1. This appeal by the assessce is directed against the order of the learned CIT (A) dated 22-10-1986 in relation to the assessment year 1979-80.
2. The arguments of the learned counsel for the assessee and the learned Departmental Representative were heard.
3. The substantive issue involved in the grounds No. 1 to 5 of the appeal relates to the treatment of the assessee as a small scale industrial undertaking as per Sub-section (2) of Section 32A read with Explanation (a) to Sub-section (1A) of Section 35B of the Income-tax Act. The assessee claimed a deduction of Rs. 2,02,301 under Section 35B of the Income-tax Acton the ground that it was a small scale industrial undertaking within the meaning of the aforesaid provisions of the Income-tax Act. The assessee pleaded before the assessing officer that the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed as on the last day of the previous year in question for the purposes of the business of the undertaking did not exceed Rs. 10,00,000. According to the assessee, the aggregate value of its plant and machinery as on the relevant date was only Rs. 7,63,891.
On a scrutiny of the balance-sheet of the assessee, the assessing officer found that the cost of machinery as on 1-4-1978 (actual) was Rs. 7,63,891 and that the value of the vehicles as on 1-4-1978 was Rs. 3,54,109. Thus the aggregate value of the plant and machinery was Rs. 11,17,910. Since the aggregate value of the plant and machinery exceeded the limit of Rs. 10,00,000 the assessing officer held that the assessee did not fall in the category of small scale industrial undertaking and was, therefore, not entitled to deduction under Section 35B. On the matter being challenged in appeal, the learned CIT (A) has dealt with this issue in paragraph 2 and 2.1 of his impugned order in the following manner : The appellant has claimed that as on the 1st day of the previous year relevant to the assessment year under appeal the cost of machinery was only Rs. 7,63,891.
The ITO has taken the view that the expression aggregate value of machinery and plant would also include the value of vehicles owned by the appellant since a car is also a plant having regard to the definition contained in Section 43(3) of the Act. Before me reference was made to the profit and loss account and the balance sheet as on 31st March 1979. The balance sheet shows the value of fixed assets at Rs. 25,35,915. The relevant schedule shows the gross block of plant and machinery at Rs. 7,76,809. It is claimed that included in this amount of Rs. 7,76,809 are tools of the value of Rs. 3,33,005 and moulds of Rs. 32,072. If these two items are, in terms of the requirements of the Explanation below Section 32A(2) to be excluded the machinery would only be Rs. 4,11,732 and even after the addition of the vehicles, the aggregate value of the appellant's machinery and plant would not exceed Rs. 10,00,000. It was pointed out that there is a separate item of moulds, patterns and dies amounting to Rs. 1,05,925.91 in this very balance sheet. The appellant's argument is that tools, in any case, are not included in this and the amount of moulds falling as part of the machinery is only Rs. 32,072.
2.1 I have carefully considered these arguments but I find that I am unable to accept them. A plain reading of the law, relevant portions of which have been extracted in the preceding paragraph would indicate that what is to be considered is as plant and machinery as would stand reflected in the books of account and financial statements such as the balance sheet as at the end of the accounting period. The exercise of trying to break up the value of plant and machinery into that relating to tools and that relating to the machinery itself is, to my mind, a little far-fetched. After all every machinery will have a certain amount of tooling that has gone into it but the tooling will not represent the value of tools. What is envisaged under the law are the value of tools as such and moulds as such to be excluded. In the break up that has been given, only steel, dies and moulds of Rs. 32,072 can be said to come under the exclusions. The rest of them are all items of machinery, which as stated earlier, could possibly have some part of tooling but it would not be proper or justified to try to arrive at the value of tooling and say that these arc all tools and so should be excluded in arriving at the aggregate value of plant and machinery. For instance, an item of Rs. 1,23,780 is said to represent the value of a lathe machine. Similarly, there arc drill machines (Rs. 24,265), welding machines (Rs. 63,650), press machines (Rs. 93,471)andlhcelcctric dicsel generator (Rs.66,000). It is the claim that some of these machineries would have tools which are to be excluded.
Leaving apart the question as to how one would arrive at the value of the tools included in these machineries, I find that the basic proposition that a part of the machinery is to include the value of tools which should in turn should be excluded, difficult to accept.
