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Issues involved: Interpretation of sections 40(c) and 40A(5) of the Income-tax Act, 1961 for a director-employee of the assessee-company, and determination of whether fans installed in the administrative office constitute 'plant and machinery' for depreciation under section 32 of the Act.
Interpretation of Section 40(c) and 40A(5): The court referred to the judgment in CIT v. Hico Products Pvt. Ltd. (No. 1) [1993] 201 ITR 567 to resolve the first issue, concluding in favor of the assessee based on precedent. Fans as 'Plant and Machinery': The court analyzed whether fans in the office premises qualified as 'plant and machinery' under section 32 of the Act. Section 32 allows depreciation for assets used in business, and the definition of 'plant' under section 43 includes items like scientific apparatus. The court emphasized that 'plant' should be interpreted broadly to encompass tools used in business activities, not limited to industrial machinery. Citing CIT v. Bank of India Ltd. [1979] 118 ITR 809 and Scientific Engineering House Pvt. Ltd. v. CIT [1986] 157 ITR 86, the court applied a functional test to determine if the fans were integral to the business operations. Ultimately, the court found the fans to be eligible for depreciation under section 32. Conclusion: Both questions were answered in the affirmative and in favor of the assessee, with no costs awarded.
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