- (1.) THESE five Income-tax References Nos. 78 to 82 of 1974, relating to the assessment years 1963-64 to 1967-68, arise out of one reference order, in which the following question of law has been referred to this court by the Income-tax Appellate Tribunal (Chandigarh Bench) under Section 256 (1) of the I. T. Act, 1961 (hereinafter referred to as "the Act"): " Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the industrial undertaking running the new re-rolling mill was not formed by the reconstruction of the business already in existence ?"
(2.) THE facts giving rise to these reference applications are these I The assessee, i. e. , M/s. Batala Engineering Co. Ltd. , Ballabgarh, is a limited company and in addition to manufacturing machine tools, it has re-rolling mill also. The accounting year followed was the financial year. The assessee is in re-rolling business since 1933. The mill which was about 30 years old had outlived its utility and that mill was, therefore, scrapped in June, 1962. The assessee installed a new mill which started functioning from July 29, 1962. The new machinery was purchased at a cost of Rs. 5,10,781. Along with certain other items like lathes, weighbridge, motors and tools, etc,, the total cost of new machinery came to Rs, 6,10,020, The old machinery worth Rs. 1,07,034 was transferred from the old rolling mill and the total cost of the machinery, therefore, came to Rs, 7,17,054. The new building worth Rs. 37,732 was constructed and the old building worth Rs. 16,239 was transferred to the new rolling mill. Certain machinery of the old rolling mill of which the original cost was Rs. 88,738 and the written down value was Rs. 20,972 was scrapped and the scrap was sold some time in 1966. The area of the old rolling mill was 3,575 sq. feet, whereas the area of the new rolling mill is 24,544 sq. feet. There are other distinguishing features of the old mill and the new rolling mill in the statement of the case, which need not be reproduced here. The assessee's claim under Section 84 of the I. T. Act, 1961, prior to its amendment in the year 1967 (hereinafter referred to as "the Act"), was disallowed by the ITO for the assessment year 1963-64, on the ground that the assessee started only a modernised rolling mill and it was not a new industrial undertaking. According to the ITO, the new business of the rolling mill was only a reconstruction of the old business. For the assessment years 1964-65, 1965-66, 1966-67 and 1967-68, the order for the assessment year 1963-64 was followed.
(3.) THE assessee, feeling aggrieved by this order, filed appeals and the AAC accepted the assessee's claim for exemption under Section 84 of the Act for the assessment year 1963-64. He found that the new rolling mill was an industrial undertaking within the meaning of Section 84 of the Act and it was not a case of reconstruction or continuing in operation of the old undertaking.;