What is to be excluded is the value of tools as such and not tools forming part of plant and machinery for which there is no warrant or basis for computation. In these circumstances and for the reasons discussion, I would hold that the ITO was justified in denying the assessee the relief under Section 35B.4. In the context of the above findings of the learned CIT (A) a number of points were raised before us by the learned counsel for the assessee. The first point raised was to the effect that the cars and other vehicles could not have been included in the definition of 'plant' for the purposes of Section 32A and Section 35B of the Income-tax Act. In this connection, the learned counsel referred to the use of the word 'installed' in Sub-section (2) of Section 32A.According to the learned counsel, since cars and other vehicles cannot be installed, they will not come within the purview of the word 'plant' as used in Sub-section (2) of Section 32A. It is not disputed that vehicles are also included in the definition of 'plant' within the meaning of Section 43(3) of the Income-tax Act. The question then arises as to whether the use of the word 'installed' in Sub-section (2) of Section 32A shall have the effect of taking out vehicles from the purview of the word 'plant' as used in that provision. We have given our anxious thought to this aspect of the matter, but do not feel persuaded to accept this contention of the learned counsel. The Chamber's Twentieth Century Dictionary [1976 Edition] defines 'install' as- 5. In the case in hand, it is not denied that the vehicles owned by the assessee were put in operational position and were actually being used during the year in question. It would, therefore, not be correct to say that the use of the word 'installed' in Sub-section (2) of Section 32A will limit the scope of that provision and take vehicles out of its ambit. If any case law support is needed on the point, the same is available in the decision of the Supreme Court in the case of CIT v.Mir Mohammed Ali [1964] 53 ITR 165 wherein it had been observed that the expression 'installed' does not necessarily mean 'fix in position', but can also be used in the sense of 'inducting or introducing or placing an apparatus in position for service or use'. In this view of the matter, the two revenue authorities were not unjustified in including the value of vehicles in the aggregate value of plant and machinery for the purposes of Sub-section (2) of Section 32A.6. The next point raised by the learned counsel for the assessee was that for the purpose of arriving at the market value of plant and machinery, the value of only such vehicles could be included as were being used in factory. Here again, we do not find any force in the argument of the learned counsel. We do not find any words of limitation in Sub-section (2) of Section 32A so as to confine its application only to vehicles used in factory.
7. The next point raised by the learned counsel was that some of the assets which fall within the definition of 'tools, jigs, dies and moulds' have wrongly been treated as plant and machinery for the purposes of Section 32A(2). In this connection, the learned counsel referred to the statement of break-up of plant and machinery and vehicles available at pages 20 and 21 of the Paperbook filed by the assessee. He also produced before us a Book called 'Machinery Guide (Directory of Manufacturers and Suppliers of Machine Tools)' issued by the Development Commissioner, Small Scale Industries, Ministry of Industry, Government of India. With the aid of this Book, the learned counsel sought to establish that some items of the machinery listed in the statement of break-up (paperbook page 20) are not in fact 'machinery' but only 'machine tools' and, therefore, within the terms of Sub-section (2) of Section 32A, their value should be excluded from the aggregation of the value of plant and machinery. After a careful thought to this aspect of the matter, here again, we do not feel inclined to accept the contention of the learned counsel. The Chamber's Twentieth Century Dictionary at page 786 defines 'machine tools' as a power-driven machine, as lathe, milling machine, drill, press, for shaping metal, wood or plastic material. Thus as per the dictionary meaning, a 'machine tool' is essentially a 'machine' and not a 'tool'.
The Book produced by the learned counsel also purports to be a 'machinery guide' and not 'tools guide'. The foreword to the said Book also clearly indicates that the Book is a machinery guide and contains information about machinery and its requirements. Every 'machine tool' is an item of 'machinery'. The machinery is a word of common parlance and common usage and in that context it is used in a very wide sense.
Moreover, a 'tool' cannot produce anything or article, whereas a 'machine tool' can produce a thing or an article. It would, therefore, not be correct to contend that items at serial numbers 2, 3, 4, 7, 12 and 13 at page 20 of the paperbook are 'tools' and their value is liable to be excluded from aggregation of the value of plant and machinery for the purposes of Sub-section (2) of Section 32A. This view of ours finds supports from the assessec's own balance sheet itself. In the balance sheet as on 31-3-1979 made available to us at page 10 of the papcrbook. Moulds, patterns and dies (sl. No. 10) have been shown separately as fixed assets from plant and machinery (sl. No. 5). Thus, according to its own showing of the assessee, moulds, patterns and dies have been shown and valued separately and do not form part of 'machinery' and their value is not included in the value of plant and machinery.
8. The next point discussed by the learned counsel was with regard to the date of valuation of the plant and machinery. For our discussion, we have taken into consideration the value as on 31-3-1979 as shown by the assessee in its statements. The same was done by the learned CIT (A) in his impugned order. There is thus no circumstances favourable to the assessee on this score. These grounds of appeal thus fail.
9. The ground No. 6 of the appeal deals with the question of expenses of Rs. 2,316 in respect of Diwali, Dassera and other festival occasions. The discussion of this issue is found in paragraph 3 of the impugned order of the learned CIT (A), which reads as under: 3. The second ground of appeal is that the ITO was not justified in disallowing an amount of Rs. 8,418 out of general expenses. The ITO has discussed these disallowances in paragraphs 7 to 9 of his order.
The total disallowance is made up as under:- The disallowance is actually Rs. 8,453 but mentioned as Rs. 8,418.
In regard to Diwali etc. expenses, the ITO has relied on the judgment of the Bombay High Court in the case of Kolhapur Sugar Mills Ltd. v. CIT [1979] 119 ITR 387. The appcllant relied on a communication dated 3rd October 1968 issued by the CBDT stating that no monetary limits have been laid down in respect of allowance on Diwali Muhurt expenses subject to the Income-tax Officer being satisfied that these expenses are admissible as a deduction under the law and are not expenses of a personal social or religious nature. In the light of the Bombay High Court judgment, I would hold that the disallowance of Rs. 2,316 is justified.
Looking to the facts and circumstances of the present case and the decision of the Bombay High Court in the case of Kolhapur Sugar Mills Ltd. v. CIT [1979] 119 ITR 387, we do not see any good reasons for our interference in the impugned order of the learned CIT (A).
10. In the result, we do not find any force in this appeal and dismiss the same.