Integrated machine components can qualify as machinery for development rebate when installed and used in the business.

Roller bearing spindles fitted into ring-frames were treated as machinery for development rebate purposes under section 10(2)(vib) of the Indian Income-tax Act, 1922. The controlling principle was that "machinery" and "installed" are to be understood in their ordinary sense, and a component of an integrated machine need not function as a separate self-contained unit to qualify. Because the spindle assembly, once fitted, formed a working unit for spinning, the fact that it could not run independently did not exclude it from the allowance. Expenditure on purchase and substitution of old spindles therefore fell within the rebate provision.

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Issues: Whether roller bearing spindles purchased and installed in ring-frames were machinery entitled to development rebate under section 10(2)(vib) of the Indian Income-tax Act, 1922, even though they were not capable of running by themselves as a separate unit.

Analysis: The question turned on the meaning of "machinery" and "installed" in section 10(2) of the Indian Income-tax Act, 1922. The earlier view that only a self-contained unit could qualify was displaced by the later Supreme Court ruling that machinery is to be understood in its ordinary sense and that a part of an integrated machine may still be machinery for the purposes of the allowance. Applying that principle, the spindle assembly, when fitted into the ring-frames, formed a functioning unit for spinning. The fact that the spindles could not operate independently did not take them outside the statutory expression. Once treated as machinery installed for use in the business, the expenditure on their purchase and substitution of old spindles fell within the provision for development rebate.

Conclusion: The claim for development rebate was maintainable and the question was answered in the affirmative in favour of the assessee.

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