COMMISSIONER OF INCOME-TAX VS KIRAN CRIMPERS
1999 P T D 156
[225 I T R 84]
[Gujarat High Court (India)]
Before R.K. Abichandani and R. Balia, JJ
COMMISSIONER OF INCOME-TAX
Versus
KIRAN CRIMPERS
Income-tax Reference No. 346 of 1983, decided on 04/12/1996.
Income-tax---
----Depreciation---"Plant", meaning of---Extra shift depreciation allowance-- Entries in Schedule---Air-conditioners---Covered by specific entry inscribed N.E.S.A.---Air-conditioner used for crimping nylon yam---Is not artificial silk manufacturing machinery---Not eligible for extra shift depreciation allowance---Indian Income Tax Act, 1961, S.32---Indian Income Tax Rules, 1962, Appendix I, Part, I, Item III(i), (ii)B(2) & (iv)(2).
The very fact that four different terms have been used in section 32 of the Income Tax Act, 1961, namely, building, machinery, plant and furniture, shows that the term "plant" has been used in a narrow sense to mean the apparatus used by a person carrying on business, which is not used as stock-in-trade, which may not fall in the category of building, machinery or furniture. The expression "plant" used in the section does not mean the factory itself as one composite unit including all buildings, machinery and apparatus therein which are required for the purposes of the factory. Under the scheme of the statutory provision each apparatus conforming to the definition of machinery or plant, as the case may be, has to be taken individually for the purpose of considering the computation of depreciation and not the organisation or the unit as a whole by treating each and every apparatus necessary for the function of the factory as forming an integral pan of the factory.
Once an apparatus becomes an integral part of another asset as such, it loses its independent identity as an asset and the asset of which it becomes an integral part alone is to be considered as an asset. However, unless one apparatus which independently is a plant or machine, when fitted to another machine to make that machine complete, becomes an integral part of the concerned asset itself and loses its independent identity, it cannot be said that the two assets are one. But mere interdependency upon each other for their functioning does not make the two assets one for the purposes of claiming depreciation.
It is a well-known principle of interpretation that where there are two entries covering the same item, one special and another general, the applicability of the general provision shall be excluded.
In the first instance, the rate of general depreciation has to be prescribed under sub-items (i) and (ii) of item III of Part I of Appendix I to the Income Tax Rule, 1962, thereafter, when the question of extra shift allowance arises to be considered under sub-item (iv), it has to be seen what specific items have been excluded from the applicability of extra shift allowance and if any items have been specifically so excluded either by inscribing N.E.S.A. while including that item under the description of machinery and plant slated for the special rate or the general rate, such item cannot be made available for computation of extra shift allowance.
Where the question arises for computing deduction for depreciation in respect of artificial silk manufacturing machinery and plant, all machinery and plant necessary for the functioning of artificial silk manufacturing unit, unless they fall within any item specifically would be dealt with in like manner for the purpose of calculating depreciation. However, if any of the item though necessary for running the artificial silk manufacturing unit, falls within the specific description of machinery and plant under any other sub-item of item III of Pars I of Appendix I to the Rules, it would lose its identity with the general character of the artificial silk manufacturing machinery and plant, and will have to be dealt with as an item separately dealt with under the table and that specific provision would govern the applicability
The phrase used in entry (2) of sub-item (ii)B of item III of Part I of Appendix I to the Rules is air-conditioning machinery including room air- conditioners. This goes to show that this entry deals with all types of air- conditioning machinery whether used in a room, factory or office or any other place of business irrespective of any particular use to which it is put. Therefore, no extra shift depreciation allowance is allowable in the case of air-conditioners necessarily used for crimping nylon yarn.
Benson (Inspector of Taxes) v. Yard Arm Club Ltd. (1979) 2 All ER 336 (CA); Bharat Suryodaya Mills v. CIT (1995) 212 ITR 6 (Guj.); Brooke: in re 64 LJ Ch. 27; CIT v. Straw-Board Mfg. Co. Ltd. (1975) 98 ITR 78 (P&H); CIT v. Tarim Commercial Mills Ltd. (1985) 151 ITR 75 (Guj.); Delta Engineering Co. Pvt. Ltd. v. CST (1963) 14 STC 515 (All.); Industrial Machinery Manufacturers Pvt. Ltd. v. State of Gujarat (1965) 16 STC 380 (Guj.); South India Corporation (P.) Ltd. v. Secretary, Board of Revenue (1964) 15 STC 74; AIR 1964 SC 207; State of Rajasthan v. Gopi Kishan Sen AIR 1992 SC 1754 and Travancore Rayons Ltd. v. ITO (1977) 109 ITR 43 (Ker.) ref.
