- (1.) TWO interesting questions of law have been referred by the Income-tax Appellate Tribunal, Delhi Bench 'c', for our opinion. They are as follows: " (i) Whether, on the facts and in the circumstances of the case, the assessee's industrial undertaking was not formed by the transfer to its business of machinery or plant previously used in any other business within the meaning of Section 15c (2) (i) of the Indian Income-tax Act, 1922, for the purposes of tax exemption in accordance with Section 15c (1) of the said Act ? (2) Whether, on the facts and in the circumstances of the case-, the machineries worth Rs. 2,68,515 was new machinery within the meaning of Section 10 (2) (vib) of the Indian Income-tax Act, 1922 ?"
(2.) IN order to settle these questions, it is necessary to set out the relevant facts. The assessee is a public limited company. It is engaged in the production of milk foods. For its establishment, it imported machineries from United Kingdom. It is now common ground that 80% of that machinery was absolutely new ; only 20 per cent. of the machinery was re-conditioned. There is no evidence that the re-conditioned machinery was used in England, after re-conditioning before it was sent out to India. However, a finding has been returned that the said machinery had no benefit of tax exemption under Section 15c in the United Kingdom. The assesses claimed tax exemption under Section 15c of the Indian Income-tax Act, 1922, on the ground thai the total capital invested in acquiring and installing the machinery had been expended for purposes of this industry. The assessee also claimed development rebate under Section 10 (2) (vib ). The Income-tax Officer repelled the claim of the assessee and held that in order to get the benefit of Section 15c, the machinery must be totally new. In his opinion, as part of the machinery was used previously in another business, he refused to grant the benefit of the aforesaid provision. Regarding the development rebate, it is not necessary to set out how the matter was dealt by the Income-tax Officer as well as the Appellate Assistant Commissioner. Suffice it to say that the Appellate Tribunal has allowed the assessee's total claim for development rebate under Section 10 (2) (vib ). So far as the question of benefit of Section 15c is concerned, the Appellate Assistant Commissioner affirmed the decision of the Income-tax Officer, whereas on appeal the Tribunal has reversed that decision and given the assessee the benefit of Section 15c. The department being dissatisfied, moved the Tribunal for a reference under Section 66 (1) of the 1922 Act. The Tribunal has thus referred the two questions of law already set out in the earlier part of this order, for our opinion.
(3.) SO far as the first question of law is concerned, it will be necessary to set out the relevant part of Section 15c (2) which applies to an industrial undertaking which " is not formed. . . . by the transfer to a new business of building, machinery or plant previously used in any other business. " The contention of the learned counsel for the department is that we must read this provision along with Section 10 (2) (vib) and as in Section 10 (2) (vib) the word " new " occurs before the word " machinery ", we must, for purposes of Section 15c, read the word " new " before the word "machinery ", and, in any case, by reason of the use of the word " used " before the words "in any other business ", the learned counsel contends that the same result follows. We are unable to agree with this contention. In our opinion the correct approach is that the machinery must have been in use in any other business in India and not in any business anywhere else in the world. This view finds ample support from the phraseology used in the provision. The use of the word " building ", in relation to transfer, clearly indicates that the transfer is of a thing existing in India whether that is building or machinery or plant, otherwise the legislature would not have clubbed the word " building " along with "machinery" or "plant". In the very context of the provision, the machinery can be new or old and all that would have to be seen is whether in the case of old machinery it had been used in a business in India or not. The object of this provision seems to be that the benefit of Section 15c is not available qua the same item twice. We are, therefore, clearly of the view that the contention of the learned counsel to the contrary cannot be accepted. No support can be derived for the said contention from the language of Section 10 (2) (vib ). In the context of that provision, the interpretation placed on " new machinery " furnishes no guide for interpretation of the word " machinery " in Section 15c (2 ). Both the provisions have been enacted for different purposes and thus one will not control the other. It is of significance that in Section 10 (2) (vib) the word ''building" is not used by the legislature along with the word "machinery". Moreover, in Section 10 (2) (vib) the legislature used the word "new" before "machinery", whereas in Section 15c (2) the word "new" has not been used before the word " machinery ".;