The Commissioner Of Income Tax, Coimbatore v. M/S. Adar Tea Products Company, Belmont, Conoor-1

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 23..12..2008 CORAM The Honourable Mrs. Justice PRABHA SRIDEVANandThe Honourable Mr. Justice K.K. SASIDHARANTax Case (Appeal) No.228 of 2004 The Commissioner of Income Tax,Coimbatore... AppellantversusM/s. Adar Tea Products Company,Belmont, Conoor-1. .. Respondent Prayer : Appeal under Section 260-A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal, "A"Bench, Chennai, dated 8.4.2003 passed in I.T.A. No.1105/MDS/2002against the order of the Commissioner of Income-Tax(Appeals)-I,Coimbatore dated 12.4.2002 made in I.T.Appeal No.185/00-01against the order of the Joint Commissioner of Income-Tax,Special Range-II, Coimbatore dated 23-05-2000 made in No.A-2/SR-II/94-95/CBE. For Appellant :: Mr. N. Muralikumaran, Senior Standing Counsel for Income Tax For Respondent :: Mr. R. Venkata Narayanan for M/s. Subbaraya Aiyar, Padmanabhan & Ramamani. Prabha Sridevan, J. The Tax Case Appeal was admitted on the following substantialquestion of law : "Whether on the facts and in the circumstances of thecase, the Appellate Tribunal was right in holding that eventhough the fluid bed drier is an energy saving device, and https://hcservices.ecourts.gov.in/hcservices/ is entitled 100% depreciation is valid in law?" The Revenue has re-framed the question of law which are posed for ourconsideration and they are as follows : "1. Whether the Tribunal was right in holding thatfluid bed drier is entitled for 100% depreciation whichdoes not find place in the restrictive definition of energysaving devices in the depreciation table appended to theIncome Tax Rules? 2. When 'being' used to restrict the definition of'energy saving devices' in the depreciation table appendedto the Income Tax Rules is the Tribunal right in holdingthat an item not enumerated in the restrictive definitionis also entitled for depreciation under the saiddefinition?" 2. The assessee had claimed depreciation at 100% on FluidBed Drier for the Assessment Year 1994-95. It was allowed. Thenotice under Section 154 of the Income Tax Act, 1961 ('Act' in short)was issued calling for the assessee's objection for withdrawal of the100% depreciation. The assessee objected to the disallowance. Theobjections were rejected as untenable since the Revenue took thestand that a Fluid bed drier is not enumerated as an energy savingdevice in the old Appendix-I which is applicable for the AssessmentYear period from 1988-1989 to 2002-2003. Even earlier, the Revenuetook the same stand for the Assessment Year 1993-94. Those orderswere confirmed in appeal. But, the appeal filed against theassessment orders in this case was allowed by the Commissioner ofIncome Tax (Appeals), relying on (2002) 253 I.T.R. 71 [Asst. C.I.T.vs. Bijoy Nagar Tea Co. Ltd.] (Income Tax Appellate Tribunal,Calcutta "B" Bench) and the Assessing Officer was directed to allow100% depreciation. The Tribunal also dismissed the appeal filed bythe Revenue. So, the present tax case appeal has been filed. 3. Learned Senior Standing Counsel appearing on behalf of theRevenue submitted that in the Table of Depreciation, Fluidized BedType Heat Boiler finds a place, but not Bed Type Heat Drier. Learnedstanding counsel read out the Table and submitted that the word"being" should be construed as exhaustive and not inclusive. Learnedstanding counsel submitted that, therefore, the questions of law mustbe answered in favour of the Revenue. 4. Learned counsel appearing on behalf of the assessee producedcertain orders as well as the brochure to sustain the case of theassessee. He also submitted that in the case of the Holding Company,viz. Conoor Tea Estates, the depreciation at 100% was allowed. 3. Learned Senior Standing Counsel appearing on behalf of theRevenue submitted that in the Table of Depreciation, Fluidized BedType Heat Boiler finds a place, but not Bed Type Heat Drier. Learnedstanding counsel read out the Table and submitted that the word"being" should be construed as exhaustive and not inclusive. Learnedstanding counsel submitted that, therefore, the questions of law mustbe answered in favour of the Revenue. 4. Learned counsel appearing on behalf of the assessee producedcertain orders as well as the brochure to sustain the case of theassessee. He also submitted that in the case of the Holding Company,viz. Conoor Tea Estates, the depreciation at 100% was allowed. 