Law: Income Tax Act, 1922

Section: 10(2)(vib)

Law: Income Tax Act, 1922

Section: 10(2)(vib)

Section 33 of the Income-tax Act, 1961 [Corresponding to section 10(2)(vib) of the Indian Income-tax Act, 1922] - Development rebate - Assessment years 1958-59 and 1959-60 - Whether where assessee-company carrying on business of manufacturing and selling cotton textiles incurred expenditure on replacement of ordinary spindles by roller bearing spindles, it was entitled to development rebate under section 10(2)(vi) of 1922 Act in respect of expenditure so incurred - Held, yes FACTS The assessee-company carried on the business of manufacturing and selling cotton textiles. In the two accounting years, namely, calendar years 1957 and 1958, the company replaced ordinary spindles by roller bearing spindles. The company claimed that the expenses incurred on these spindles having been held to be a capital nature in the previous years, it was entitled to development rebate under section 10(2)(ivb). Both the ITO and the Assistant Commissioner rejected the claim. On further appeal, the Tribunal held that the roller bearing spindles were not self contained units capable of being put to use in the business for the benefit of which they installed, and rejected the claim for the development rebate on that ground. On reference : HELD The spindles in respect of which the expenditure was incurred and for which the development rebate was claimed by the assessee were clearly machinery and, when installed in the ring-frames, would constitute a self-contained unit for spinning. Though, therefore, they by themselves might not be said to be a self-contained unit, they must be held to be a "machinery" and the spindles must also be held to have been installed for the purposes of the second paragraph of clause (vi) and clause (via) of section 10(2) of 1922 Act and consequently, the expenditure incurred in their purchase and in substituting them for the old spindles would be entitled to development rebate. In the circumstances, therefore, the Tribunal was not correct in disallowing the development rebate. Note : The case was decided in favour of the assessee. CASES REFERRED TO CIT v. Mir Mohammad Ali [1964] 53 ITR 165 (SC), Corporation of Calcutta v. Chairman, Cossipore and Chitpore…

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