High Court Of Calcutta
CIT vs. Hindustan Motors Ltd.
Sections 33(1)(b), 33, 43(3)
Asst. Year 1971-72
Dipak Kumar Sen, Actg. C.J. & Shyamal Kumar Sen, J.
IT Ref. No. 404 of 1977
28th January, 1988Â
S.K. Bhattacharyya, for the Revenue : R.N. Bajoria, for the Assessee
DIPAK KUMAR SEN, J.:
This reference arises out of the income-tax assessment of Hindusthan Motors Ltd., the assessee, in the asst. yr. 1971-72. On an application of the Revenue under s. 256(1) of the IT Act, 1961, the following questions have been referred by the Tribunal as questions of law arising out of its order for the opinion of this Court:
” 1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee is entitled to higher rebate on all its automobile ancillaries including those utilised by it in the assembling of its own cars and in that view allowing a higher rebate at 25per cent for the asst. yr. 1971-72 ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee’s claim to development rebate in respect of the tube-well was justified and in that view granting development rebate on tube- well brought into existence during the asst. yr. 1971-72 for Rs. 1,18,205 ? “
2. The controversy involved in question No. 1 is covered by the decision of this Court in the case of the same assessee in respect of the earlier assessment years where an identical question was considered and answered. The said decision is CIT vs. Hindusthan Motors Ltd. (1980) 19 CTR (Cal) 44 : (1981) 127 ITR 210 (Cal). Following the said decision, we answer this question in the affirmative and in favour of the assessee.
The ITO in making the assessment for the assessment year involved did not allow development rebate to the assessee on tubewells which were constructed during the year at a cost of Rs. 1, 18,205. On an appeal by the assessee, the AAC, following an appellate order dated April 11, 1975, for the asst. yr. 1972-73 in the case of the same assessee, directed the ITO to allow the development rebate for tube-wells as claimed by the assessee.
Being aggrieved, the Revenue preferred an appeal from the order of the AAC before the Tribunal. It was contended before the Tribunal on behalf of the Revenue that a tube-well was neither a plant nor machinery and that the ITO was right in refusing to grant development rebate on the said item which did not participate in the production. It was contended on behalf of the assessee that a plant included any apparatus used for carrying on any business. A number of decisions of various High Courts as also the Supreme Court were cited before the Tribunal which accepted the wide and broad interpretation given to the expression ” plant ” in the context of the IT Act.
5. The Tribunal found it to be settled law that the expression ” plant ” should be interpreted broadly as had been done by Courts and also having regard to the inclusive definition of the said expression in the IT Act. The Tribunal held further that if any apparatus participated in production in any business or had any relation to or bearing on production or manufacture, then the same could be treated as a plant. The Tribunal also noted the meaning of the expression ” plant ” as given in Webster’s Dictionary.
6. The Tribunal accepted the contentions of the assessee that a tube-well was an apparatus with equipment necessary for drawing water from subterranean sources. The Tribunal found that such water was necessary not only for production but also for industrial labour and held that the tube-wells were required by the assessee in its capacity as an employer as also in its capacity as a businessman. The Tribunal affirmed the order of the AAC and dismissed the appeal of the Revenue.
7. At the hearing before us, learned advocate for the Revenue did not dispute that the expression ” plant ” should be interpreted widely and broadly. He, however, submitted that there was no finding or evidence in the instant case that the tube-wells set up during the assessment year involved were in fact required or utilised by the assessee for the purpose of its business. It was contended that the Tribunal proceeded solely on the submissions of the assessee which were accepted in toto.
8. Learned advocate for the assessee, on the other hand, submitted that in its application under s. 256(1) of the IT Act, 1961, the Revenue had sought to raise a question of fact before the Tribunal as follows: “Whether the conclusion and/or finding of the Tribunal that items connected with tube-wells are required by the assessee as an employer as well as a businessman and as such the same falls within the meaning of the term ‘Plant’ to justify the assessee’s claim to development rebate in respect of tube-wells for the asst. yr. 1971-72 is based on any legal evidence or whether such conclusion or finding is otherwise unreasonable and/or perverse.”
