ORDER
A. Kalyanasundharam, Accountant Member
1. In this appeal by the assessee, the only issue involved is whether the assessee is a ‘Mineral Oil Concern’ and thereby whether the assessee is entitled to depreciation at the rate of 30% on well-head tanks, which are used for storage of vegetable oils. The plea of the assessee before us was that the assessee is carrying on the business of dealing, handling, distribution of oils to various grades and types and at the relevant time for storage of (raw) crude vegetable oil in its well-head tanks for the State Trading Corporation. The plea was that the well-head tanks were constructed as per the specifications of I.S.I, of storage of crude vegetable oils (Palm Oil). The assessee’s claim was that the vegetable oil is a mixture of hydrocarbons and glycerol and contains fatty acids to the tune of 10% and on refinement it is reduced to about 1% . In view of the fact that the vegetable oils contained corrosive chemicals as well as the rate of depreciation would be 30% and not 15%. The assessee further relied upon the fact that it is recognized as a ‘Mineral Oil Concern’ by the registering authority as well as by the Municipal Corporation referring to the Income-tax Rules III-D (7), he submitted that mineral oil concerns are those which use well-head tanks. It is an accepted tact by the Commissioner in the order Under Section 263 that the assessee is having well-head tanks, which are used in its business. Further, the chemical composition of the product, namely, vegetable oil is the same as the chemical composition in the petroleum products. For this proposition, he referred to Burmah Shell Refineries Ltd. v. G.B. Chand, ITO [1966] 61 ITR 493 (Bom.) and further drew our attention to the Delhi High Court decision in Addl CIT v. Distillers Trading Corpn. Ltd. [1982] 137 ITR 894. Referring to this decision of the Delhi High Court the submission was that even in that case the manufacture of ethyl alcohol from molasses was half to be a mineral oil product as the product was similar to the one which could be derived by cracking up petroleum products. He referred to the Bombay High Court decision in Burmah Shell Refineries Ltd.’s case (supra) for meaning of the term ‘petroleum products’ and also drew our attention to ITO v. J.K. Synthetics Ltd. [1982] 1 SOT 415 (Delhi) (SB) where the issue of nylon being a petroleum product was considered. He filed a detailed paper book running to about 83 pages containing certificates of experts regarding mineral oil dealing and also the specifications of the vegetable oil as well as the potential of conversion of petroleum hydro-carbons etc. He further emphasized that in view of the Delhi High Court decision, the mineral oil concern cannot be limited to the petroleum products extracted from the earth but also all those products, which are above the earth having similar chemical compositions. This is what has been recognized by the Delhi High Court and, therefore, the claim was that, the assessee should be allowed depreciation @ 30% and not at 15 % as per the information of the CIT in his order under Section 263.
2. The contention of the Department, on the other hand, was that normally the meaning to a term, which is not provided for in the Income-tax Act has to be given the same as is generally understood or as is commonly used. Under the common conception the term ‘mineral oil’ generally includes only those, which are extracted from below the earth and ‘mineral oil concern’ as provided in the rules are those, which are related to the extraction of oil from below the earth. In the instant case, it is a case of storage of vegetable oil, which is meant for human consumption cannot be given the same meaning as mineral oil and though it may contain some acid element this by itself cannot be said to mean that the machinery is come into contact with corrosive chemicals. The intention of the Legislature is that chemical should be used in the process for a particular end of product and some machineries so come in contact with such chemicals, which may lead to corrosion, then only it could be said to be coming in contact with corrosive chemicals. The contention of Department further was that the Bombay High Court decision is of no help to the assessee and even the Delhi High Court decision is of no assistance.
3. We have given very careful considerations to the arguments that have been advanced by both the parties. The assessee’s claim is that it falls under Clause III-D(V), which read as under :-
Mineral oil concerns-Field operations (above ground)-Portable boilers, drilling tools, well-head tanks, rigs etc. (N.E.S.A.) rate of depreciation 30%.
In the alternative, the claim of the assessee was that the machinery conies into contact with corrosive chemicals and, therefore, depreciation should be allowed at 15% and double triple shift allowances should be provided for.
3.1 The claim of the Department, on the other hand, is the assessee is entitled to neither and only normal depreciation is available to the assessee.
