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Claim for development rebate on expenditure incurred in changing over from D.C. to A.C. system - Whether the electrical installations constitute plant and machinery for the purpose of development rebate under section 10(2)(vib) of the Indian Income-tax Act, 1922? Analysis: The judgment pertains to a reference under section 66(1) of the Indian Income-tax Act, 1922, where the assessee, a company engaged in manufacturing and selling rosin and turpentine, incurred an expenditure of Rs. 1,11,407 in changing over from a D.C. to an A.C. system. The company claimed a deduction of Rs. 27,852 as development rebate, which was initially disallowed by the Income-tax Officer but later allowed by the Appellate Tribunal, Allahabad. The main issue revolved around whether the expenditure incurred constituted "machinery or plant" under section 10(2)(vib) of the Act. The Tribunal considered the definition of "machinery" and "plant" in various clauses of section 10(2) of the Act and relied on precedents to interpret the meaning of these terms. In Commissioner of Income-tax v. Mir Mohammad Ali, it was held that the term "machinery" should have the same meaning across different clauses of the Act. Additionally, in Raju and Mannar v. Commissioner of Income-tax, it was established that fitting a diesel engine in a motor vehicle constitutes installation within the meaning of section 10(2)(vib) of the Act. The Tribunal described the changeover from D.C. to A.C. system as involving new installations of poles, cables, conductors, and switchboards for distribution to various feeders. The Supreme Court's interpretation in Commissioner of Income-tax v. Mir Mohammad Ali clarified that the term "installed" should be understood broadly, not limited to being fixed in position, which aligns with the context of the present case. Furthermore, the definition of "plant" in sub-section (5) of section 10 was deemed to encompass a wide range of articles, including poles, cables, conductors, and switchboards. The Income-tax Officer had allowed normal depreciation on the articles in question under clause (vi) of section 10(2) of the Act, indicating recognition of these items as machinery or plant. Given this, the Tribunal's decision to grant development rebate under clause (vib) of section 10(2) was upheld. The High Court ruled that the electrical installations resulting from the changeover constituted plant, making the assessee eligible for development rebate on the expenditure incurred. In conclusion, the High Court answered the reference question affirmatively, stating that the electrical installations from the changeover were considered plant, thereby entitling the assessee to development rebate. The court directed the Commissioner of Income-tax, U.P. to pay Rs. 200 as costs for the reference.
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