Commissioner Of Income-Tax v. Mahanagar Telephone Nigam Ltd.

Arijit Pasayat, C.J:— This is an appeal under section 260A of the Income-tax Act, 1961 (in short “the Act”). The only plea raised is that the Income-tax Appellate Tribunal (for short “the Tribunal”), was not justified in holding that extra-shift allowance is allowable on underground cables treating the same as part of the plant of the assessee.

2. The dispute relates to the assessment year 1987–88.

3. The factual background is as follows:

For the assessment year in question the assessee filed its return declaring a total loss of Rs. 47,65,82, 959. Subsequently, by a revised return, the loss was indicated to be Rs. 40,64,12, 360. The Assessing Officer noticed that the assessee had claimed extra-shift allowance in respect of lines, wires and cables while computing the depreciation allowable. The assessee had claimed extrashift allowance under the heading “Triple shift allowance” on two heads “On lines and wires” and “On cables”. The assessee was required to show cause why the claims shall not be disallowed. The assessee's stand was that the overhead lines and wires were categorised in the chart of depreciation as actually forming an integral part of the system, i.e, network of telephone exchanges, the apparatus and plant. Hence, lines and wires cannot be separated from the overall system of machinery and plant. Therefore, the claim made regarding extra-shift allowance on lines and wires was in order. The Assessing Officer, with reference to item No. (14) of clause F of old Appendix I to the Income-tax Rules, 1962 (for short “the Rules”), held that no extra-shift allowance was permissible on the assets styled as overhead lines and wires. So far as the underground cables and wires are concerned, it was submitted that there was no bar for extra-shift allowance. This did not find acceptance with the Assessing Officer who held that a distinction cannot be made between overhead lines and wires and underground lines and wires and cables. It was held that cables, lines and wires do not form an integral part of the overall plant and machinery. Further, the legislative intent was that the benefit of extra-shift allowance was not to be allowed on cable, whether it was overhead or underground. Consequently, the entire claim was refused. The assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals) (for short “the CIT(A)”). The said authority was of the view that there being no dispute that the plant would also include machinery in the common parlance, there was no justification in disallowing extra-shift allowance on the underground cables. The assessee, however, did not press its claim for extrashift allowance on overhead wires and cables. The matter was carried in appeal before the Tribunal by the Revenue. It was noted by the Tribunal that the conditions requisite for grant of extra-shift allowance were fulfilled and, therefore, the view of the Commissioner of Income-tax (Appeals) was in order.

4. In support of the appeal learned counsel for the Revenue submitted that the artificial bifurcation made by the Commissioner of Income-tax (Appeals) of overhead and underground lines and cables, etc., does not stand to reason. According to him, the area of functioning being the same there was no scope for making such a distinction.

5. We find that in order to be eligible for claim for deduction as extra-shift allowance the following conditions are required to be fulfilled: (a) the asset for which extra-shift allowance is claimed should be plant and machinery; (b) there should be multiple shift functioning of the concern; (c) such plant and machinery should be entitled to depreciation; and (d) there should not be any prohibition in Appendix I to the Rules relating to the allowance of extra shift allowance.

6. As noted by the Tribunal the main business of the assessee is to provide communication network in Delhi and Bombay and the main apparatus of the assessee consists of exchange and related equipment, cable lines and wires, etc. The cable network forms the link between two exchanges. This network consists of underground cables laid from one exchange to another exchange in various localities which are served by the exchange and as such forms part of the apparatus of the plant of the assessee. Since the underground cables constitute link between two exchanges, in its absence, the entire network will cease to function.

7. The expression “plant” has been defined in section 43(3) by an inclusive definition. The definition given by Lindley, J. in Yarmouth v. France, [1887] 19 QBD 647 (QB) is generally adopted. It was observed (page 658): “There is no definition of plant in the Act: but, in its ordinary sense, it includes whatever apparatus is used by a businessman for carrying on his business, —not his stock-in-trade, which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business.” In Scientific Engineering House (P.) Ltd. v. CIT, [1986] 157 ITR 86 (SC), the test laid down was whether the article fulfils the function of a plant in the assessee's trading activity and whether it is a tool of his trade with which he carries on his business? If the answer is in the affirmative, it will be a plant. The inevitable conclusion in view of the legal and factual background highlighted above is that the underground cables which are used by the assessee for carrying on its business constitute plant of the assessee. That being the position, the conclusions of the Tribunal are in order. The submission that there can be no distinction between overhead cables and wires and underground cables and wires is hardly acceptable because of the expression of legislative intent by the use of specific words. Only overhead cables and wires were covered and not underground wires and cables. The normal rule is that the general words in a statute must receive a general construction unless there is something in the statute itself such as the subject-matter with which the statute is dealing or the context in which the said words are used to show the legislative intent that they must be given a restrictive or wider meaning. Viscount Simon quoted with approval a passage from Rowlatt J. expressing the principle with the following words, which have become locus classicus (page 71): “In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.” (Cape Brandy Syndicate v. IRC, [1921] 1 KB 64).

8. We find no merit in this appeal which is dismissed.