STEELSWORTH LIMITED Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF GAUHATI
COMMISSIONER OF INCOME TAX
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G. MEHROTRA, C. J. -
(1.) INCOME-tax Ref. No. 1/63 arises out of a reference made by the ITAT, Calcutta Bench, Calcutta. The following question of law has been referred to this court for opinion:
"Whether, on the facts and in the circumstances of the case, that part of the condition mentioned in cl. (i) of sub-s. (2) of S. 15C of the Indian IT Act, namely, not formed by transfer to a new business of building, machinery or plant used in a business which was being carried on or before the 1st day of April, 1948, had been satisfied by the assessee so as to entitle it to the relief envisaged in that section for the asst. yrs. 1953-54, 1954-55 and 1955-56?"
(2.) AS the Tribunal has refused to refer certain further questions which, according to the assessee, arose out of the order of the Tribunal, on the application made before this court the Tribunal was asked to state a case. The Tribunal has thus stated the case and referred the following two questions of law for opinion to this court:
"(1) Whether, on the facts and circumstances of the case, the proviso to S. 13 of the IT Act is attracted? and (2) Whether there was any material on the record for the basis adopted by the ITO or the Tribunal for computing the income of the assessee?"
This is the subject-matter of IT Ref. No. 8/64. Both these references have been argued together and we propose to give our opinion to the three questions by one consolidated order.
The assessee is a limited company engaged in the manufacture and sale of bolted tanks, welded tanks, pulleys, steel plates, etc. It also carried on business as the dealer in miscellaneous hardware articles. The business of the company was started on 15th April, 1951, and the first assessment year was 1952-53. The assessment years in question are 1953-54, 1954-55 and 1955-56. Some old machinery were purchased during the accounting period for the year 1952-53. During the accounting year for 1953-54 assessment also, old machinery of considerable worth were purchased for the manufacture of bolted tanks. It is set out in the statement of the case that it is common ground that the undertaking started its manufacturing operations by purchasing old machinery and also during the accounting period for 1953-54 old machinery for the manufacture of bolted tanks were purchased from Messrs. Agarwal and Co. of Tinsukia. The old machinery which were purchased from M/s Agarwal and Co. of Tinsukia were used in that business before the 1st April, 1948.
The relevant provision of the Indian IT Act, 1922 (hereinafter called "the Act") is S. 15C which reads as follows:
"15C. (1) Save as otherwise hereinafter provided, the tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking to which this section applies as do not exceed six per cent per annum on the capital employed in the undertaking, computed in accordance with such rule as may be made in this behalf by the Central Board of Revenue. (2) This section applies to any industrial undertaking which-- (i) is not formed by the splitting up, or the reconstruction of business already in existence or by the transfer to a new business of building, machinery or plant used in a business which was being carried on before the 1st day of April, 1948;...."
(3.) ONLY the relevant portion of the section has been quoted above. The new industry will thus be entitled to the benefit of S. 15C(1), unless it is an undertaking not formed by the splitting up, or the reconstruction, of business already in existence or by the transfer to a new business of building, machinery or plant used in a business which was being carried on before the 1st day of April, 1948.
The contention of the assessee which has been repelled by the Tribunal was that, unless the undertaking at its initial stage was formed by the transfer of old building, machinery or plant or was formed by the splitting up or reconstruction of already existing business, the undertaking will be entitled to the benefit of the section. The Tribunal has held that as from the facts of the case it was evident that the manufacturing unit out of which the profit was earned by the assessee came into existence after purchase of the machinery and the plant used in a business which was being carried on before the 1st day of April, 1948, the S. 15C will not be applicable to this undertaking.;
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