M.J. Thakore instructed by Manish R. Bhatt for the Commissioner.
N.R. Divetia for the Assessee.
JUDGMENT
R. BALIA, J.---The Income-tax Tribunal, Ahmedabad Bench "A", vide its order dated August 9, 1983, at the instance of the Commissioner of Income-tax had drawn up a statement of case and submitted to this Court for opinion the following question of law said to be arising out of its order in 1.T.A. No.833/Ahd of 1982 relating to the assessment year 1978-79:
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the assessee was entitled to extra shift allowance on air-conditioning machinery used for crimping yarn?"
As is apparent from the question, the issue relates to allow ability of additional deduction by way of depreciation termed as "extra shift allowance" in respect of air-conditioning machinery, which are used for crimping yarn in its factory premises, which is run for more than one shift.
The facts as appear from the statement of case are that the assessee has claimed extra shift allowance in respect of air-conditioners used by it for its unit of crimping yarn. The air-conditioners were fitted separately to the wall of the room. The Tribunal also found that the air-conditioners were necessary for crimping yarn. On this finding the Tribunal by applying the decision of the Gujarat High Court in Industrial Machinery Manufacturers Pvt. Ltd. v. State of Gujarat (1965) 16 STC 380, held that air-conditioners are plant and being essential for running crimping unit it fell in item III of sub-item (ii)B of Appendix (Part-I) and the assessee was entitled to extra shift allowance in respect of air-conditioners
It has been urged by Mr. Thakore, learned counsel for the Revenue, that air-conditioners of all types including room air-conditioners are subjected to a specific entry in the same Appendix (Part 1), item III, sub -item (ii)B (2) just above the item on which the assessee relies. Item (2) is followed by an inscription "N. E.S.A." the import of this inscription has been stated in sub-item (iv) of item III which deals with depreciation on machinery and plant not being a ship, of the same Appendix.
Placing reliance on these two specific provisions, learned counsel urged that extra shift allowance for additional shifts worked by a factory for the purposes of computing additional depreciation is not available in the case of a specific entry air-conditioning machinery by reference to another entry providing for rate of depreciation generally used in that business. He placed reliance on a decision of this Court in Bharat Suryadaya Mills v. CIT (1995) 212 ITR 6.
It has been countered by Mr. Divetia that the Tribunal has accepted the assessee's contention on the basis of certificates issued by the South Gujarat Textile Processors Association and Manmade Textile Research Association that air-conditioners are a part of the crimping machinery and this being a finding of fact not challenged by the Revenue as a finding of fact aught to have been challenged, the air-conditioners ought to be treated as a part of the plant or machinery falling in item III of sub-item (ii)B of .Appendix I referred to above and item (3) being not suffixed by inscription "N.E.S.A.". Sub-item (iv) of Part III has no application so as to deny the petitioner the claim for extra shift allowance in respect of the machinery to question. He strongly placed reliance on Industrial Machinery Manufacturers Pvt Ltd.s case (1965) 16 STC 380 (Guj.), referred to above and another decision of this Court in CIT v. Tarun Commercial Mills Ltd. (1985) 151 ITR 75 (Guj.).
Before proceeding further, we may deal with the preliminary objection raised by learned counsel for the assessee. It was urged that since the Tribunal has found that air-conditioners are part of crimping machinery and that finding has not been challenged by raising a specific question, no further question for considering air-conditioners as not crimping machinery but some other machinery can arise for consideration. Having carefully read the order of the Tribunal, we are of the opinion that this reading of the finding as such is not an appropriate reading of the order. The context of the two certificates which have been produced by the assessee in support of his case that air-conditioners are necessary for use of crimping machinery and that the crimping yarn plant cannot function without air-conditioners as such air-conditioners as are installed in a crimping yarn unit must necessarily be treated as an artificial art silk plant. In the light of this plea, the two certificates reproduced in the order itself read in no unmistakable terms that what is meant by this finding is that use of air-conditioners are necessary and essential for the process of crimping of nylon yarn or for the functioning of crimping machinery. The certificate from the South Gujarat Textile Processors Association reads that "air-conditioners (apparatus) is part and parcel for the working of crimping machine in a crimping unit and without the simultaneous working of air-conditioning machine, no crimping machinery can work. Therefore, in a crimping unit which works for 24 hours, the air-conditioning machinery must work for 24 hours.
