The Judgment of the Court was delivered by

Ajit K. Sengupta, J.:— In this reference under section 256(2) of the Income-tax Act, 1961, the following question of law has been referred to this court for the assessment years 1981–82 and 1982–83:

“Whether, on the facts and in the circumstances of the case, the assessee was entitled to claim depreciation on the cost of electrification of labour quarters and if so at what rate?”

2. The facts giving rise to this reference are as under:

The assessee-company in the two years, viz., assessment years 1981–82 and 1982–83, owned several tea estates scattered over the Nilgiri hills. On the electrification of labour quarters/lines in the different tea estates, the assessee-company incurred an expenditure of Rs. 2,35,199 in 1981–82 and Rs. 5,25,956 in 1982–83. The expenditure which was incurred by way of electrification of the different quarters in the tea estates consisted of stationery items, wiring and fittings of electric light and fan installations.

3. The assessee-company claimed before the authorities for the first year, i.e, 1981–82, the expenditure incurred on 897 labour quarters and in 1982–83 on 1,324 labour quarters. For the purpose of depreciation of the electrification of each quarter, the expenditure incurred was divided. by the total number of quarters for which the said expenditure was incurred and thus computed the cost for electrification of each quarter was less than Rs. 750 and depreciation at 100 per cent. as per the first proviso to section 32(1)(ii) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), was claimed. The assessing authority accepted the said contention and allowed depreciation on the electrification of different quarters at 100 per cent. in view of the first proviso to section 32(1)(ii) of the Act.

4. The Commissioner of Income-tax issued a notice under section 263 of the Act and the assessee replied to the said notice. The assessee in its reply contended that the nature of the assets on which 100 per cent: depreciation has been allowed are stationery items, wiring and fittings of electric light and fan installations and the description of the assets given in Appendix I with reference to “electrical machinery” which are not entitled to E.S.A covered those items in its plain language. The assessee further contended in its reply that the said electrical machinery was installed in each unit of labour quarter/lines which were separate and identifiable units and hence, depreciation with reference to the expenditure incurred on such electrification should be allowed at 100 per cent. because the cost of such expenditure for each unit of the labour quarters did not exceed Rs. 750.

5. However, the Commissioner of Income-tax was of the view that the components used in the electrification of labour quarter/lines for each unit cannot be considered as either machinery or electrical machinery. Hence, according to the Commissioner of Income-tax, the Income-tax Officer has incorrectly allowed depreciation at 100 per cent. on the cost of electrification of labour quarters/lines and the order, according to the Commissioner of Income-tax, was erroneous to that extent. However, the Commissioner of Income-tax directed the Income-tax Officer to recompute the depreciation at ten per cent. on the cost of electrification of labour quarter/lines and suitably amend the assessment order.

6. On appeal before the Tribunal, the Tribunal pointed out that there was contradiction in the order of the Commissioner of Income-tax.

7. According to the Tribunal, if electrification of labour quarter/lines are not covered under the term “machinery”, no depreciation under section 32(1)(ii) of the Act or under Appendix I to the said Rules could be allowed. However, the Commissioner of Income-tax himself had given direction to allow depreciation at ten per cent. and implied thereby that electrification of quarters had been treated as machinery.

8. According to the Tribunal, the Commissioner of Income-tax has not passed a reasoned order nor given any finding whether the case was covered under the proviso to section 32(1)(ii) of the Act. According to the Tribunal, if depreciation at ten per cent. was to be allowed, in that event the discussion whether electrification of quarters could be treated as machinery or electrical machinery was quite unnecessary. The Tribunal observed that when this fact was pointed out to the learned Departmental Representative to clarify as to why depreciation at ten per cent. was allowed when, according to the Commissioner of Income-tax, electrification cannot be treated as machinery, the Departmental Representative was unable to offer any reasonable explanation. According to the Tribunal, the Commissioner of Income-tax did not properly consider the case of the assessee that electrification of each quarter has to be treated as a separate unit and thus the total cost with reference to each quarter being less than Rs. 750 depreciation at 100 per cent. was rightly allowed under the proviso to section 32(1)(ii) of the Act.