5. The Table of Depreciation reads as follows :-Block of assetsDepreciationallowance aspercentage ofWritten down value."III. MACHINERY AND PLANT...8. ...(ix) Energy saving devices, being –A. Specialised boilers and furnaces : (a) Ignifluid/fluidised bed boilers ] (b) Flameless furnaces and continuous ] pusher type furnaces ] (c) Fludised bed type heat treatment ] 80 furnaces ] (d) High efficient boilers (thermal ] efficient higher than 75 per cent ] in case of coal fired and 80 per ] cent in case of oil/gas fired ] boilers ] 6. It is the case of the assessee that for the Assessment Year1992-93, in respect of Conoor Tea Estates, which is the HoldingCompany, the authorities had accepted the case of the assessee.Those orders have been produced. The Assessing Officer, as against adepreciation of Rs.11,55,970/-, allowed the claim to the extent ofRs.11,43,586/-. The C.I.T. (Appeals) directed the Assessing Officerto indicate the working of the claim of depreciation. The appealfiled by the Revenue to the Tribunal was dismissed. In the typed setof papers, a working sheet is enclosed, under which 100% depreciationfor fluid bed drier is shown in the calculation. None of the ordersin the holding company's case indicate anything to show that fluidbed drier has been accepted as an energy saving device. Further, thereference in the assessment order in the present case is that thesame stand was taken by the Revenue for the Assessment Year 1993-94and it has been accepted. But that order is not before us. 7. The order in 253 ITR 71 (supra) has been produced. It is ashort order, wherein while the Tribunal holds that it is not possiblefor them, "to go into the technicalities of finding the differencebetween a drier and a boiler", they were of the opinion "that thereis no reason why depreciation at the rate of 100% should not be givento fluid bed type drier also". The conclusion is not satisfactory. 8. Initially, an objection was raised that the appeal itself isnot competent since there is a circular of CBDT prescribing monetarylimit for filing an appeal and since the tax effect in the presentcase was negligible and no substantial questions of law arose forconsideration and therefore, the appeal itself deserves to bedismissed. Learned senior standing counsel appearing on behalf of theRevenue submitted that those circulars will not bind this Court ifthis Court decides to hear the matter for determining the question oflaw. We are not inclined to take note of this technical objection inthis case. 8. Initially, an objection was raised that the appeal itself isnot competent since there is a circular of CBDT prescribing monetarylimit for filing an appeal and since the tax effect in the presentcase was negligible and no substantial questions of law arose forconsideration and therefore, the appeal itself deserves to bedismissed. Learned senior standing counsel appearing on behalf of theRevenue submitted that those circulars will not bind this Court ifthis Court decides to hear the matter for determining the question oflaw. We are not inclined to take note of this technical objection inthis case. 9. Several judgments were cited to show how the words used shallbe construed as 'exhaustive' or 'illustrative'. In (1976) 37 S.T.C.319 [State of Tamil Nadu vs. Pyare Lal Malhotra], it was held thatordinarily the expression "that is to say" is employed to make clearand fix the meaning of what is to be explained or defined. Suchwords are not used, as a rule, to amplify a meaning. It also statesthat a definition is accepted to be exhaustive. Its very terms may,however, show that it is not meant to be exhaustive. A purporteddefinition may say that the term sought to be defined "includes" whatit specifies, but, in that case, the definition is not complete. Inthat case, the words that were construed by the Supreme Court were"that is to say". 10. In (1978) 114 I.T.R. 802 [Commissioner of Income-Tax vs.Arasan Fertilisers (P) Ltd.], the word used was "namely". In Item 13of the Fifth Schedule to the Income Tax Act, after the word"fertilizers", the word "namely" was introduced. Our Court held that"namely" would restrict the interpretation of the word to those typesof fertilizers that are enumerated and not to all types offertilizers and answered the reference in favour of the Revenue. 