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Issues involved: Whether EA Machines were office appliances not eligible for allowance of development rebate u/s 33(1) of the Income-tax Act, 1961.
Summary: The judgment of the Bombay High Court addressed the issue of whether EA Machines were considered office appliances and thus ineligible for development rebate under section 33(1) of the Income-tax Act, 1961. The Commissioner initially held that the development rebate granted on EA Machines was wrongly allowed as a deduction, leading to a revision of the assessment. The Tribunal extensively examined the functionality of data processing machines, highlighting their technical nature and diverse capabilities such as wage calculations, quality control, cost production, and customer billing. It was noted that these machines were part of a system used for various business purposes, requiring specialized installations and training periods for operators and programmers. The Tribunal concluded that due to the complex and technical nature of EA Machines, they could not be classified as office appliances typically used in offices. The machines were primarily utilized by the assessee for renting out to customers and were integral to the business operations. The court analyzed the definitions of "appliance" and "apparatus" to emphasize that while an apparatus may be part of an appliance, not all apparatuses qualify as appliances. The court also referred to a previous judgment regarding the interpretation of the term "appliances" in a different context, where machines similar to EA Machines were not considered domestic appliances. Ultimately, the court upheld the Tribunal's decision, ruling that EA Machines were not office appliances and were eligible for development rebate under section 33(1) of the Income-tax Act, 1961. The revenue was directed to bear the costs of the assessee.
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