TMI Blog1972 (10) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... ling with this question, held that the development rebate would be granted in respect of the reconditioned plant and machinery of the value of Rs. 2,68,514.63 less Rs. 20,014.10, being the cost of the two items of machinery and plant ineligible for the grant of development rebate. He, however, in the operative part of his order, disallowed the development rebate in respect of the entire sum of Rs. 2,68,515. An application for rectification of this order was made to the Income-tax Officer but he passed no orders thereon inasmuch as the matter was under appeal to the Appellate Assistant Commissioner, Patiala Range. The Appellate Assistant Commissioner observed that the Income-tax Officer had not properly given effect to his own decision. However, he felt that the development rebate had been wrongly granted in respect of some other plant and machinery and according to him, if such development rebate was withdrawn, the assessee's position would remain almost unaffected. He, therefore, did not make any change in the computation of the development rebate from that made by the Income-tax Officer. The assessees by their letter No. 45 dated January 8, 1964, pointed out that the impression o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Supreme Court which we have referred to above is fully applicable in the sense that they continue to be machineries for the purposes of development rebate also. " The Tribunal on 17th December, 1965, passed a rectification order under section 254(2) of the Income-tax Act, 1961, in the matter of the statement of the case. This order is in the following terms : " In the appeal before the Tribunal the assessee argued that development rebate was allowable under section 10(2)(vib) in respect of 'new machinery or plant' and the word 'new' there signifies machinery or plant which had no contact with Indian income-tax law at any earlier stage and was new so far as Indian business and Indian taxation were concerned and the machinery and plant in dispute were of this type. It was further argued that reconditioned machinery was unused and was new machinery for the purpose of section 10(2)(vib), since, on reconditioning, the identity of the old machinery was lost and this was an additional ground for allowing development rebate in respect of the machinery in question which was reconditioned. " The Commissioner of Income-tax being dissatisfied with the order of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reconditioning cost was pound 859-5-7 made up as follows : Materials pound 213-15-0 (as per bill of Dawson and Downie Ltd., exhibit C, hereto) pound 35-19-3 (as per bill of Drayton Regulator Instrument Co. Ltd., exhibit D) pound 0-8-1 Labour and material 609-3-3 --------------- pound 859-5-7 --------------- Including the packing and delivery and freight and insurance expenses of pound 208-0-9 the c.i.f. value of the pumps came to Rs. 16,564.22. The charges incurred in India prior to installation of the machinery, being direct and general expenses, amounted to Rs. 5,663.02 making up a total cost of the two vacuum pumps of Rs. 22,227.24 as per item 1 of the general statement being exhibit A hereto. From the above it would be seen that the reconditioning of the pumps involved a substantial change as a sum of pound 859-5-7 was spent as reconditioning charges on the pumps originally bought for pound 175. (b) From Horlicks Ltd., the assessee acquired one second stage evaporator for pound 100 as per invoice No. 296 dated 23-5-1959, being item 2 of exhibit B. For reconditioning the evaporator a sum of pound 649-0-8 was spent as follows : On pipe work : pound 3- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y also acquired a reconditioned Roby Malt Grinding Mill for malt grinding, being item 5 of exhibit A, at a cost of pound 139-1-10 (as per invoice No. AUS-96, being part of exhibit H, which specifically refers to it having been reconditioned) which together with shipping and insurance to Calcutta resulted in a c.i.f. cost of pound 196-18-5, equal to Rs. 2,628.67. Together with expenses in India of Rs. 582.92, freight from Calcutta of Rs. 500.60 and Indian material and labour of Rs. 1,785.24, this gave a total cost of the machinery at Rs. 5,497.43. (f) The assessee acquired a reconditioned copper mash tun of a capacity of 500 gallons used for mashing being item 6 of exhibit A at a cost of pound 123-1-10 as invoice No. AUS-96, dated 10-7-59, being part of exhibit H. In the said invoice the machinery is referred to as 'reconditioned complete with stirrer drive'. The packing and delivery and insurance and freight cost pound 55-19-2, making up a total c.i.f. value of pound 179-1-0 equal to Rs. 2,387.33 which together with the Indian cost of clearing, freight, labour and materials gave a resultant total of Rs. 4,870.75. (h) The assessee acquired two Roller Driers reconditioned, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rule laid down in Cochin Company's case and has been ruled out without any basis. According to him, it does answer the test laid down in Cochin Company's case . Before proceeding to deal with the respective contentions of the learned counsel, it will be proper to set down the relevant observations of their Lordships of the Supreme Court in Cochin Company's case . They are in the following terms : " The word 'new' is not defined in the Income-tax Act. According to the Shorter Oxford Dictionary, the word 'new' means 'not existing before ; now made, or brought into existence, for the first time'. In the context of the language of the statute, particularly in its application to a machinery, we are of the opinion that the expression 'new' must be construed in this sense and in contradistinction and antithesis to the word 'used'. According to the statement of the suppliers there is no room for doubt that the machines were used after they were first made. Subsequently, the machines were taken into parts and were reassembled after replacing worn out parts and after incorporating the latest modifications. But the question still remains whether the two machines, after being recondition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,800. Including the freight and insurance the value of this item comes to Rs. 48,684.22. The cost of reconditioning it was incurred in India and the cost was Rs. 27,037.65. This amount was spent on accessories which would show that there was no substantial change or replacement of the used boiler that was acquired and in the subject-matter of item (d). So far as items (e) and (f) are concerned, their cost, as mentioned in exhibit H, is as follows : Cost of item (e) including cost of pound 139-1-10 export packing Cost of item (f) including cost of pound 123-1-10 export packing The railage, insurance and freight on these two items was pound 108-12-7 The figures stated above represent the price of the reconditioned machinery comprised in items (e) and (f). There is no evidence as to what was paid to acquire these machines before they were reconditioned. In this situation, it cannot be said that the reconditioning was of such a nature as to bring the case of these items within Cochin Company's case. In India, only an amount of Rs. 1,785 was spent on material and labour and this does not seem to have any connection with the reconditioning of the plant. We, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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