MANCHANDA, J. - (1.) THIS is a case stated under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act). The question referred is : "Whether the assessee is entitled to development rebate on the 50 new Kolhus added during the relevant previous year ?"
(2.) THE material facts are these : THE assessee in a firm which, inter alia, carries on business of letting out Kolhus on hire. THE relevant assessment year is 1960-61, the accounting year whereof the year ending 30th of October, 1959. During the said previous year, the assessee let out 829 kolhus, out of which 779 kolhus were old ones and 50 were new additions manufactured during the previous year. THE original cost of the said additions of kolhus amounted to Rs. 15,032. New kharad machines were also added during the previous year whose original cost was Rs. 4,000. The assessee claimed development rebate in respect of the 50 new kolhus and kharad machines added during the previous year, but the claim was ignored by the Income-tax Officer. The assessee appealed to the Appellate Assistant Commissioner and contended, inter alia, that development rebate should have been allowed on the additional kolhus and the kharad machines. The Appellate Assistant Commissioner upheld the assessees contention observing : "The Income-tax Officer has not given any reason why development rebate has not been allowed. The assessee has created proper reserve. Hence development rebate is allowed on this amount of Rs. 19,032. The Income-tax Officer is directed to allow development rebate at 25%." Thereupon, the department filed an appeal to the Tribunal against the aforesaid decision of the Appellate Assistant Commissioner so far as it pertained to the additional kolhus valued at Rs. 15,032 and contended that the Appellate Assistant Commissioner had erred in allowing development rebate thereon, because : (1) Kolhu is not "machinery or plant installed" within the meaning of section 10(2) (vib); and (2) it was not plant or machinery wholly used for the purposes of the business carried on by the assessee. According to the Tribunal, the true interpretation of section 10(2) (vib) was that development rebate could only be claimed by a person who satisfied two conditions : (1) that the plant or machinery should be installed in such persons business, and (2) that it should be wholly used for the purposes of that very business carried on by him. But, as the assessee carried on the business of letting kolhus on hire to others in order that they may make use of them for the purpose of their business, the Tribunal opined that it can not be said that the kolhus were installed and used for the purposes of the assessees business of hiring. To support the conclusion that the installation and the user of the plant or machinery must be by one and the same person, reference was made by the Tribunal to the provisions of section 12(3) of the Act, which catalogues the allowances to which an assessee who lets on hire machinery belonging to him is entitled to and, as that makes no reference to the allowance of development rebate under section 10(2) (vib), it was concluded that, even if the hiring constituted a business under section 10, the development rebate would not be admissible. The order of the Appellate Assistant Commissioner was accordingly reversed and the appeal allowed. Hence, this reference at the instance of the assessee.
(3.) AS there is no case directly in point and the matter is res integra, it will be useful to set out the relevant provisions of the Act at the very outset. Section 10(1) reads : "The tax shall be payable by an assessee under the head Profits and gains of business, profession or vocation in respect of the profits or gains of any....... carried on by him. (2) Such profits or gains shall be computed after making the following allowances, namely :.. (vi) in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent,... to such percentage.. (vib) in respect of a new ship acquired or new machinery or plant installed after the 31st day of March, 1954, which is wholly used for the purpose of the business carried on by the assessee, a sum by way of development rebate in respect of the year of acquisition of the ship or of the ship or of the installation of machinery or plant, equivalent to,.." The relevant portion of section 10(5) runs : "....plant includes vehicles, books, scientific apparatus and surgical equipment purchased for the purpose of the business, profession or vocation;..." A combined reading of the provisions set out above makes it clear that the words "plant and machinery" in section 10(2) have to be given a very wide meaning. Even for the purpose of section 10(2) (vib), as it stood at relevant time and before the Income-tax Act of 1961, wherein by section 33, which corresponded to the old section 10(2) (vib), a specific provision was added excluding office appliance or a road transport vehicle from the definition of "plant". In any case, kolhus are neither office appliance nor "vehicles" and, therefore, if not machinery would certainly be a "plant" and as such qualify for depreciation and development rebate provided the other conditions of section 10(2) (vib) are satisfied. There cannot also be much doubt that depreciation as well as development rebate could only be claimed by the person who is the owner of the property. Sub-clause (vi) of sub-section (2) of section 10 makes it clear that depreciation can only be claimed by the person whose property is attached (sic). The words used are "being the property of the assessee", in other words, the owner of the property. The assessee in the present case is undoubtedly the owner of the kolhus. The conditions for qualifying for development rebate are :(1) that the asset is new, (2) installed after the 31st of March, 1954 (3) it should be owned by the assessee, (4) it is used wholly for the purposes of the assessees business, and (5) the development rebate reserve must have been created.;