The other certificate reads. "This is to certify that crimping of nylon yarn on a crimping machine is always done in an air-conditioned atmosphere.
It is on the basis of these two certificates that the finding of the Tribunal has been recorded. The true meaning of the finding has to be read in the context in which the contention about such fact has been raised. In the light of the assessee's own case, the finding is acceptance of his plea that air -conditioners are necessary for the use of crimping machinery for carrying on the process of crimping of nylon yarn.
We will now proceed to examine the issue before us in the light of the finding recorded by the Tribunal, as explained and suggested by learned counsel for the assessee that air-conditioners are necessary for the use of the crimping machine at the petitioner's factory for manufacture of crimping yarn. This is also to be taken into consideration that at no point of time there is any dispute between the parties that but for the use to which it is being put the machinery in question is and falls in the category of air-conditioning machinery. They are described throughout as air-conditioners used for crimping yarn machinery. Therefore, the question which requires to be answered is whether air-conditioners which are necessary for the use of crimping yarn machine are eligible for extra shift allowance by treating them to be a machinery or plant falling in the category of artificial silk manufacturing plant/machinery or it should be treated as air-conditioning machinery used for artificial silk manufacturing machinery/plant.
At the outset, we may notice that depreciation on certain fixed assets owned by an assessee is required to be allowed as deduction under section 32 of the Income Tax Act, 1961, since subsection (1) of which opens with the words.
"In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deduction shall, subject to the provisions of section 34, be allowed---
(i) in the case of ships other than ships ordinarily plying on inland waters, such percentage on the actual cost thereof to the assessee as may, in any case or class of cases or in respect of ,any period or periods, be prescribed.
Provided that different 'percentages may be prescribed for different periods having regard to the date of acquisition of the ship.
(ii) in the case of buildings, machinery, plant or furniture, other than ships covered by clause (i), such percentage on the written down value thereof as may in any case or class of cases be prescribed.
Provided that where the actual cost of any machinery or plant does not exceed seven hundred and fifty rupees, the actual cost thereof shall be allowed as a deduction to respect of the previous year in which such machinery or plant is first put to use by the assessee for the purposes of his business or profession:
Provided further that no deduction shall be allowed under this clause or clause (iii) in respect of .any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975, end is used otherwise than in a business of running it on hire for tourists ...."
In the four expressions used under section 32, the word "plant" can "De of the widest import, though it has different shades of meaning. In the Concise Oxford Dictionary, different shades of meaning have been assigned to the word "plant". One meaning falls in the realm of botanical expression pertaining to vegetation; as a noun it has been defined to a small organism of this kind as distinguished from a shrub or tree. Obviously we are not concerned with this meaning. Amongst other meanings which have been assigned to it in one sense it means "machinery, fixtures, etc., used in industrial process", in another sense it means "a factory itself".
In Webster's Third New International Dictionary, the meaning of the word "plant" has been stated to be, which may be relevant for the present consideration, "land", "building", machinery", apparatus", fixtures employed in carrying on a trade or a mechanical or other industrial business. It has also been stated to mean a factory, work of a particular product for example an automobile plant or an ice-cream plant" and yet greater import has been given to mean the "total facilities available for production or the service in a particular country or place". In another shade it has been defined to mean "a piece of equipment or a set of machine/parts functioning together for the performance of a particular operation".
We may also usefully refer to the meaning of plant as given in Words and Phrases Legally Defined (Butter worth) which states that "in the context of alt Act which deals with what goes on in factories, "plant" is an ordinary English word in common usage whose meaning is well-understood. To quote the Shorter Oxford English Dictionary it means "the fixtures, implements and apparatus used in carrying on any industrial process".
