K. Gnanaprakasam, J. - (1.) THE assessee is engaged in the manufacture of meters used for the measurement of electricity, which are three kinds, namely, (1) single phase meters. (2) poly phase meters, and (3) maximum demand indication 2 part meter. THE assessee claimed the benefit of development rebate as provided under Section 33(1)(a) of the Income-tax Act, 1961. Section 33 of the Income-tax Act allows development rebate in the case of machinery or plant installed for the purpose of the business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule. Section 33(1)(a) of the Income-tax Act, states : "In respect of a new ship or new machinery or plant (other than office appliances or road transport vehicles) which is owned by the asses-see and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section and of Section 34, be allowed a deduction, in respect of the previous year in which the ship was acquired or the machinery or plant was installed or, if the ship, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, a sum by way of development rebate as specified in Clause (b)."
(2.) SECTION 33(1)(b)(B) of the Act states : "In the case of machinery or plant,-- (i) where the machinery or plant is installed for the purposes of business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule,-- (a) thirty-five per cent, of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and (b) twenty-five per cent, of such cost, where it is installed after the 51st day of March, 1970." Item No. (7) in the Fifth Schedule is "Equipment for the generation and transmission of electricity, including transformers, cables and transmission towers". Item No. (24) of the Fifth Schedule refers to parts of articles mentioned in item No. (7). The assessee's contention is that the meters manufactured by the asses-see should be regarded as equipment for the generation and transmission of electricity or in the alternative, as component parts of such equipment and development rebate should be given in respect of machinery installed for the manufacture of such meters. The evidence tendered by the assessee in this regard was not accepted by the Income-tax Officer and he refused the development rebate claimed by him. On appeal to the Tribunal, the contention of the assessee was accepted and it concluded that the assessee is entitled to development rebate at the appropriate rate and directed the Income-tax Officer to recompute the income, by granting development rebate. It is in these circumstances, that the Revenue has caused to be brought before us the following questions for the opinion of this court : "1. Whether the Appellate Tribunal was justified in law in holding and had valid materials to hold that the assessee is entitled to allowance of higher development rebate in respect of the plant and machinery installed for the purpose of manufacture of meters used for the measurement of electricity ? 2. Whether the Appellate Tribunal was justified in holding and also had valid material to hold that the machinery and plant installed by the assessee are for the purposes of business of manufacture equipment for the generation and transmission of electricity ?" This court, having directed the Tribunal to refer the questions and also to send the statement of the case for deciding the questions, the abovesaid questions were referred to this court.
(3.) WE will first take up question No. 2, i.e., whether the Appellate Tribunal was justified in holding and also had valid material to hold that the machinery and plant installed by the assessee are for the purposes of business of manufacture equipment for the generation and transmission of electricity ? The learned advocate for the Revenue has relied upon the case of Hindustan Wire Products Ltd. v. CIT . That is a case where the company was carrying on the business of manufacture and sale of insulated copper wires of a particular type known as winding wires which were exclusively used in the manufacture of different types of gadgets but not for the purpose of generation and transmission of electricity. The assessee claimed the benefit of development rebate under Section 33(1)(iii)(c)(A) of the Income-tax Act, 1961, on the ground that the wires manufactured by them fell within the word "cables" employed in item No. (7) of the Schedule V and Schedule VI, respectively. The High Court of Punjab and Haryana held (headnote) : "The winding wires sold by the appellant-company could not be identified at all as 'cables' in the sense in which item No. (7) conceived of cables and the appellant was not entitled to the benefits available to a priority industry claimed by it." The said view of the High Court was confirmed by the Supreme Court in Hindustan Wire Products Ltd. v. CIT , wherein it is observed (headnote) : "Item No. (7) of Schedule V or Schedule VI speaks of equipment for the generation or transmission of electricity and such equipment includes transformers, cables and transmission towers. To appreciate what is comprehended in item No. (7), it is permissible to refer to a related entry, item No. 24, which refers to component parts of the articles mentioned, inter alia, in item No. (7). When item No. 24 is read in its entirety, it is apparent that the component parts mentioned in item No. (7) are component parts of what can be described as machinery. Then reading item No. (7) in conjunction with item No. (24), the conclusion is inescapable that when item No. (7) speaks of equipment, reference is intended to machinery needed for the generation and transmission of electricity. The item envisages complete self-contained units of equipment, units which on being put together or connected together constitute the apparatus for the generation and transmission of electricity. Viewed in that context, the reference in item No. (7) to cables must mean cables identifiable as complete self-contained units in themselves and as distinct units of equipment when employed in the generation and transmission of electricity. A cable does not fall within item No. (7) if it is merely a component, or part of component, of a unit of equipment or machinery." ;