11. In (2000) 118 S.T.C. 379 [Commissioner of Sales Tax vs.Popular Trading Co.], the words used were "that is to say", i.e.,with regard to entry tax, oil seeds, "that is to say ..... coconut"and the Supreme Court held that the expression "that is to say" isdescriptive, enumerative and exhaustive and circumscribes to a greatextent the scope of the entry. 12. Though no judgments have been produced where the word "being"has been interpreted, we find that there are some decisions which maythrow light in this regard. In (2004) 2 S.C.C. 249 [M.P. Cement https://hcservices.ecourts.gov.in/hcservices/ 11. In (2000) 118 S.T.C. 379 [Commissioner of Sales Tax vs.Popular Trading Co.], the words used were "that is to say", i.e.,with regard to entry tax, oil seeds, "that is to say ..... coconut"and the Supreme Court held that the expression "that is to say" isdescriptive, enumerative and exhaustive and circumscribes to a greatextent the scope of the entry. 12. Though no judgments have been produced where the word "being"has been interpreted, we find that there are some decisions which maythrow light in this regard. In (2004) 2 S.C.C. 249 [M.P. Cement https://hcservices.ecourts.gov.in/hcservices/ Manufacturers' Association v. State of M.P. and Ors.], the SupremeCourt held with regard to taxability of electricity, "Electricitybeing goods, shall also be subject to provisions of Entry 90-A ofList-I". In 1986 (Supp) S.C.C. 201 [Vrajlal Manilal & Co. vs. Stateof M.P. & Another], we find the following words : "Held – Tenduleaves not being goods of specialised importance in inter-State tradeor commerce under Section 14(ix) of the Central Sales Tax Act, 1956,Section 8(1) not violative of Article 286(3) of the Constitution".In (2007) 6 S.C.C. 724 [S. Rathinam vs. L.S. Mariappan], it was held,"A will not being a mode of transfer, but a mode of devolution, thebar under the Transfer of Property Act, 1952 will not have anyapplication...". In (1987) 2 S.C.C. 383 [Gaya Prasad vs. SurendraBahadur Singh], it was held, "An agreement being not a transfer isnot subject to restrictions of Section 7 of the Transfer of PropertyAct". In (1990) 1 S.C.C. 12 [India Cement Ltd. and Others v. Stateof Tamil Nadu and Others], it was held, "...royalty being a levy ortax on the restricted material, ...". In A.I.R. 1963 S.C. 966 [H.H.Sudhindara Thirtha Swamiar vs. Commissioner for Hindu Religious andCharitable Endowments], it was held, "...a fee being a levy inconsideration of rendering a service of a particular type,..."."...Excise duty being a levy on the manufacture or production ofgoods could ordinarily have been collected at that stage itself..." -(1998) 1 S.C.C. 616 [State of Kerala vs. Madras Rubber Factory Ltd.].In (1998) 6 S.C.C. 79 [Union of India vs. Mustafa & Najibai TradingCo.], it was held, "... confiscation of goods under Section 111 ofthe Customs Act being a penalty in rem...". 13. Let us see what can be used in the above extracts tosubstitute the word "being". For example, in the sentence, "exciseduty being a levy on the manufacture or production of the goods" canbe read to mean, "excise duty which is a levy on the manufacture orproduction of the goods". Therefore, how we may understand the word"being" used in the depreciation table is, it means, Energy savingdevices "which are" the devices mentioned therein. Further, in thesame table, the subject category in 8(ix) has the caption"specialised boilers and furnaces" and the word "drier" is not used.In the same table, the words "ventilator used with anesthesiaapparatus" and the words "ventilators other than those used withanesthesia" are used with reference to "life saving... being...". Ifwe have to treat "being" as like or including, then it was notnecessary to specifically mention "ventilators used with anesthesiaapparatus" and "ventilators other than those used with anesthesia".So, it does appear that the depreciation table enumerates andexhausts those equipments for which depreciation is admissible at therates mentioned. Under the head "Renewal energy devices", the "solarcrop driers" as well as "solar water heaters" are included. So, if"driers" was meant to be included, we are sure, they would have beenspecifically indicated therein. https://hcservices.ecourts.gov.in/hcservices/ as to whether a fluidised bed drier is energy efficient. That is thecriterion for inclusion. https://hcservices.ecourts.gov.in/hcservices/ as to whether a fluidised bed drier is energy efficient. That is thecriterion for inclusion. 