In this connection, the decision in Benson (Inspector of Taxes) v. Yard Arm Club Ltd. (1979) 2 All ER 336, 346 (CA), per Shaw, L.J., may also be referred to wherein considering the question of "plant", the Court said "the characteristic of plant appears to be that it is an adjunct to the carrying on of a business and not the essential Fire or core of the business itself.
We may in this connection also refer to the meaning of plant n the context of the activity of carrying on business assigned to plant and machinery in Stroud's Judicial Dictionary, wherein it has been stated "plant" and "machinery" are two quite different things, speaking generally machinery includes everything which by its action produces or assists in production; and that "plant" might be regarded as that without which production could not go on ...and included such things reference was made to as brewer's pipes, vats, and the like"; and reference was made a to opinion of Kekewich, J., in Re Brooke, 64 L.J. Ch.27.
Reading the dictionary meaning of "machine", as given in the Concise Oxford Dictionary, it means "an apparatus using or applying mechanical power having several parts each with the definite function and together performing certain kinds of work and that an instrument transmits or directs a force on apparatus, machines collectively known as machinery. the components of a machine or a mechanism of machine also conveys the same meaning.
Stroud's Judicial Dictionary. while giving meaning to "machinery" reads, "Machinery" implies the application of mechanical means to the attainment of some particular end by the help of natural forces; "operative machinery" means machinery with the potentiality of operating or doing work.
According to the plain dictionary meaning in its widest connotation in the context of trade or business, the expression plant may sometimes mean the factory itself as one composite unit including all buildings, machinery and apparatus therein which are required for the purposes of the factory. Obviously, the term "plant" has not been used under section 32 of the Act or for that matter under the Rules framed there under in that wide meaning. The very fact that four different terms have been used, namely, building, machinery, plant and furniture, the term "plants" has been used in a narrow sense to mean that it includes whatever apparatus is used by a person carrying on his business which is not as a stock-in-trade which buys or makes or sells and which may not fall in the category of the building, machinery or the furniture as such. Thus, in principle the argument that the unit as a whole must be treated as a plant manufacturing artificial silk without identifying the individual apparatus installed therein or used therein for the purposes of carrying on business of the assessee in order to compute allowable deduction a depreciation under section 32 of the Act cannot be accepted.
The clearer distinction in the context of the provision with which we are concerned has to be borne in mind that exists between different meanings, which the expression "plant" may convey. In its broadest sense it may mean the whole gamut of a business organisation owned by the assessee in a different context it may mean a factory which may include buildings, roads, sheds, machinery and all apparatus which are necessary for its functioning as a whole and in yet another sense it may mean each apparatus by itself which may properly be termed as fixture, implement and apparatus used in carrying on any industrial activity. Keeping in view the broad meaning which can be assigned to plant so as to mean organisation itself or to include within itself of apparatus, which may be machinery as well and keeping in view the use of separate expressions in the Act and the prescription of different rates on written down value of each building, machinery and plant used in carrying on business of the assessee, whether of manufacture or not, it must be held that what is required to be considered for the purpose of computing depreciation which can be allowed as deduction is each building, machinery or plant falling within the narrower description of the term. In view of the aforesaid, we are unable to accept the contention of learned counsel for the assessee that "plant" for the purposes of computation of allowable deduction as depreciation under the Income Tax Act should be taken to mean the entire organisation or unit as a whole comprising all the apparatus installed therein which are necessary for its function but it will have to be seen that for the purposes of carrying on business of the assessee what apparatuses are owned by the assessee at one or more places of business where his activity of business is being carried on whether of manufacture or trading and whether they are being used for the purposes of carrying on business generally. Once these tests are satisfied, the question for computation of deduction arise in respect of written down value of each asset machinery or plant on the basis of rates which have been prescribed by the, Rules.
