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Issues: Interpretation of the term "new" under sections 10(2)(vi) and 10(2)(via) of the Indian Income-tax Act in relation to reconditioned machines supplied to the assessee.
Analysis: The case involved a question of law regarding whether reconditioned machines supplied to the assessee could be considered "new" for the purpose of claiming initial and extra depreciations under the Indian Income-tax Act. The machines in question were two Jackstone Junior Frosters described by the manufacturers as "Reconditioned Jackstone Junior Frosters Mark II" in the invoice. The suppliers confirmed that the machines were stripped, reassembled, and incorporated with the latest modifications, providing a twelve months' guarantee similar to that of new machines. Both the Income-tax Officer and the Appellate Assistant Commissioner concluded that the machines were not "new" as per the relevant sections of the Act. However, the Tribunal opined that the term "new" should be understood in the context of not being old, considering the guarantee provided by the manufacturers for the reconditioned machines. The High Court, concurring with the views of the Income-tax Officer and the Appellate Assistant Commissioner, emphasized the statements made by the suppliers themselves, which indicated that the machines were not explicitly termed as new. The Court highlighted that the suppliers' description of the machines as "virtually as new" and providing a guarantee similar to new machines did not categorize them as new. The Court rejected the argument that the machines could be considered new based on the guarantee provided, emphasizing that the term "new" should be interpreted in the ordinary sense of the word. The Court clarified that despite the reconditioning process, where worn-out parts were replaced and modifications were incorporated, the machines retained their identity and could not be classified as new machines. The Court emphasized that the absence of a specific definition of "new" in the Act implied that the term should be understood in its ordinary English language meaning. Refusing to accept the reconditioned machines as new, the Court concluded that the machines, although reconditioned and guaranteed by the manufacturers, did not meet the criteria to be classified as new machines under the relevant provisions of the Income-tax Act. Consequently, the Court answered the question in the negative, indicating that the machines were not considered new for the purpose of claiming depreciations under the Act. The Registrar was directed to take action under section 66(5) of the Act, and no costs were awarded in the case.
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