9. The said question was not referred by the Tribunal to this Court. The Revenue thereafter did not move this Court under s. 256(2) of the Act for a direction to the Tribunal to refer the said question. It was, therefore, submitted that the facts as found by the Tribunal have become final and cannot be gone into further in the present reference. The only question was the question of law whether the assessee was entitled to claim development rebate in respect of the tube-wells on the basis that the same were plant.
10. Learned advocate for the assessee relied on and cited the following decisions to establish that the expression ” plant ” had a wide application and covered many items not considered in the ordinary sense to be manufacturing apparatus: (a) CIT vs. Taj Mahal Hotel reported in (1971) 82 ITR 44 (SC). In this case, the assessee which ran a hotel claimed depreciation allowance in respect of sanitary and pipeline fittings under the head ” Furniture and fittings “. The assessee also claimed that the said fittings installed in its hotel came within the definition of ” plant ” within the meaning of s. 10(5) of the Indian IT Act, 1922, and claimed development rebate in respect thereof.
11. It was held by the Supreme Court that the definition of the expression ” plant ” in s. 10(5) of the Act of 1922 was very wide and that the same was an inclusive definition. It was held further that the said fittings were required to be installed by the assessee for carrying on its business of running a hotel and came within the definition of the expression “plant” within the meaning of the said s. 10(5). The fact that the assessee had claimed depreciation in respect of the said fittings under the head ” Furniture and fittings ” under r. 8(2) of the IT Rules, 1922, did not affect the position so far as development rebate was concerned. (b) CIT vs. Warner Hindustan Ltd. 1978 CTR (AP) 228 : (1979) 117 ITR 15 (AP). In this case, it was held by a Division Bench of the Andhra Pradesh High Court that the definition of the expression ” plant “, in s. 43(3) of the IT Act, 1961, was of wide amplitude and included even a well if the same was dug for the purpose of the business of the assessee. On the facts, it was found that a well had been dug by the assessee to meet the needs of the factory and the assessee, therefore, was entitled to depreciation as also development rebate on the cost of digging the well. (c) CIT vs. Warner Hindustan Ltd. (supra). In this case, the Andhra Pradesh High Court followed its earlier decision in the case of the same assessee noted hereinabove and held that a well dug for the purpose of business was a plant within the meaning of s. 43(3) of the IT Act, 1961, and depreciation on the cost of such well was allowable as a deduction. (d) CIT vs. Warner Hindusthan Ltd. (1985) 48 CTR (AP) 231 : (1985) 160 ITR 217 (AP). In this case also, the Andhra Pradesh High
Court followed its earlier decisions in the case of the same assessee noted hereinabove and held that the assessee was entitled to claim depreciation on the cost of digging and construction of a well within the factory premises.
In the facts and circumstances, it appears that the Revenue, not having challenged the findings or conclusions of fact by the Tribunal, viz., that the tube-well in question was utilised for obtaining water necessary for the purposes both of production and of industrial labour of the assessee, we are precluded from enquiring further into the question whether the said tube-well was in fact utilised in the business of the assessee.
The only point to be considered is whether the cost of the tube-wells set up by the assessee in the assessment year involved came within the definition of the word ” plant”. The definition of the expression ” plant ” in s. 43(3) of the IT Act, 1961, is a wide definition as in s. 10(5) of the earlier Act of 1922. The decisions cited on behalf of the assessee are clear and it cannot be contended that a tube-well set up by an assessee for the purposes of his business and utilised as such, will not be a plant within the meaning of s. 43(3) of the IT Act, 196 1, and entitled to development rebate.
For the reasons as aforesaid, we are unable to accept the contentions of the Revenue. We answer question No. 2 in the affirmative and also in favour of the assessee.
There will be, no order as to costs.
SHYAMAL KUMAR SEN, J.:
[Citation : 170 ITR 431]