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Issues:
- Entitlement to development rebate under section 10(2)(vib) of the Indian Income-tax Act, 1922 for the cost of spindles purchased by the assessee-company. Analysis: The judgment pertains to the assessment years 1958-1959 and 1959-1960, focusing on whether the assessee-company was eligible for development rebate under section 10(2)(vib) of the Income-tax Act for the cost of spindles purchased. The company, engaged in manufacturing and selling cotton textiles, replaced ordinary spindles with roller bearing spindles in the accounting years 1957 and 1958, incurring costs of &8377; 25,063 and &8377; 67,980 respectively. The company claimed the expenses as capital in nature, justifying entitlement to development rebate. However, the Income-tax Officer, Assistant Commissioner, and the Tribunal rejected the claim based on the argument that the roller bearing spindles were not self-contained units and had to be used in conjunction with other machinery in the company's mills. The Tribunal's decision was influenced by conflicting judicial opinions on the definition of "machinery." The High Court of Bombay had previously held that no development rebate could be claimed for machinery that was not a self-contained unit. Conversely, the High Courts of Madras and Kerala had taken a different stance. The conflict was resolved by the Supreme Court in Commissioner of Income-tax v. Mir Mohammad Ali, where it clarified that a diesel engine was considered "machinery" for the purpose of claiming extra depreciation. The Supreme Court's decision emphasized that the term "machinery" was ordinary and not technical, encompassing various clauses of section 10(2) of the Income-tax Act. Applying the Supreme Court's interpretation to the case at hand, the High Court held that the spindles purchased by the assessee were indeed machinery and constituted a self-contained unit for spinning when installed in the ring-frames. Despite not being standalone units, the spindles were considered machinery, making the expenses incurred eligible for development rebate under the relevant clauses of section 10(2). Consequently, the Tribunal's denial of the development rebate was deemed incorrect, and the High Court ruled in favor of the assessee, affirming their entitlement to the rebate. The Commissioner was directed to bear the costs of the reference, and the question was answered in the affirmative.
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