V.G. Oak, C.J. - (1.) THIS is a reference under Section 66(1) of the Indian Income-tax Act, 1922 (hereafter referred; to as," the Act"). The assessee is a company manufacturing and selling rosin and turpentine. For a long time the company was using electricity on D.C. system. In order to reduce electricity charges the company decided to change over from D.C. system to A.C. system. The change involved a total expenditure of .Rs. 1,11,407. The company claimed a deduction of Rs. 27,852 as development rebate. THIS claim was disallowed by the Income-tax Officer. The decision was upheld in appeal by the Appellate Assistant Commissioner. But the assessee succeeded before the Appellate Tribunal, Allahabad. The Tribunal held that the assessee was entitled to development rebate under Section 10(2)(vib) of the Act, The Tribunal was not sure whether all the equipments used in the change over was new. The case was, therefore, remanded to the Income-tax Officer to dispose of the claim of the assessee for development rebate on that footing. The appeal was partly allowed. At the request of the Commissioner of Income-tax, U. P., the Tribunal has referred the following question of law to this court : " Whether, on the facts and in the circumstances of the case, the electrical installations installed by the assessee-compony, as a result of a change over from D.C, to A.C. system, constitute plant and machinery and whether development rebate was admissible in respect of expenditure incurred in connection therewith? "
(2.) THE assessee claimed development rebate under Clause (vib) of Sub-section (2) of Section 10 of the Act. Clause (vib) is ; "In respect of machinery or plant being new, which has been installed after the 31st day of March, 1954, and which is wholly used for the purposes, of the business carried on by the assessee, a sum by way of development rebate in respect of the year of installation equivalent to 25 per cent. of the actual cost of such machinery or plant to the assessee..." It was not disputed for the department that the expenditure in question was wholly used for purposes of the business of the assessee. But it was urged for the department that the expenditure was not in respect of any machinery or plant. So, the main question for consideration in this reference is whether the expenditure of Rs. 1,11,407 was in respect of any "machinery or plant" within the meaning of Clause (vib) of Section 10(2) of the Act. In order to understand the meaning of the words "machinery" and 'plant', used in Clause (vib), it will be convenient to consider certain other clauses of Section 10(2) of the Act. Clause (vi) provides for depreciation of buildings, machinery and plant. Clause (via) deals with depreciation of buildings newly erected or of machinery or plant installed after March 31,. 1948. It will be noticed that all these Clauses (vi), (via), and (vib) use the-words "machinery" and "plant". The Tribunal rightly observed that. there is a presumption that the legislature must have used the words. "machinery" and "plant" in various clauses of Section 10(2) of the Act in the same sense.
(3.) IN Commissioner of INcome-tax v. Mir Mohammad Ali, 1964 53 ITR 165, the assessee was a transport operator. The assessee replaced petrol engines in two buses by diesel engines incurring an expenditure of Rs. 18,544. The question arose whether in addition to normal depreciation the assessee was entitled to extra depreciation allowances under the second paragraph of Clause (vi) and Clause* (via) of Section 10(2) of the Act. It was held that the assessee was pntitled to deduction of extra depreciation allowances under the second, paragraph of Clauses (vi) and (via) of Section 20(2). It was further held that the same meaning ought to be given to the word "machinery" in the various Clauses (iv), (v), (vi)and (via) of Section 10(2) of the Act. On the same reasoning, the word "machinery" should have the same meaning in Clause (vib) of Section 10(2) of the Act. In Raju and Mannar v. Commissioner of Income-tax, 1963 50 ITR 202 it was held by the Madras High Court that a diesel engine is mahcinery and fitting the engine in a motor vehicle is installation within the meaning of Section 10(2)(vib) of the Act. So, a person who owns lorries is entitled to claim development rebate and extra depreciation in respect of diesel engines which he has fitted up in his lorries replacing old petrol engines. The decision of the Madras High Court was upheld by the Supreme Court in Commissioner of Income-tax v. Raju and Mannar, [1966] 60 I.T.R, 246 (S.C.).;