What is the meaning of the expression ‘machinery’

The Kerala High Court adopted the Madras view In Mrs. George Mathew Vs. Commissioner of Income Tax, Kerala and Coimbatore, . Therein their Lordships laid down that: “the expression ‘plant has a far wider connotation than the expression ‘machinery’; These two expressions are used in the alternative in Section 10 (2) (vi) and (vi-a) of the Income Tax Act so that ‘machinery’ if it is new, though it does not constitute ‘plant’, is entitled to initial and extra depreciations. The term ‘machinery’ has net been defined in the Income Tax Act and in the absence of a statutory definition the word has to be given the ordinary meaning. Further, the term ‘machinery’ should be given the same meaning throughout Section 10(2) (vi) and (vi-a). The term ‘machinery’ is not restricted In the application only to a self-contained unit capable of being put to use in the business.”

MYSORE HIGH COURT

DIVISION BENCH

( Before : K.S. Hegde, J; Ahmed Ali Khan, J )

MANGALORE GANESH BEEDI WORKS — Appellant

Vs.

COMMISSIONER OF INCOME TAX, IN MYSORE, BANGALORE — Respondent

Income-tax Referred Case No. 14 of 1962

Decided on : 16-07-1963

Income Tax Act, 1922 – Section 10 (2), Section 10 (2) (vi) (b), Section 10 (5)
Income Tax Act, 1922 — Sections 10(2), 10(2)(vi)(b), 10(5) — Meaning of machinery

JUDGMENT

Hegde, J.

1.There is conflict of judicial opinion on the question of law debated before this Court, the main question for decision is as to what is the meaning of the expression ‘machinery’ found in Section 10 (2) (vi) (b) of the Indian Income-lax Act, 1922 which will be hereinafter referred to as the ‘Act’.

2. Section 10 (2) provides for the computation of profits or gain. Section 10 (2) (vi) provides for making allowances for depreciation. Section 10 (2) (vi-b) says:

“In respect of machinery and plant being new which has been installed after the 31st of March, 1954 and which is wholly used for the purposes of the business carded on by the assessee, a 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 …..”.

(Proviso omitted).

3. The word ‘plant’ is defined in Section 10(5) as Including:

“Vehicles, books, scientific apparatus and surgical equipment for the purpose of business, profession or vocation …..”

4. The word “machinery” is not defined in the Act, The Privy Council in Corporation of Calcutta v. Chairman Cossipore and Chitapore Municipality ILR 49 Cal 190 AIR 1922 PC 27, observed that it is very hazardous to define that word. Dealing with the connotation of the word “machinery” this is what is observed in that decision:

“The word, ‘machinery’ must mean something more than a collection of ordinary tools. It must mean something more than a solid structure built upon the ground, whose parts either do not move at all, or if they do move, do not move the one with or upon the other in interdependent action with the object of producing a specific and definite result.

Their Lordships concur with Lord Davey in thinking that there is great danger in attempting to give a definition of the word ‘machinery’ which will be applicable in all cases. It may be impossible to succeed in such an attempt. If their Lordships were obliged to run the hazard of the attempt they would be inclined to say that the word ‘machinery’ when used in ordinary language prima facie, means some mechanical contrivances which, by themselves or in combination with one or more other mechanical contrivances, by the combined movement and interdependent operation of their respective parts generate power, or evoke, modify, apply or direct mutual forces with the object in each case of effecting so definite and specific a result. The tank and its supporting structure do not satisfy this definition.

But their Lordships think that however skilfully definitions of ‘machinery’ may be framed, the determination in any given case of what is or is not ‘mahinery’ must to a large extent, depend upon the special facts of that case …..

5. But one thing appears to me to be quite plain, and that is;– When the legislature used two different expressions, namely, “machinery” or “plant” it could not have meant the same thing. It must be presumed that the legislature intended to convey by those two words two alternative concepts. Coming to the facts of the present case, there is no difficulty about the Electric Stove. It can be held to be a ‘plant’. The learned Assistant Advocate-General agrees with me in that regard. Under any circumstance it can certainly be held to be a machinery. But when we come to ‘Diesel Engine’ we are faced with a controversy. There can be no doubt that it is not a ‘plant’. The question is whether it is a ‘machinery’. On behalf of the assessee it was said that it is a machinery. But it is contended on behalf of the Revenue that it is only a part of the machinery and not machinery as such.

6. In ordinary parlance — If 1 am correctly informed on that point a ‘Diesel Engine’ is considered as a machinery. 1 think it is in that sense, the word “machinery” has been used in Section 10(2)(vi) as well as in Rule 8 of the Rules framed under the Act.

7. As mentioned earlier there is no unanimity at Judicial opinion as regards the scope of the expression ‘machinery’. A Bench of the Bombay High Court in Maneklal Vallabhdas Parekh Vs. Commissioner of Income Tax, Bombay North, , held that:

“In order that initial depreciation should be allowable on machinery, the machinery must be a self-contained unit capable of being put to use in the business for the benefit of which it is installed.”

