- (1.) THIS is a reference made by the Income-tax Appellate Tribunal of New Delhi under Section 66 (1) of the Indian Income-tax Act, 1922 (Act II of 1922), hereafter to be referred as "the Act". The question referred reads : " Whether the assessee was entitled to the concession contained in Section 15c of the Indian Income-tax Act, 1922, in respect of Ashok Dyeing and Printing Works ? "
(2.) THE assessee is firm Phagoo Mal Sant Ram of Amritsar which had been carrying on business in its name. It opened a new branch under the style of Ashok Dyeing and Printing Works, opening its new industrial undertaking on October 22, 1957. For this undertaking it constructed a factory building at Rs. 47,221 and installed in it machinery of the value of Rs. 1,47,358. Out of the total value of the machinery, a sum of Rs. 1,05,376 represented purchase of old machinery from several parties, and the remaining sum of Rs. 41,982 was the price of the new machinery. So in regard to this new undertaking the assessee (a) set up a new factory building costing Rs. 47,221, and (b) purchased (i) new machinery of the value of Rs. 41,982, and (ii) old machinery of the value of Rs. 1,05,376. In the assessment years 1959-60 and 1961-62, the assessee claimed exemption under Section 15c of the Act. The Income-tax Officer denied this claim saying : " It appears to me that the assessee's main business was printing of cloth only which in my opinion does not satisfy the condition of Clause (ii) of Sub-section (2) of Section 15c of the Income-tax Act inasmuch as it neither manufactures nor produces any article. Apart from that, it also appears that mostly the old machinery was installed by the assessee in this business. I, therefore, do not allow the assessee's claim. "
(3.) ON appeal the Appellate Assistant Commissioner of Income-tax allowed this claim on a conclusion that the new undertaking of the assessee satisfied the conditions laid down in Clauses (i) to (iii) of Sub-section (2) of Section 15c of the Act and nothing in that section debarred the claim of exemption by the assessee in respect of old and second-hand assets used in the undertaking. On appeal to the Income-tax Appellate Tribunal, the order of the Appellate Assistant Commissioner of Income-tax was reversed, restoring that of the Income-tax Officer, The learned Tribunal, after referring to Section 15c (2) of the Act, proceeded to come to this conclusion : " It will be observed that if machinery et cetera, previously used in other business, was transferred to a new business, then such transferred assets were not entitled to the exemption. In other words, if old assets were transferred by one assessee to his own business or to somebody else's business, then the exemption would be lost. We have already shown that the intention of the legislature is not at variance with this interpretation. ";