So far as the present case is concerned, the controversy whether the air-conditioners are machinery or plant or whether the same are used for the purposes of carrying on business by the assessee who owns in question does not arise as the same are accepted premises. The question, therefore, which really arises taking air-conditioners individually, can it be said to be a plant of machinery conforming to the description of artificial silk manufacturing plant or an air-conditioning machine. It is also not in dispute that the assets in question are primarily air-conditioning machinery and do fall within the description of item(2) under sub-item(ii) "B" of item III of Appendix I (Part [) providing for different rates of depreciation on machinery and plant other than ships. It is also not in dispute that the said air-conditioners are necessary for the purpose of functioning of yarn crimping machine for the end-product of the factory. So, can it be said that because the air-conditioners are necessarily used for the functioning of the factory, it becomes an artificial silk manufacturing machinery or plant? On a close reading of the scheme of the Act and the Rules, our answer to the question is in the negative. As we have discussed above, under the very scheme of the statutory provision, each apparatus conforming to the definition for machinery or the plant, as the case may be, has to be taken individually for the purposes of considering the computation of depreciation and not the organization or the unit as a whole by treating each and every apparatus which is necessary for the function of the factory as forming integral part of the factory, known as artificial silk manufacturing plant. Once that premise is reached, the further conclusion does not pose much difficulty.
Earlier, we have seen that depreciation has to be calculated at the rate prescribed. Under the definition clause of the Act prescribed means, prescribed by the Rules. Rule 5 of the Income Tax Rules provides that depreciation is to be calculated at the percentage specified in the second column of the Table in Part I of Appendix 1 to the Rules on the actual cost or, as the case may be, the written down value of such of the assets as are used for the purposes of the business or profession of the assessee at any time during the previous year. Pausing here, the use of the words "such of the assets" in rule 5(1) further fortifies our conclusion that each of the assets owned by the assessee for the purpose of his business is to be taken individually and independent of each other, though one may be necessary for the functioning of the other if it is not an integral part of the other asset itself. Once an apparatus becomes an integral part of another asset as such, it loses its independent identity as an asset and the asset of which it becomes an integral part is only to be considered as an asset. For example, when the assessee owns a motor car for the purposes of his business, necessarily it includes all the parts which go into the making of the car and necessary for its running, notwithstanding the fact that individually taken some of the parts by themselves may be treated as machine or plant, or a dynamo if used independently may itself be a machinery but when fitted in another it loses its identity as a machine independent of the machine in which it is fitted. To say in other words unless one apparatus which independently is a plant or machine, when fitted to another machine to make that machine complete, becomes an integral part of the concerned asset itself and loses its independent identity then it cannot be said that the two assets exist. But mere interdependency of each other for their functioning does not make the two assets one for the purposes of claiming depreciation. The view that when a machine becomes an integral part of another machine or plant then it cannot be treated separately and has to be treated as a part of that machine itself finds support from an earlier decision of this Court in State of Gujarat v. Jayant Paper Mills, 81 Taxation 367 (sic) wherein the Court after referring to two decisions of the Punjab and Haryana and Kerala High Courts in CIT v. Straw-Board Mfg. Co. Ltd. (1975) 98 ITR 78 and Travancore Rayons Ltd. v. ITO (1977) 109 ITR 43, respectively, observed "there does not appear also serious controversy that where electric installations become integral part of other machinery, they become eligible for extra shift allowance as part of general machinery, but if such electric installations are independent of other machines then they are not eligible for extra shift allowance.
The provision for extra shift allowance where a concern works double shift or triple shift is also provided in Appendix I as a part of the rate structure for allowance of depreciation as deduction. While dealing with the rates applicable to machinery and plant for depreciation, we may notice that to the first instance in item III of the Table. the general rate of depreciation was provided under subitem(i) by saying that the general rate applicable to machinery and plant not being a ship for which no special rate has been fixed under sub-item (ii). Sub-item. (ii) deals with the special rate under various sub-divisions from (A) to (F). Sub-item (iii) deals with extra depreciation allowance for approved hotels and sub-item(iv) deals with extra shift allowance. Firstly, a provision is made that an extra shift allowance shall be allowed where a concern claims such allowance on account of double shift or on account of triple shift working and establishes that it has worked double shift or triple shift, as the case may be, subject to the maximum limit specified in the provisions with which we are not concerned. It also provides that in respect of certain machinery or plant it shall not be allowed. It says that extra shift allowance shall not be allowed in respect of any item of machinery or plant which has been specifically excepted by inscription of the letter "N.E.S.A." meaning, "No extra shift allowance' against it. In sub -item (ii) and also in respect of the machinery and plant to which the general rate of depreciation of 10 per cent. applies on the items enumerated under sub-item(iv). This provision which had been reproduced in the earlier part of our discussion further clarifies that for the purposes of eligibility of extra shift allowance each item of machinery or plant is to be treated separately. Secondly, it gives a clue that wherever any item has found specific mention under sub-item (ii) of Part B of the table and extra shift allowance was not to be allowed, such specific item has been suffixed with inscription N.E.S.A. and since it was not possible to insert this inscription in respect of items to which the general rate was applicable, specific items have been enumerated for