TMI Blog1984 (1) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... ure, the total cost of building, plant and machinery comprised in that plant or industrial unit was ₹ 10,50,997. The admitted position was that out of the aforesaid plant and machinery, plant and machinery of the total written down value of ₹ 2,51,556 was transferred to the said Raipur plant from the Bhandup factory of the assessee and installed in the Raipur plant. During the previous year, relevant to the assessment year 1964-65, additional buildings at a cost of ₹ 1,62,287 were constructed at the said Raipur plant and machinery and plant worth ₹ 45,388 was installed. In this way, the total value of the buildings, plant and machinery in the Raipur plant came to ₹ 12,58,672 in the said previous year. No additions to the plant or machinery or buildings were made during the previous years relevant to the assessment years 1965-66 and 1966-67. In the course of the assessment proceedings, for the assessment year 1964-65 the assessee claimed relief under section 84 of the Act (as it then stood), in respect of the said Raipur plant. The ITO omitted to consider the said claim of the assessee at the time of passing of the assessment order for that year. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'form' used therein. It was urged by him that the said word was not defined in the Act and, hence, it must be given its ordinary meaning, viz., 'put in shape' or 'assumed shape'. It was urged by the revenue that in the year of manufacture, the said Raipur plant must be regarded as having been formed by transfer of old plant and machinery as the value of such old plant and machinery utilised in the Raipur plant exceeded 20 per cent of the total value of the building, plant and machinery used in the said unit. After setting out the relevant provisions of section 84, the Tribunal came to the conclusion that the relief under section 84 in relation to the said Raipur plant could not be available to the assessee for the assessment year relevant to the previous year in which the said undertaking began to manufacture or produce articles and for the four years immediately succeeding. In other words, it was held by the Tribunal that as the said unit began to produce or manufacture articles in the previous year relevant to the assessment year 1963-64, in view of the aforesaid facts the said unit was not entitled to the relief referred to in section 84 in that year and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant, which was previously used and included in the said unit, did not exceed 20 per cent of the total value of the building, machinery and plant comprised in the said unit in the previous year relevant to the assessment year 1964-65 and the two succeeding assessment years, the said unit was entitled to the benefit of the partial tax-holiday afforded by section 84 to the extent set out therein. It was submitted by her that the expression 'formed' used in clause (ii) of sub-section (2) of section 84 could only mean 'composed of' or 'made up of or 'constituted by' and that the question whether the unit had complied with the conditions prescribed for the grant of relief under section 84 had to be considered separately in the year in which the unit in question commenced the manufacture or production of articles as well as in the four succeeding years. 6. The submission of Mr. Joshi, the learned counsel for the department, on the other hand, was that in view of the expression 'formed by' used in clause (ii) of sub section (2) of section 84, the question as to whether the unit in question could be regarded as new unit or whether it was to be regarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business, then, for the purposes of clause (ii) of sub-section (2) and clause (a) of sub-section (3), the industrial undertaking or hotel to which the transfer has been made shall be deemed to have complied with the condition specified therein and the total value of the building, machinery or plant or part so transferred shall not be taken into account in computing the capital employed in the industrial undertaking or hotel. (3A) to (6)****** (7) The provisions of this section shall, in relation to an industrial undertaking, apply to the assessment- (i)for the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or, as the case may be, operate the cold storage plant or plants, and (ii )where the assessee is a co-operative society, for the six assessment years immediately succeeding, and where the assessee is any other person, for the four assessment years immediately succeeding. We may point out that there have been minor differences in these provisions as they stood for the assessment years 1962-63 to 1964-65, and as they stood for the assessment years 1965-66 and 1966-67. However, these are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section, one must construe the said section reasonably in the context of the purpose for which the section has been introduced. It is a well settled canon of construction that the provision relating to exemption must as far as possible be liberally construed and in favour of the assessee provided in doing so no violence was being done to the language used .... (p. 570) 8. Coming now to the case before us, what we have to see is whether the said Raipur unit or plant of the assessee could be said to be a plant, which was not formed by the transfer to a new business of a building, machinery or plant previously used for any purpose, i.e., whether the assessee complied with or fulfilled the condition laid down in clause (ii) of sub-section (2) of section 84. For that purpose the Explanation set out earlier and the provisions of sub-section (7) have to be kept in mind. The facts show that in the year in which the manufacture began, which we propose to refer to as the year of manufacture, the previously used plant and machinery included in the said Raipur plant exceeded the limit of 20 per cent prescribed under the Explanation and, hence, no contention was raised on behalf of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e great importance, because the Explanation contains a deeming provision and, inter alia, provides that where the building, machinery or plant or any part thereof, which has been previously used and transferred to the new business, did not exceed 20 per cent of the total value of the building, machinery or plant used in that business, the condition prescribed in clause (ii) of sub-section (2) is deemed to be complied with. In view of the plain language of sub-section (7), the applicability of the Explanation will have to be considered in the assessment year relevant to the previous year in which the manufacture or production has commenced and the four succeeding assessment years. If this is done in respect of the assessment years 1964-65 to 1966-67, it would be found that the value of the previously used machinery and plant transferred to the Raipur plant, being the new building, did not exceed 20 per cent of the total value of the building, machinery or plant used in that business and, hence, it must be held that the requirements of the Explanation were complied with. The result of this would be that the condition prescribed in section 84(2)(ii) would be deemed to be complied with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s nobody's contention that in the next assessment year also it would still be entitled to get that benefit. This would show that, for example, the applicability of or the compliance with the condition prescribed in clause (iv) of sub-section (2) of section 84 has to be considered in respect of each of the relevant assessment years. Similarly the computation of the benefit which is limited to 6 per cent of the capital employed would have to be done separately in the relevant assessment year being the assessment year in whose relevant previous year the manufacturing commences and in each of the four immediately succeeding years. The exclusion of the value of previously used building, machinery or plant in the computation of such capital would have to be done in respect of each of the said five assessment years. If the applicability of these conditions is to be considered separately for each of the five relevant assessment years, there is no reason why the applicability of the other conditions prescribed in sub-section (2) of section 84 should also not be similarly considered. Even as far as clause (ii ) of sub-section (2) is concerned, let us assume that an assessee in the year i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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