[1. to 4. These paras are not reproduced here as they involve minor issues].
5. Now we come to the remaining point in the appeal of the revenue for the assessment year 1975-76. The revenue is aggrieved with the order of the AAC allowing additional depreciation under Section 32(1)(vi) of the Income-tax Act, 1961 ('the Act') on the entire machinery of the value of Rs. 4,69,495, which according to it, included the value of machinery installed prior to 31-5-1974 on which development rebate had been allowed in accordance with law. This objection of the revenue has arisen on account of insertion of Clause (vi) in ; Section 32(1) by the Direct Taxes (Amendment) Act, 1974, with elect from 1-4-1975. By the insertion of this clause, additional depreciation was to be allowed on the machinery newly installed after 31-5-1974 instead of the development rebate as provided in Section 33 of the Act. The question of date of installation of machinery, thus, acquired importance on account of the introduction of this new provision, which referred to a date likely to fall within the accounting year of an assessee. In the instant case, the assessee's accounting year for his proprietary business of manufacturing cycle handles was calendar year which ended on 31-12-1974. It will be material, therefore, to ascertain the facts about the installation of machinery and we will like to reproduce below the factual data, which is contained in the assessee's paper book as part of his written submissions made before the AAC : 1.2. The first ground of appeal is in respect of non-allowance of depreciation under Section 32(1)(vi) of the Income-tax Act, 1961, on the entire machinery installed amounting to Rs. 4,69,495 (15/18) during the year under assessment. The appellant has installed various machines in his industrial undertaking for the manufacture of cycle-handles. The production was started some time in April 1974. The previous year in respect of new industrial undertaking (Surpal Industries, Ludhiana) is the year ending 31st December, 1974. For the manufacture of cycle-handles, various machines were required to be installed. In the month of April 1974, some of the machines were installed and in respect of the jobs for which the machinery was not installed, the same were got done from outside.
Total machines installed up to 31-5-1974 were amounting to Rs. 2,26,720 (16). The other machines worth Rs. 2,42,775 were installed after 31st May, 1974. The unit for the manufacture of cycle-handles is a composite unit. The plating plant was installed in the month of November 1974. The complete installation of the machinery for the manufacture of cycle-handles was done in the month of November 1974.
1.5. From the above, it is clear that when a number of machines are installed as part of one and same unit of manufacture, the entire can be said to have been installed on the day when the last of the machines is installed. In the appellant's case the plating plant, which is one of the machines for the manufacture of cycle-handles, which was installed in the month of November 1974, the entire manufacturing unit for the manufacture of bicycle-handles can be held to have installed in November 1974, i.e., after 31st May, 1974.
Accordingly, the appellant is entitled to additional depreciation on the entire machinery installed amounting to Rs. 4,69,495.
The ITO in the assessment order under appeal allowed development rebate at the rate of 15 per cent on the machinery of the value of Rs. 2,26,720 installed up to the crucial date 31-5-1974 and additional depreciation at the rate of 20 per cent under Section 32(1)(vi) on the machinery of the value of Rs. 2,42,775. The AAC felt by taking note of observations of the Gujarat High Court at page 535 in the case of CIT v. Saurashtra Wire-Healds Mfg. Co. (P.) Ltd.  67 ITR 524 that the entire machinery and plant was installed in November 1974 and the assessee was right in claiming additional depreciation at the rate of 20 per cent on the value of total machinery installed at Rs. 4,69,495.
The revenue has questioned the decision of the AAC.6. We have heard the rival submissions and carefully gone through the decision of the Gujarat High Court and the facts stated by the assessee which are reproduced above. In our opinion, the stand taken by the revenue is more correct and the AAC fell into error in accepting the assessee's contention. It is clear from the facts quoted above from the assessee's written submissions before the AAC that the assessee installed various machines in his industrial undertaking for the manufacture of cycle-handles and with the help of that unit, production was started in April 1974 itself. The unit was capable of manufacturing cycle-handles barring certain jobs which the assessee got done from outside. The assessee, thus, went into the production of cycle-handles and started selling them. From these facts, it is apparent that the machinery installed in April 1974, i.e., before the crucial date of 31-5-1974 was a unit, which was capable of producing the cycle-handles except in respect of certain processes. The only process which appears to be left out, as can be seen from para 1.5, quoted above, relates to the installation of plating plant. In that para, the assessee has clearly stated that plating plant was one of the machines for the manufacture of cycle-handles, which was installed in the month of November 1974 and on that basis it was claimed that the entire unit was installed in November 1974. It is clear that plating plant was an independent unit which could plate the handles already manufactured.
This was an independent unit which was required for further processing of cycle-handles manufactured by existing machinery, it was not a case of an item of machinery, which would have been needed for the production or manufacture of cycle-bandies itself. This plant was-further added so as to cover all the processes required for marketing duly plated cycle-handles In Saumshtra Wire-Healds Mfg. Co.
(P.) Ltd.'s case (supra) it is seen that whereas one machine was installed in March 1956 the remaining five machines were installed by the middle of April 1956 and the remaining machinery in connection with the manufacture of wire-healds was also installed in the month of April 1956. The High Court has specifically noted at page 535 that after the installing of all the six machines, the entire manufacturing unit was completed then only. It is further noted at page 528 that experimental production of wire-healds was started in April 1956 and regular production was also started in the same month. These facts go to show that production could not be started of wire-healds until all the six machines were installed. This is not the case here. The production of cycle-handles, in fact, began after the installation and it will be too much to say that even when the machinery was producing articles, intended to be manufactured, still it was not installed and its installation was to remain pending till a plant for another process of plating was installed. Taking note of the facts and the circumstances of the case as placed before the authorities below, we are of the opinion that the AAC's order on this point is wrong and the view taken by the ITO is correct. Consequently, we reverse the findings of the AAC and restore that of the ITO and allow the contention of the revenue.
7. In the result, the appeals of the revenue and the cross-objections of the assessee stand allowed as indicated above.