15. In the compilation given by the learned senior standingcounsel, the words "furnaces" and "boilers" are explained, whichinformation appears to have been downloaded from a website.'Furnace' is an enclosed chamber where heat is produced to heatbuildings, destroy refuse, smelt or refine moss. 'Boiler' is aheating unit that heats water, whereas a furnace is a heating unitthat heats air. Therefore, in both these equipments, heat isgenerated by the boiler or the furnace, as the case may be, whereas,as regards drier, the meaning is "an apparatus for removing moistureeither by forced ventilation or heat". Therefore, for a drier, heatis not necessary; the drier may remove moisture otherwise than byapplication of heat, whereas for both the boiler and a furnace, heatgeneration is a must. The assessee also has produced some documentsto support his case. One such document is a letter written by theassessee himself, according to which a furnace is a generic name fora heating place, and one form of furnace is a drier. He has alsogiven the brochure issued by the company which has sold the fluidisedbed drier. Of course, the literature in the brochure shows that"there is efficient transfer of heat to the solid matter" and thedrying chamber and the plenum chamber have "double walled insulationto minimize losses" and it is stated, "Our driers and (sic) designedfor maximum temperature of 83 degree centigrade. Consequently, airrequirement and power requirement are low". These cannot concludethe issue, since the information is sufficient. But, even if thebrochure clearly indicated the Fluidised drier's energy efficiency,we doubt, if we can include what the law makers have chosen not toinclude. 16. In P. Ramanatha Aiyar's "Advanced Law Lexicon", III Edition,2005, the words "being a trader" is translated as "carrying ontrade"; "being partners" as one "who have had relationship ofpartners"; and "being the property of the assessee" means "theassessee owns the property". Of course, this does not help us, but'being a trader' could be expressed in other words as 'one who is atrader'. Similarly, 'being partners' may mean 'who are partners' and'being the property of the assessee' may mean 'which is the propertyof the assessee'. Therefore, in this case, the only way we are ableto consider the word "being" is to read the table as "energy savingdevices which are the equipments named thereunder". Therefore, itwould appear that "being" is more like "namely". 17. In Diebold Systems Pvt. Ltd. vs. Commissioner of CommercialTaxes (Karnataka), Bangalore, (2006) 144 S.T.C. 59], the KarnatakaHigh Court held as follows : "33. Entry 20 (ii) of Part 'C' of Second Schedule tothe Act speaks of "peripherals". The Entry is as under : https://hcservices.ecourts.gov.in/hcservices/ (ii) Peripherals that is to say, – (a) All kinds of printers and their parts namely, dotmatrix, ink jet, laser, line matrix and the like (b) Terminals, scanners, multimedia kits, plotters,modem and their parts. Immediately after the expression "peripherals", theLegislature has used the expression "that is to say, allkinds of printers and their parts and terminals, scanners,multi-media kits, plotters, modem and their parts". 17. In Diebold Systems Pvt. Ltd. vs. Commissioner of CommercialTaxes (Karnataka), Bangalore, (2006) 144 S.T.C. 59], the KarnatakaHigh Court held as follows : "33. Entry 20 (ii) of Part 'C' of Second Schedule tothe Act speaks of "peripherals". The Entry is as under : https://hcservices.ecourts.gov.in/hcservices/ (ii) Peripherals that is to say, – (a) All kinds of printers and their parts namely, dotmatrix, ink jet, laser, line matrix and the like (b) Terminals, scanners, multimedia kits, plotters,modem and their parts. Immediately after the expression "peripherals", theLegislature has used the expression "that is to say, allkinds of printers and their parts and terminals, scanners,multi-media kits, plotters, modem and their parts". The expression "that is to say" is the commencement ofancillary clause, which explains the meaning of theprincipal clause. This expression is explained by the ApexCourt in the case of State of Tamil Nadu vs. PyarelalMalhotra, (1976) 1 S.C.C. 843 and in that, the Court hasobserved that the expression "that