the purposes of such non-allowance of extra shift allowance. Therefore, no distinction can be drawn between the items enumerated under sub-item(iv) of item III of the table and the items followed with inscription N.E.S.A. under sub-items (ii). In that view of the matter, whatever rates are prescribed under sub-items (i) and (ii) of item II of Appendix I in the first instance, depreciation has to be calculated at the rates as have been stated in column 2 of the table against each item and thereafter alone, the question of computing extra shift allowance subject to the eligibility of each item of machinery or plant has to be considered. Therefore, the fact that a particular type of machinery has been entitled for computation of depreciation at a special rate other than general rate would not by itself be a ground for treating the two sets of machinery and plant falling under the general rate or the special rate, would make any difference. Obviously, when air-conditioning machinery, has been enlisted as a separate item of machinery or plant for the purposes of computation of rate of depreciation- and it has also been enlisted for no extra shift allowance, it cannot be treated as artificial silk manufacturing machinery by treating it to be necessary part of the unit manufacturing artificial silk falling under that item unless it has become integral part of other machinery. It is a well known principle of interpretation that where there are two entries covering the same item, one special and another general, the applicability of the general provision shall be excluded. The principle finds its expression in the maxims generalia specialibus non derogant and generalibus specialia derogant. These maxims spell out that general things do not derogate from special things but special things derogate from general things. The familiar approach in such cases is to find out which of the two provisions canvassed is more general and which is more specific and to construe the more general in a way to exclude from it the more specific. In this connection, we may refer to the case of South India Corporation (P.) Ltd. v. Secretary, Board of Revenue (1964) 15 STC 74, 88; AIR 1964 SC 207 (at page 215):
"It is settled law that a special provisions should be given effect to the extent of its scope, leaving the general provisions to control cases where the special provisions does not apply."
This principle was reiterated in State of Rajasthan v. Gopi Kishan Sen, AIR 1992 SC 1754. The Court in paragraph 6 (at page 1756) of the judgment said:
"The rule of harmonious construction of apparently conflicting statutory provisions is well-established for upholding and giving effect to all the provisions as far as it may be possible, and for avoiding the interpretation which may render any of them ineffective or otiose. In the present case rule 29 dealing with payment of increment is in general terms while the Schedule in the 1969 Rules makes a special provision governing the untrained teachers, attracting the maxim generalibus specialia derogant, if a special provision is made on a certain subject, that subject is excluded from the general provision. The Schedule in the 1969 Rules, therefore, must be held to prevail over the general provisions of 1951 Rules."
It may also happen that in a given case the two entries vis-a-vis which the question arises for consideration both fall in a separate special category, in that event also it has to be considered out of the two which provides for general applicability of the genre and which provides further specification. If we examine the issue from that point of view, it is apparent that out of the two entries, air-conditioning machinery and artificial silk manufacturing machinery and plant though placed in sub-item (ii) for the purpose of providing special rates of depreciation, the artificial silk manufacturing machinery and plant by itself is of general description meaning thereby all items of machinery and plant of artificial silk manufacturing like any other machinery and plant of any other manufacturing, would fall in the general category where a special rate has not been prescribed and vis-a-vis the controversy in question air-conditioning machinery installed at any manufacturing factory will form a distinct item of asset calling for treatment of depreciation than machinery and plant in general for functioning of that factory. To illustrate, textile manufacturing machinery and plant is not separately dealt with for the purposes of special rates and the same would attract general rate applicable under sub-item (i). If the provision has to be applied with respect to textile machinery and plant, it would read rate applicable to textile machinery and plant under sub-item (i). Obviously, in that even while the textile machinery and plant is being dealt with under the general item, the air-conditioning machinery will have to be dealt with as an item of machinery and plant dealt with specifically under sub-item (2) of sub-item (ii). The applicability of the maxim generalibus specialia derogant shall not raise any difficulty. Likewise, when the question would arise for computing deduction for depreciation in respect of artificial silk manufacturing machinery and plant, while all machinery and plant necessary for the functioning of artificial silk manufacturing unless there are other provisions to deal with the same fall within any item specifically, the same would be dealt with in like manner for the purpose of calculating depleciation. However, if any of the items though necessary for running the artificial silk manufacturing unit falls within the specific description of machinery and plant under any other sub-item of the Appendix I, it would lose its identity with the general character of artificial silk manufacturing machinery and plant, but will have to be dealt with as an items separately dealt with under the table and that specific provisions would govern the applicability. In other words, it can be said that, in the first instance, the rate of general depreciation has to be prescribed under sub-item (i) and sub item (ii) of the table and thereafter, when the question of extra shift allowance arises to be considered under sub-item (iv), it has to be seen what specific items have been excluded from the applicability of extra shift allowance and if any of the items has been specifically so excluded either by inscribing N.E.S.A. while including that item under description of machinery and plant slated for the special rate or are subjected to general rate, such item cannot be made available for computation of extra shift allowance. We may notice that it was also not seriously disputed by learned counsel for the assessee -the question has arisen in the context of air conditioning machinery installed in a textile manufacturing unit.
