COMMISSIONER OF INCOME-TAX, MADRAS vs. MIR MOHD. ALI, BUS OWNER, VELLORE

CIVIL APPEAL No. 145/1963Supreme Court[1964] 7 S.C.R. 84624 April 1964Bench: 3 JudgesAuthor: K. SUBBA RAO, J.C. SHAH, S.M. SIKRI12 pages
AI SummaryDismissed

What were the facts?

The assessee, a bus owner, replaced petrol engines in two buses with new diesel engines, incurring an expenditure of Rs. 18,544/- during the year ending March 31, 1950. The assessee claimed depreciation allowance under Section 10(2)(vi) and 10(2)(via) of the Indian Income-tax Act, 1922, in addition to normal depreciation. The Income Tax Officer allowed only 25% depreciation under Section 10(2)(vi). The Appellate Tribunal held that the engine was part of equipment and not machinery for claiming extra depreciation, and the replacement was a capital addition. The High Court, on reference, amended the question and answered it in favour of the assessee. The Commissioner of Income-tax appealed this decision to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court, by a majority of two judges (Subba Rao and Sikri, JJ.) against one (Shah, J.), held that the assessee was entitled to extra depreciation under Section 10(2)(vi) and 10(2)(via) of the Indian Income-tax Act, 1922, in respect of the diesel oil engine fitted to the motor vehicles in replacement of the existing engines. The majority applied the definition of 'machinery' from Corporation of Calcutta v. Chairman, Cossipore and Chitpore Municipality, finding that a diesel engine clearly fits this definition. They further held that when an engine is fixed in a vehicle, it is considered 'installed' within the meaning of the relevant clauses. The dissenting opinion by Shah, J. argued that the replacement of an engine is not an 'installation of machinery' as the machinery must be brought into service as a self-contained unit, and a mere part without independent use cannot be considered installed machinery for the purpose of extra depreciation.

What were the issues?

1. Whether extra depreciation is admissible under Section 10(2)(via) of the Income Tax Act, 1922, in respect of a diesel oil engine fitted to a motor vehicle in replacement of the existing engine? (Question of law). Assessee's Contentions: The assessee argued that the diesel engine fitted in replacement of the petrol engine constituted 'machinery' and its installation qualified for extra depreciation under Section 10(2)(vi) and 10(2)(via). They relied on the definition of 'machinery' from Corporation of Calcutta v. Chairman, Cossipore and Chitpore Municipality, asserting that the engine is clearly machinery and when fixed in a vehicle, it is installed. Revenue's Contentions: The revenue contended that the engine was merely a part of the equipment and not 'machinery' in itself. They argued that when an engine is fixed in a motor vehicle, it cannot be considered 'installed' within the meaning of the sub-sections, as it lacks independent use in the business and is not a self-contained unit. They also argued that replacement of a part of machinery is not installation of machinery.

Which sections of the Income-tax Act were involved?

Section 10(2)(vi),Section 10(2)(via),Section 66A(2)

AI-generated summary — verify with the full judgment below

1964 April 24 846 SUPRE:ME COURT REPORTS [1964] COMMISSIONER OF INCOME-TAX, MADRAS v. MIR MOHD. ALI, BUS OWNER, VELLORE IK. SUBBA RAO, J. C. SHA!-1 AND s. M. StKRI, JJ.] Income Tax-Depreciation allowance-Replacement of petrol engine in a bus by new Diesel engine-If amounts to installation of machin.ery-"Installation of mJchinery" Mean- ing of-Indian Income-tax Act, 1922 (11 of 1922), ss. 10(2)(vi). 10(2)(vial.

The assessee, who was the owner of a fleet of buses, rep- laced the petrol engines in two of his buses by new Diesel engines incurring an expenditure of Rs. 18,544/- in this con- nection, during the year of account ending with March 31, 1950. For the relevant assessment year he claimed deprecia- tion allowance under the second para of cl. (vi) and cl. (via) of s. 10(2) of the Indian Income-tax Act, 1922, apart from the normal depreciation under the first para of cl. (vi), but he was allowed only 25 per cent depreciation under the first para of cl. (vi) on the ground that he was not entitled to extra depredation under s. 10(2) (vi) or s. 10(2)(via) because the engine was only part of an equipment and could not by itself become machinery and that when a

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