8. In their Lordships’ view, before any article could be considered as a ‘machinery’ it must be a self contained unit. The judgment of the court is a brief one. Therein much of the discussion relates to the scope of expression ‘plant’. This is all that their Lordships stated while dealing with the scope of the expression ‘machinery’:

“We are also unable to agree with the alternative contentions of Mr. Mehta that these diesel engines constitute machinery being new which has been installed.” In our view, in order that initial depreciation should be allowable on machinery, it must be a self-contained unit capable of being put to use in the business, profession or vocation for the benefit of which it is installed. In present case, the diesel engines installed by the assesses do not satisfy that test”

9. The above decision of the Bombay High Court was accepted as correct by the Andhra Pradesh High Court in B. Srikantiah Vs. The Commissioner of Income Tax, Andhra Pradesh, Hyderabad, . Therein their Lordships held that:

“In order to sustain a claim for the allowances of initial depreciation under the second paragraph of Section 10 (2) (vi) of the Indian Income Tax Act, and Additional depreciation u/s 10(2)(vi)(a) machinery must be regarded as a unit; spare parts, however costly they may be, should not be regarded as objects of claims in that behalf. The definition of ‘plot’ in Section 10(5) indicates that, for the purposes of clauses (vi) and (vi-a) of Section 10(2), ‘plant’ should be viewed as a unit. Component parts thereof are excluded from its purview. The expression ‘machinery’ should also be considered in the same light and denotes ‘machinery as a unit’.”

10. If the view of the Bombay and Andhra Pradesh High Courts is correct then there is no difference bet between a – ‘plant’ and a ‘machinery’ — a view which hardly accords with well accepted canons of interpretation. From the language of Section 10 (2) (vi) (b), it is clear that a ‘machinery’ must be something different from a ‘plant which means that it need not be a self-contained unit. I agree that it is hazardous to define that expression. 1 shall be content to borrow the explanation given by the Privy Council in ILR 49 Cal 190 : AIR 1922 PC 27, i.e.,

“the word, ‘machinery’ when used in ordinary language prima facie means some mechanical contrivances which, by themselves or in combination with one or more other mechanical contrivances, by the combined movement and interdependent operation of their respective parts generate power, or evoke, modify, apply, or direct natural forces with the object in each case of effecting so definite and specific a result.”

Tested by these observations “Diesel Engine” is undoubtedly a “machinery”.

11. For the view taken by me, support is available from the decision of the Madras High Court in Mir Mohamad Ali, Bus Owner, Vellore Vs. Commissioner of Income Tax, Madras, . Therein their Lordships laid down that:

“the word ‘machinery’ must be given the same meaning with reference to each of the provisions, namely, the first and second paragraphs of Section 10(2)(vi) and Section 10(2)(vi)(a) of the Income Tax Act; what is machinery for the purpose of normal depreciation under the first paragraph of Section 10(2)(vi) should continue to be machinery also for the additional allowances under the second paragraph of Section 10(2)(vi) and Section 10(2)(vi) (a).”

They further laid down that:

“Machinery does not cease to be machinery merely because it has to be used in conjunction with one or more machines, nor merely because it is installed as part of a manufacturing or industrial plant.” Further it was held;

“The statutory provision for depreciation is in the alternative; whether it is plant or whether it is machinery without its being itself a plant, the assesses is entitled to claim the allowance for depreciation.

In the year of account ending March 31, 1950, the assessee replaced the petrol driven engines in two of his buses by new diesel engines. He claimed in relation to the yew diesel engines; (i) normal depreciation under the first paragraph of 10(2)(vi) of the Income Tax Act, (ii) initial depreciation under the second paragraph of Section 10 (2) (vi) and (iii) special depreciation u/s 10(2)(vi)(a). The Department allowed the nornal depreciation but did not allow the other two claims. On a reference: Held, (i) that a diesel engine was by itself ‘machinery’ within the meaning of Section 10 (2) (vi) and (vi-a) of the Income Tax Act and continued to be machinery even after it was made an integral part of the assessee’s bus and the assessee was therefore entitled to all the three classes of depreciation under paragraphs. (1) and (2) of Section 10(2)(vi) and Section 10(2)(vi-a) of the Acts.

12. The Kerala High Court adopted the Madras view In Mrs. George Mathew Vs. Commissioner of Income Tax, Kerala and Coimbatore, . Therein their Lordships laid down that:

“the expression ‘plant has a far wider connotation than the expression ‘machinery’; These two expressions are used in the alternative in Section 10 (2) (vi) and (vi-a) of the Income Tax Act so that ‘machinery’ if it is new, though it does not constitute ‘plant’, is entitled to initial and extra depreciations. The term ‘machinery’ has net been defined in the Income Tax Act and in the absence of a statutory definition the word has to be given the ordinary meaning. Further, the term ‘machinery’ should be given the same meaning throughout Section 10(2) (vi) and (vi-a). The term ‘machinery’ is not restricted In the application only to a self-contained unit capable of being put to use in the business.”

I need hardly say that I am in respectful agreement with the view taken by the Madras and Kerala High Courts.

13. For the reasons mentioned above, my answer to the question submitted is in the affirmative and in favour of the assessed. The Revenue to pay costs. Advocate’s Fee, Rs. 250/- (Rupees Two hundred and fifty).

Ahmed Ali Khan, J.

14. I agree.

15. Reference answered in affirmative.

Cases Referred
Mir Mohamad Ali, Bus Owner, Vellore Vs. Commissioner of Income Tax, Madras, AIR 1960 Mad 476 : (1960) 73 LW 153
Maneklal Vallabhdas Parekh Vs. Commissioner of Income Tax, Bombay North, (1959) 37 ITR 142
Mrs. George Mathew Vs. Commissioner of Income Tax, Kerala and Coimbatore, AIR 1960 Ker 353 : (1961) 43 ITR 535
B. Srikantiah Vs. The Commissioner of Income Tax, Andhra Pradesh, Hyderabad, AIR 1961 AP 318 : (1961) 41 ITR 518