notwithstanding the fact that individually taken some of the parts by themselves may be treated as machine or plant, or a dynamo if used independently may itself be a machinery but when fitted in another it loses its identity as a machine independent of the machine in which it is fitted. To say in other words unless one apparatus which independently is a plant or machine, when fitted to another machine to make that machine complete, becomes an integral part of the concerned asset itself and loses its independent identity then it cannot be said that the two assets exist. But mere interdependency of each other for their functioning does not make the two assets one for the purposes of claiming depreciation. The view that when a machine becomes an integral part of another machine or plant then it cannot be treated separately and has to be treated as a part of that machine itself finds support from an earlier decision of this Court in State of Gujarat v. Jayant Paper Mills, 81 Taxation 367 (sic) wherein the Court after referring to two decisions of the
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Punjab and Haryana and Kerala High Courts in CIT v. Straw-Board Mfg. Co. Ltd. (1975) 98 ITR 78 and Travancore Rayons Ltd. v. ITO (1977) 109 ITR 43, respectively, observed "there does not appear also serious controversy that where electric installations become integral part of other machinery, they become eligible for extra shift allowance as part of general machinery, but if such electric installations are independent of other machines then they are not eligible for extra shift allowance. ' The provision for extra shift allowance where a concern works double shift or triple shift is also provided in Appendix I as a part of the rate structure for allowance of depreciation as deduction. While dealing with the rates applicable to machinery and plant for depreciation, we may notice that in the first instance in item III of the Table, the general rate of depreciation was provided under sub-item(i) by saying that the general rate applicable to machinery and plant not being a ship for which no special rate has been fixed under sub-item (ii). Sub-item (ii) deals with the special rate under various sub-divisions from (A) to (F). Sub-item (iii) deals with extra depreciation allowance for approved hotels and sub-item(iv) deals with extra shift allowance. Firstly, a provision is made that an extra shift allowance shall be allowed where a concern claims such allowance on account of double shift or on account of triple shift working and establishes that it has worked double shift or triple shift, as the case may be, subject to the maximum limit specified in the provisions with which we are not concerned. It also provides that in respect of certain machinery or plant it shall not be allowed. It says that extra shift allowance shall not be allowed in respect of any item of machinery or plant which has been specifically excepted by inscription of the letter "N.E.S.A." meaning, "No extra shift allowance' against it. In sub-item (ii) and also in respect of the machinery and plant to which the general rate of depreciation of 10 per cent. Applies on the items enumerated under sub-item(iv). This provision which had been reproduced in the earlier part of our discussion further clarifies that for the purposes of eligibility of extra shift allowance each item of machinery or plant is to be treated separately. Secondly, it gives a clue that wherever any item has found specific mention under sub-item(ii) of Part B of the table and extra shift allowance was not to be allowed, such specific item has been suffixed with inscription N.E.S.A. And since it was not possible to insert this inscription in respect of items to which the general rate was applicable, specific items have been enumerated for the purposes of such non-allowance of extra shift allowance. Therefore, no distinction can be drawn between the items enumerated under sub-item(iv) of item III of the table and the items followed with inscription N.E.S.A. Under sub-items (ii). In that view of the matter, whatever rates are prescribed under sub-items (i) and (ii) of item II of Appendix I in the first instance, depreciation has to be calculated at the rates as have been stated in column 2 of the table against each item and thereafter alone, the question of computing extra shift allowance subject to the eligibility of each item of machinery or plant has to be considered. Therefore, the fact that a particular type of machinery has been entitled for computation of depreciation at a special rate other than general rate would not by itself be a ground for treating the two sets of machinery and plant falling under the general rate or the special rate, would make any difference. Obviously, when air-conditioning machinery, has been enlisted as a separate item of machinery or plant for the purposes of computation of rate of depreciation and it has also been enlisted for no extra shift allowance, it cannot be treated as artificial silk manufacturing machinery by treating it to be necessary part of the unit manufacturing artificial silk falling under that item unless it has become integral part of other machinery. It is a well-known principle of interpretation that where there are two entries covering the same item, one special and another general, the applicability of the general provision shall be excluded. The principle finds its expression in the maxims generalia specialibus non derogant and generalibus specialia derogant. These maxims spell out that general things do not derogate from special things but special things derogate from general things. The familiar approach in such cases is to find out which of the two provisions canvassed is more general and which is more specific and to construe the more general in a way to exclude from it
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the more specific. In this connection, we may refer to the case of South India Corporation (P.) Ltd. v. Secretary, Board of Revenue (1964) 15 STC 74, 88; AIR 1964 SC 207 (at page 215): "It is settled law that a special provisions should be given effect to the extent of its scope, leaving the general provisions to control cases where the special provisions…
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