In reaching this conclusion, we are also fortified by the decision of this High Court in Bharat Suryodaya Mills v. CIT (1995) 212 ITR 6, where the question arose in connection with grant of extra shift allowance on electrical machinery. Referring to the provisions of rule 5 and Appendix I referred to above, the Bench to which one of us was a party (R.K. Abichandani. J.), speaking for the Court, said (at page 8):
"In view of the above specific provision, it is clear that the extra shift allowance benefit was not available for the electrical machinery. The Income-tax Officer had, therefore, no power to allow extra shift allowance on electrical machinery."
We may notice here that the question has arisen on the like contention raised by the assessee in the case in respect of electrical machinery. The assessee had claimed extra shift allowance on electrical machinery which was allowed by the Income-tax Officer in the first instance; however, noticing the aforesaid provision under rule 5 read with Appendix I, a notice to show cause was issued to the assessee for rectifying the mistake which was considered to be apparent from the record and the order was rectified by him. The assessee had contended that the machinery forms part and parcel of the machinery as a whole and could not be treated as electrical machinery, as is the contention before us that air-conditioners form part and parcel of the artificial silk manufacturing machinery as a whole and shall fall within that description and on that premise it was further contended that since this question raised an arguable issue the pre-condition for invoking the provisions for rectification did not exist. This contention that the issue raises any arguable question obviously did not find favour with this Court, which is apparent from the aforesaid conclusion. Thus, this Court has found that this proposition does not raise an arguable issue so as to have two opinions on the question.
Coming to the decisions relied on by learned counsel for the assessee, we first refer to Industrial Machinery Manufacturers', Pvt., Ltd.'s case (1965) 16 STC 380 (Guj.). Having carefully considered the decision, we are of the opinion that the ratio of the case has no application to the facts before us it related to the sales tax applicable to the humidifiers used by the textile mills. The finding of the Revenue was that from the material placed before them it appeared that the humidifiers were used in various Departments of the textile industry for improving the quality and production in general. It also appeared that modern textile industry cannot do without such humidifiers and accepted the position that humidifiers are necessary for the production of the cloth in that by maintaining a particular humidity in the room in which the manufacturing process is being carried on, they help to increase the length and strength of yarn and that modern textile industry cannot do without humidifiers. To this extent facts found in the case at hand are similar. However, the similarity ends when the question of application of law or determining to which particular entry the item belongs arises. The Court was considering the question whether it fell in entry 15 of Schedule C to the Bombay Sales Tax Act, 1959, which read "machinery used in the manufacture of goods". The other entry which was relevant for the purposes of tax under the Bombay Act was entry 20 of the Schedule which prescribed rate on electrical goods. The Department had taken the view that since humidifiers were run by electric motors they were electrical goods. There was no dispute about that also. Here the general entry affecting the electrical goods was entry 20 and the special entry was entry 15 concerning machinery used in manufacture of goods which may be any type of electrical, mechanical, manual or other. Considering the meaning of the word "used in" on the basis of facts arrived at by the Revenue authorities, the Court held (at page 384):
"Manufacture of goods means the process of converting raw materials into finished goods and whatever machinery is required for converting raw materials into finished goods would be machinery used in the manufacture of such goods. Every item of machinery which has a use in the manufacture of finished goods, which plays some role in the process of manufacture of finished goods and without which manufacture of finished goods would not be possible would be machinery used in the manufacture of such goods. Such machinery would be an essential and integral part of the plant which manufactures finished goods and would certainly satisfy the description that it is machinery used in the manufacture of finished goods. If this test be applied, it is clear that humidifiers are machinery used in the manufacture of cloth."
