Depreciation on replacement diesel engine treated as machinery newly installed, allowing additional allowance under the tax provision

For depreciation purposes, "machinery" was given its ordinary meaning, and a diesel engine fixed in a motor vehicle was treated as machinery newly installed even though it replaced an existing engine. The majority held that the depreciation provisions did not require a narrow construction limiting machinery to a self-contained unit, and the statutory reference to plant and vehicles did not cut down that ordinary meaning. The replacement engine therefore satisfied the conditions for additional allowance, reflecting the provision's purpose of encouraging modernisation. A dissenting view treated the change as mere substitution of one part of an existing machine and would have denied the allowance.

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Issues: Whether extra depreciation was admissible under section 10(2)(vi) and section 10(2)(via) of the Indian Income Tax Act, 1922, in respect of diesel engines fitted in motor vehicles in replacement of the existing engines.

Analysis: The majority held that the word "machinery" in the depreciation provisions bore its ordinary meaning and that nothing in the scheme of the relevant clauses required a narrow construction confining it to a self-contained unit. A diesel engine was machinery in itself, and when it was purchased and fixed in a vehicle it was installed within the meaning of the provisions. The fact that the new engine replaced an old one did not prevent it from being machinery newly installed, and the conditions for the additional allowance were satisfied. The statutory reference to plant, and the definition of plant including vehicles, did not cut down the ordinary meaning of machinery. The purpose of the provision was to encourage modernisation, and the replacement engine fell within that purpose.

Conclusion: Extra depreciation was admissible, and the question was answered in the affirmative in favour of the assessee.

Dissenting Opinion: Shah, J. held that the expression "machinery being new has been installed" contemplated a self-contained unit brought into service for the business, and that the replacement of a petrol engine by a diesel engine in a vehicle was only substitution of a part of an existing machine. On that view, the assessee was not entitled to the additional allowance.

Ratio Decidendi: For the purpose of the initial or extra depreciation provisions, machinery is to be understood in its ordinary sense, and a new diesel engine fixed in a vehicle is machinery newly installed even if it replaces an earlier engine.

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