4. The Income-tax Act, 1961 has not provided any definition of the terms, mineral, mineral oil, vegetable, etc, and we have, therefore, to look up the dictionary meanings as is generally understood.
The meanings of the various terms as given in Chambers Twentieth Century Dictionary, 1983 edition are given below :
Pages
Mineral a substance produced by processes of
inorganic nature : a substance got by
mining : ore : a substance neither ani-
mal nor vegetable. (800)
Mineral Oil any oil of mineral origin (800)
Inorganic not organic : not organized : not belonging
to an organism : of accidental origin, not
normally developed (649)
Inorganic the chemistry of all substances but
Chemistry carbon compounds, generally admit-
ting a few of these also (as oxides of car-
bon, carbonates) (649)
Organical pertaining to, derived from, like, of the
nature of, an organ (in any sense) : of an
organism, organism or organization:
organized: inherent in organization: struc-
tural : formed as if by organic process :
belonging to the etymological structure
of a word : containing or combined with
carbon compounds : of crops, crop-
production. (891)
Organic the chemistry of carbon compounds. (891)
Chemistry
Vegetable a plant, a plant or part of one used for
food, other than those reckoned fruits. (1439)
5. The reading of the above meanings to the terms indicates that mineral oil would include all those oils which do not have any character of animal or vegetable but something which could be called as inanimate or inorganic in nature. From the above meanings, it is clear that there is a settle difference between organic chemistry and inorganic chemistry, as the former is related to the carbon compounds while latter is related to all those matters other than the carbon compounds except as oxides of carbon or carbonates. As admitted by the assessee, the vegetable oil is a mixture of hydro-carbons and glycerol and, therefore, as per the meanings given above, vegetable oil cannot be termed as a mineral oil because mineral oil is an inorganic matter of all substances other than carbon compounds generally admitting a few in the shape of oxides only. It, therefore, appears that vegetable oil could not be termed as mineral oil, since the vegetable oil is extracted from out of plants which plant is organic in nature. Thus, it follows that a concern dealing in vegetable oils could not be termed as mineral oil concern, and, therefore, the claim of the assessee that it is entitled to depreciation at 30% on the well-head tanks used for storage under Clause III-D(7) is not tenable in law.
5.1 The certificate of an excerpt at page 9 of the paper book only indicates that the well-head tanks could also be used for storage of mineral oil, is of no help to the assessee.
5.2 In the case of Burmah Shell Refineries Ltd.
(supra) the Bombay High Court deals with mineral oil in the context of petroleum products, normally extraction of petrol, refining of the crude petroleum for conversion into petroleum products as such diesel, petrol, kerosene, etc., does not deal with vegetable oils.
5.3 In Distillers Trading Corpn. Ltd.’s case (supra) their Lordships of the Delhi High Court were considering a situation of whether ethyl alcohol produced from molasses, the concern could be said to be a mineral oil concern or not. Their Lordships in that case had come to the conclusion that the assessee could be said to be a mineral oil concern mainly for the reason that ethyl alcohol could also be derived by cracking up of petroleum and since the assessee was producing or manufacturing ethyl alcohol by any other method he should not be called to be a non-mineral oil concern. They were impressed by the expression “hydro-carbon oil” which is “any of various oily liquids consisting chiefly or wholly of mixture’s of hydro-carbons (as petroleum or many of its products)”.
5.4 Thus even this case is of no help to the assessee on the primary grounds itself as the vegetable oil is a product out of plants which are organic in nature and that vegetable oil under no circumstances could be produced by cracking up of petroleum products. We are, therefore, of the view that it has to be held that the assessee is clearly not covered by the term ‘Mineral Oil Concern’ and the action of the CIT Under Section 263 is, therefore, proper. On the alternative plea also the claim of the assessee must fail as there is no processing involved and the tank is used for storage purposes only. One of the other alternative plea was that it comes into contact with corrosive chemicals. As per the chemical composition, vegetable oil do contain some fatty acids but this by itself cannot mean that the machinery, i.e., namely, the storage tanks come in contact with corrosive chemicals. The coming in contact with corrosive chemicals as is normally understood is use of chemicals during processing, which necessarily comes into contact with machinery. In the instant case, it is a case of storage of vegetable oil containing little bit of fatty acids. Therefore, even this plea of the assessee has no merit. The plea of the assessee, accordingly, fails.
6. In the result, the appeal is dismissed.