- (1.) PORRITTS and Spencer (Asia) Ltd. , the asses-see, is a public limited company. The assessee maintained books of account on the mercantile system and for the assessment year 1972-73 filed a return declaring loss of Rs. 23,04,840 which included development rebate of Rs. 21,44,985 and deduction under Section 80j of the Income-tax Act, 1961 (herrviafter called "the Act"), amounting to Rs. 8,01,872.
(2.) THE assessee's case was that it had imported second hand reconditioned plant and machinery from Porritts and Spencer Ltd. (U. K.) and the reconditioning cost in relation to the value of the second hand plant and machinery in some cases exceeded 80% of their value and the second hand machines were completely knocked down, separated and rebuilt after replacement of all worn out parts by the repairers. These facts are contained in annexure. "g", printed at page 92 of the paper book, produced by the assessee before the Income-tax Officer. Annexure "h" printed at page 94 of the paper book gives the details of the machines and its parts, the basic value of the second hand machinery, the reconditioning cost, including the total value paid by the assessee to the U. K. company. The basic value of the second hand plant and machinery was 60,780 and the reconditioning cost is shown as 55,853, which is 91 % of the cost of the second hand plant and machinery. The total value paid was Rs. 50,06,453.
(3.) ON the aforesaid cost of the reconditioned plant and machinery, which is over Rs. 50 lakhs, the assessee claimed development rebate under Section 33 (1) (a) of the Act at the rates specified in Clause (b) which is allowable for new machinery or plant. The Income-tax Officer took notice of the fact that the machinery and plant were not new and were second hand duly reconditioned at a cost which was less than the value of the second hand ones as the reconditioning and replacement cost was 91% and, therefore, concluded that it was not new machinery or plant and that Section 33 (1) (a) of the Act was not applicable, and instead applied Section 33 (1a) (b) under which rebate at a lower rate was permissible for used machinery or plant. So, one of the questions before us would be whether second hand machinery and plant, on renovation or reconditioning, can be considered new machinery and plant within the meaning of Section 33 (1) (a) of the Act.;