Thus, it is apparent that the Court was concerned with the question whether a particular item of machinery on which the rate of tax was to be applied was a machinery used it manufacture of goods and was not concerned with whether the machinery is a textile machinery as such. The term "plant" was used in the sense of manufacturing unit as a whole and not with reference to indicate separate apparatuses composing that unit. The case before us is weather air-conditioners are artificial silk manufacturing machinery or plant. The question before us is not whether air-conditioners are used in the manufacture of artificial silk. We may further notice that this distinction has clearly been made in the said decision itself while dealing with the decision of the Allahabad High Court in Delta Engg. Co., P., Ltd., v. CST (1963) 14 STC 515 in which the question raised was whether the water pumps are agricultural implements when they are used for pumping out water from tube wells for the purposes of irrigation. The Allahabad High Court had negatived the contention of the assessee to treat the water pumps used for agricultural purposes, as an agricultural implement calling for applicability of rate of tax as was applicable to agricultural implement. When the said decision was pressed into service by the Revenue for canvassing before the Court that humidifiers used in textile machinery merely because of such user does not become textile machinery so as to attract sales tax at the rate applicable to such machine, the Court rejecting the plea of the Revenue, said (at page 385 of 16 STC):
"It is difficult to see how this decision can assist us in determining the question which arises on the present reference. In this case the Court was concerned with the limited question as to whether water pumps could be said to be agricultural implements. The question was not whether water pumps could be said to be machinery used in agriculture. The question which we have to consider is, however, an entirely different question, namely, the true connotation of the expression 'machinery used in the manufacture of goods' ."
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This distinction is apparent in the present case as well. Here we are not concerned with whether the air-conditioners are machinery used in manufacturing of artificial silk, but we are concerned whether the air conditioners are by themselves artificial silk manufacturing machinery or plant. Therefore, the question of determining whether air-conditioners used in the artificial silk plant can be treated to be an integral part of any other machine used in that factory has to be decided independent of it being use in that factory. Therefore, the aforesaid decision does not assist the assessee in any manner.
The other decision which has been relied upon by learned counsel for the assessee is CIT v. Tarun Commercial Mills Ltd. (1985) 151 ITR 75, wherein this Court has held that air-conditioners are to be treated as plant and not as office appliances. As we have already noticed, there is no dispute before, nor is it the case of the Revenue that air-conditioners are not plant or machinery at all. Therefore, we are unable to see how this case advances the case of the assessee in any manner.
There is yet another reason which fortifies our conclusion. The phrases used in entry (2) of sub-item (ii) under item III of Appendix I is air conditioning machinery including room air-conditioners. This goes to show that this entry deals with all types of air-conditioning machinery whether used in a room, factory or office or any other place of business irrespective of any particular use to which it is put. The air-conditioning machinery in any form including, even if it a room conditioner only, is subjected to special treatment with non-applicability of provisions relating to extra shift allowance. The applicability of this provision is not depending upon the particular use to which an air-conditioning machinery is put. If we are right in our conclusion and we think so, there is no room for accepting the further argument that it should be treated to be falling in another description because its use is necessary for the functioning of a manufacturing unit of the assessee.
Taking the other view shall render the item (2) or for that matter most of the separate entries of sub-item (ii) B of item III of Appendix I, part I, otiose. An interpretation leading to such result has to be avoided.
For the reasons aforesaid, we are of the view that the Tribunal was not justified in holding that air-conditioners which are necessary for functioning of the crimping yarn machine of the assessee are eligible to extra shift allowance for the purposes of computing depreciation under section 32 of the Act.
Accordingly, we answer the question referred to us in the negative, in favour of the Revenue and against the assessee. This reference stands disposed of accordingly with no order as to costs.
M.B.A./1658/FCReference answered.