COMMISSIONER OF INCOME TAX Vs. NATIONAL AIR PRODUCTS LIMITED

JUDGEMENT

(1.) M/s. National Air Products Ltd. (hereinafter referred to as 'the assessee') is a private limited company. During the accounting year which ended on 30-6-1964 relevant for the assessment year 1965-66 the assesses company started the business of manufacture of oxygen gas. In the course of its assessment for the assessment year 1965-66 the assessee claimed depreciation on cylinders used for storing oxygen gas. The Income-tax Officer rejected the assessec's claim on the ground that all the cylinders were not used but were simply purchased and stored in godowns observing that the number of cylinders used in the accounting year was negligible he disallowed the pssessee's claim for depreciation. The total amount of investment by the assessee in the cylinders was Rs. 8,59,562.00 .

(2.) . The assessee preferred an appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner observed that gas cylinders did not find a mention in any of the heads in the Schedule proscribed under Rule 5 of the Income-tax Rules. Apart from that, he observed these cylinders did not form part of Plant and Machinery but were merely containers or packages returnable by the customers. They did not get worn out easily and, therefore, no particular rate of depreciation could be applied to them. Further, the Appellate Assistant Commissioner referred by way if anology to the reference to returnable-packages mentioned as an item under the head 'Refineries' in the Schedule. These were not entitled to depreciation, only the cost of packages actually used could be allowed as a revenue expense so he held no depreciation could be allowed in respect of the gas cylinders. He, however, directed that the cost of replacement of the cylinders as and when effected should be allowed as a deduction.

(3.) . The assessee preferred a further appeal to the Income-tax Appellate Tribunal. The Appellate Tribunal was of the view that the gas cylinders constituted "Plant" within the meaning of the Income-tax Act, 1961. In arriving at this conclusion they relied upon the definition of "plant" contained in Section 43(3) as including ships, vehicles, books, scientific apparatus and surgical equipment. The Tribunal also referred to the decision of the House of Lords in Hinton (Inspector of Taxes) v. Madan and Ireland Ltd. 1960-39 ITR 357 (HL)] adopting the definition given by Lindley L. J. in Yarmouth v. France (I887-19 QBD 647) . The Tribunal, therefore, held that the assesses was entitled to depreciation on the gas cylinders, this conclusion was followed by the Tribunal in the subsequent year 1966-67.