Factory roads depreciation and extra-shift allowance turn on the electrical machinery test for built-in motors.

Depreciation was allowable on roads laid inside factory premises, applying the Supreme Court principle governing factory roads, so the assessee succeeded on that point. Extra-shift allowance depended on whether the item fell within the exclusion for electrical machinery under Appendix I, Part I, Class III, Clause F(iv) of the Income-tax Rules, 1962. The arc furnace was not treated as electrical machinery because electricity merely passed through it and no in-built motor forming an inseparable part was shown, so the Revenue's position prevailed on that issue. The power travel electric lift required fresh examination because the Tribunal had applied an irrelevant consideration instead of the correct test.

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Issues: (i) Whether depreciation was allowable on roads laid inside the factory premises. (ii) Whether extra-shift allowance was admissible on the arc furnace and the power travel electric lift used in the factory.

Issue (i): Whether depreciation was allowable on roads laid inside the factory premises.

Analysis: The claim stood covered by the Supreme Court decision applying the depreciation principles to roads within factory , and the same reasoning governed the present case.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Issue (ii): Whether extra-shift allowance was admissible on the arc furnace and the power travel electric lift used in the factory.

Analysis: The allowance turned on whether the item fell within the exclusion for electrical machinery under Appendix I, Part I, Class III, Clause F(iv) of the Income-tax Rules, 1962. On the arc furnace, the applicable test was whether an electric motor was in-built into the machinery and formed an inseparable part of it. Applying that test, the arc furnace was not electrical machinery because electricity merely passed through it and no in-built motor was shown. As to the power travel electric lift, the Tribunal had proceeded on an irrelevant consideration and had not applied the correct test for determining whether it was electrical machinery, so the issue required fresh examination.

Conclusion: The issue was answered in favour of the Revenue on the arc furnace, while the question relating to the power travel electric lift was remitted for reconsideration in the light of the correct legal test.

Final Conclusion: The assessee succeeded on depreciation for factory roads and on the arc furnace, but the claim regarding the power travel electric lift required fresh determination.

Ratio Decidendi: For the purpose of the exclusion of electrical machinery from extra-shift allowance, the decisive test is whether an electric motor is in-built into the machinery and forms an essential, inseparable part of it; mere use or passage of electricity does not by itself make the machinery electrical.

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