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Commissioner of Income Tax v/s Sri Ramakrishna Steel Industries Limited

    TC No. 1213 and 1214 of 1984, REF No. 1032 and 1033 of 1984

    Decided On, 11 February 1997

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE ABDUL HADI AND THE HONOURABLE MR. JUSTICE N.V. BALASUBRAMANIAN

   



Judgment Text

N. V. BALASUBRAMANIAN J.


Pursuant to the directions of this court, the Appellate Tribunal has stated a case and referred the following two questions of law for the opinion of this court


"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee is entitled to depreciation on the roads laid inside the factory premises?


2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee would be entitled to extra shift allowance on, (1) the arc furnace, and (2) the power travel electric lift used in its factory?" *


In so far as the first question that has been referred to us is concerned, learned counsel appearing for the Revenue has fairly stated that the issue raised in the first question is fully covered by the decision of the Supreme Court in the case of CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. 1992 AIR(SC) 1782, 1992 (196) ITR 149, 1992 (3) JT 158, 1992 (1) Scale 1000, 1992 (3) SCC 326, 1992 (2) SCR 1017, 1992 (104) CTR 243, 1992 (62) TAXMAN 471, 1992 (2) TLR 865, 1992 (104) CTR(SC) 248 and against the Revenue. Following the said judgment, the Tribunal was right in holding that the assessee was entitled to depreciation on the roads laid inside the factory premises. Accordingly, we answer the first question referred to us in the affirmative and against the Revenue


The second question relates to the claim of the assessee for extra shift allowance on the arc furnace and the power travel electric lift used in the factory. The assessee had an arc furnace and a power travel electric lift, which worked multiple shifts. The assessee claimed extra-shift allowance in computing depreciation in respect of these accessories. The Income-tax Officer rejected the claim on the ground that the two articles should be regarded as electric machinery and hence no extra-shift allowance was admissible in respect of these two articles. The Appellate Tribunal on an appeal held that the arc furnace cannot be treated as electric machinery. In so far as the power travel electric lift is concerned, the Appellate Tribunal held that it was an electric machinery, but it is not a stationary one in the sense that it has movable parts. The Appellate Tribunal, therefore, held that the assessee was entitled to claim extra-shift depreciation on the cost of the arc furnace as well as the power travel electric lift. The relevant entry dealing with the extra-shift depreciation allowance is found in Appendix I, Part I, Class III, Clause F(iv) of the Income-tax Rules, 1962. However, the extra shift allowance is not allowable in respect of any machinery or plant, which has been specifically excepted by insertion of letters "no extra-shift allowance" and some of the items listed in the table. One such item is electrical machinery and the relevant entry reads as under


"(1) Electrical machinery---switchear and instruments, transformers and other stationary plant and wiring and fittings of electric light and fan installations." *


The Appellate Tribunal found that the arc furnace cannot be treated as electrical machinery. The question what is electrical machinery was the subject-matter for consideration before this court with reference to the same depreciation schedule in CIT v. M. S. Sahadevan 1980 (123) ITR 820, 1980 (4) TAXMAN 188 and this court, after considering the entry held as under:


"Wherever the machinery is such that in-built into it is the electric motor, then it would be electrical machinery. For instance, taking a mono-bloc, it is possible to have a motor pump separately and an electric motor separately. In such a case, it would not be electrical machinery. But, the mono-bloc is worked electrically because it cannot be operated except with the aid of electricity as the electric motor is in-built into it. Other examples may also be thought of. Therefore, the nature of the enquiry in order to find out whether it is electrical machinery or not is to investigate whether the electric motor is in-built into the machinery and whether it forms vital and inseparable part and parcel of the machinery. The fact that electrical devices are put into the machinery would not by itself determine the character of the machinery. The electrical devices would only be for the purpose of allowing electricity to pass through the particular item to produce the desired result. Such machinery cannot be taken to be electrical machinery." *


Applying the test to the facts and circumstances of the case, it is clear that the arc furnace cannot be treated as electrical machinery because there is no electric motor in-built into it and the electric energy is only passing through it. It has no in-built motor. Therefore, the view of the Appellate Tribunal that the arc furnace cannot be regarded as an electrical machinery is in orderBut, in so far as the power travel electricity is concerned, we find that the Tribunal has proceeded on a wrong basis. It has taken into consideration the fact that it is not a stationary one and it has movable parts and hence, cannot be regarded as electrical machinery. That view of the Appellate Tribunal that it is not a stationary one is not a relevant factor to determine whether the power travel electric lift can be regarded as electrical machinery or not. The case has to be decided on the basis of the tests laid down by this court in the case of M. S. Sahadevan (supra). Since the Tribunal has not applied the proper tests to determine whether the power travel electric lift can be regarded as an electrical machinery, the view of the Tribunal that the assessee is entitled to extra-shift allowance on the cost of the power travel electric lift is not sustainable in law. Therefore, we are of the view that the Appellate Tribunal should reconsider the question with reference to the power travel electric lift in the light of the tests laid down by this court in CIT v.

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M. S. Sahadevan (supra) and whether it would fall within the relevant entry. Accordingly, we answer the second question as under The Tribunal was right in holding that the assessee would be entitled to extra-shift allowance on the arc furnace and in so far as the claim of the assessee for power travel electricity is concerned, the Appellate Tribunal should go into the matter de novo in the light of the observations made by us. Accordingly, we answer the first part of the question that is relating to arc furnace in the affirmative and against the Revenue and we are returning the question unanswered with reference to the power travel electric lift. No costs.
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