9. At the hearing before us, it has been contended by Dr. Pal that the view that electrification of labour quarters should be treated as machinery and should be allowed 100 per cent. depreciation in terms of the proviso to section 32(1)(ii) of the Act is in accordance with law, should be upheld.

10. It is his contention that the nature of the assets on which depreciation is claimed is wiring and fittings of electrical light and fan installations and this has not been disputed at any stage by any of the authorities.

11. He has also submitted that in view of the factual position and in view of item III of Appendix I, Part I of the Schedule to the Income-tax Rules, 1962, relating to “machinery and plant”, the depreciation as allowed by the Income-tax Officer was just and proper.

12. Learned counsel for the Revenue, however, has supported the order of the Commissioner of Income-tax.

13. We have considered the rival contentions.

14. We are convinced that the electrical light and fan installations are treated as plant by the statute itself. No controversy can persist on that. The only controversy that remains is whether the said electrical fittings with light and fan installations in each unit of the labour quarters should be taken as a separate identifiable unit so as to be eligible for 100 per cent. depreciation, the cost thereof not exceeding Rs. 750. For this purpose we are to refer to the first proviso to section 32(1) of the Income-tax Act. The said proviso at the material time read as follows:

“Provided that where the actual cost of any machinery or plant does not exceed seven hundred and fifty rupees….”

“Any machinery or plant” means that each single machinery or a single plant has to be worth Rs. 750 or below. The word “any” commonly means one. Therefore, any plant or machinery should be understood as referring to a unit of machinery or plant. Therefore, if the multiple units, of each machinery or plant are acquired for use in the business each such machinery or plant out of a number of such machinery or plant shall be entitled to the benefit of the proviso.

15. Dr. Pal has submitted that electrical fittings in each unit of labour quarters has to be separate as a plant because each unit of the labour quarters itself is separately identifiable. It is not that the cost of the entire electrical fittings of the labour lines should be taken as one unit without unitary separation. When each quarter is a separate unit, the electrical fittings therein should also be taken as one separate unit and the proviso to section 32(1)(ii) shall apply. We take note that the Madras High Court in Mysore Dasaprakash v. Commissioner Of Income-Tax., [1989] 177 ITR 38 has held that electrical switch boards, distribution switch boards, etc., and sanitary pipeline installations in a hotel building should be considered as one integrated unit and there is no scope for dissecting these items into different component parts for each room so as to claim deduction in respect of roomwise expenditure under the said first proviso. But we think that the said decision is distinguishable. There the unit as such is one unit and its entire electrical fittings with electrical distribution system is an indivisible whole. But in the present case the fittings and installations are divisible quarterwise, each quarter being separate from the other. It is not a case of one building containing multiple rooms, the whole being used as a hotel. The electrical installations in the quarters in the labour lines cannot be said to be an integrated whole as in the case of a hotel. Therefore, the argument advanced on behalf of the assessee carries conviction with us that the electrical fittings and lights and fan installations in each quarter are to be taken as one unit of plant and the benefit of the proviso shall be available for each such unit. One test that can be applied for the applicability of the proviso is whether if a particular plant is purchased over and over again according to the requirement of the expanding business the benefit of the proviso can be denied to such plant by reason merely of its multiplicity. The answer shall obviously be in the negative because the divisibility of one unit from the other is the decisive test which would be amply satisfied. On the same basis, there is divisibility of the electrical fittings and installations in each quarter. The test of the divisibility would lie in the fact that the replacement of the fittings or the installation in one quarter would not necessarily affect the fittings and installations in the other quarter. These tests of divisibility would, however, vary from case to case depending on the facts of each case. As in the case of a hotel, there is no element of divisibility. The hotel as such is one and indivisible.

16. For the reasons stated, we answer the question in this reference in the affirmative and depreciation at the rate of 100 per cent. would be allowable if the cost for electrification of each quarter does not exceed the ceiling provided for in the proviso to section 32(1)(ii).

17. The answer is in favour of the assessee and against the Revenue. There will be no order as to costs.

Nure Alam Chowdhury, J.:— I agree.