is to say" is employed tomake clear and fix the meaning of what is to be explained ordefined. Such words are not used as a rule, to amplify themeaning while removing a possible doubt for which purposethe word 'includes' is generally employed. In unusual cases,depending upon the context of the words "that is to say",this expression may be followed by illustrative instances.The Supreme Court in the case of Sait Rikhaji Furtarnal vs.State of A.P., 1991 Suppl. (I) SCC 2002 has observed thatthe expression "that is to say" is exhaustive and notillustrative. The meaning of the expression "peripheralequipment" is defined in the Illustrated Computer Dictionary(Donald D. Spencer - Third Edition) to mean input/outputunits and auxiliary storage units of a computer system,attached by cables to the Central Processing Unit used toget data in the date out, and to act as a reservoir forlarge amounts of data that cannot be held in the CentralProcessing Unit at one time. The word "terminal" means keyboard/display or key board/printer device used to inputprograms and data to the computer and to receive the outputfrom the computer. The Legislature having introduced the phrase"peripherals" under sub-entry (ii) of Part 'C' of the SecondSchedule to the Act, has defined the term by using theexpression "that is to say". The definition must determinethe application of the phrase. In our view, the context inwhich the expression "that is to say" is used in exhaustiveand not illustrative. Therefore, since ATM's are notincluded under sub-entry 20 (ii) (b) of the Part 'C' ofSecond Schedule to the Act, by construction, it cannot be brought under that Entry." 18. The Table of Depreciation states that the energy-savingdevices for which 100% depreciation is allowed are the equipmentsnamed therein, i.e., "the energy devices" which are "fluidised bedboilers, furnaces". 19. The Supreme Court has held that if a provision is made in thecontext of a law providing for concessional rates of tax for thepurpose of encouraging an industrial activity, a liberal constructionshould be put upon the language of the statute – vide C.I.T. vs.Straw Board Manufacturing Co. Ltd. [1989 Supp (2) S.C.C. 523]. 20. The items in an exemption notification are to be strictlyconstrued, but once the goods in question fall even narrowly in oneof the exempted categories, then the exemption notification has to beconstrued broadly and widegely – vide A.I.R. 1995 S.C. 1469 [BombayChemical (P) Ltd. vs. C.C.E.]. 19. The Supreme Court has held that if a provision is made in thecontext of a law providing for concessional rates of tax for thepurpose of encouraging an industrial activity, a liberal constructionshould be put upon the language of the statute – vide C.I.T. vs.Straw Board Manufacturing Co. Ltd. [1989 Supp (2) S.C.C. 523]. 20. The items in an exemption notification are to be strictlyconstrued, but once the goods in question fall even narrowly in oneof the exempted categories, then the exemption notification has to beconstrued broadly and widegely – vide A.I.R. 1995 S.C. 1469 [BombayChemical (P) Ltd. vs. C.C.E.]. 21. The table includes energy-saving device in the context andfor the purpose of encouraging industries to adopt energy-savingmeasures. While it was possible, in the context of encouragingindustrial activity, to bring within the net of exemption,manufacture of products which may even 'be remotely considered as'paper'; we cannot adopt the same reasoning here, since the tableindicates its intention to afford depreciation at the rates mentionedonly to the specifically listed equipments. It is not even provedthat a drier of the kind mentioned herein is an energy saving device. 22. For the reasons mentioned above, we answer the questionraised in this appeal in favour of the Revenue. The order of theIncome Tax Appellate Tribunal, "A" Bench, Chennai, dated 8.4.2003passed in I.T.A. No.1105/MDS/2002 is set aside and the appeal isallowed. Sd/Asst.Registrar /true copy/ Sub Asst.Registrar ab https://hcservices.ecourts.gov.in/hcservices/ To The Registrar,Income Tax Appellate Tribunal, "A" Bench, Chennai. 2.The Commissioner of Income-Tax(Appeals)-I,Coimbatore. 3.The Joint Commissioner of Income-Tax, Special Range-II,Coimbatore. 1 CC To Mr.Subbaraya Aiyar, Advocate, SR NO.71959 1 CC To Mr.N. Muralikumaran , Advocate, SR NO.72095 Tax Case (Appeal) No.228 of 2004 bvn(co)pmk/9.2.2009.