TMI Blog1973 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... tual operations for manufacturing crude pencillin as from December 12, 1954. In the profit and loss account for the year ending March 31, 1955, it showed a closing stock of crude Rs. 16,727. The first samples of crude pencillin which were manufactured by the assessee-company on December 14, 1954, were required to be sent to U.S.A. and U.K. for obtaining certificates as to their qualities. The requisite certificates were received some time in June, 1955, and the assessee-company started manufacture of sterile penicillin from August, 1955, onwards. It is not disputed that sterile penicillin is the only product which can be sold in the market. It will be useful to refer to the total income of the assessee-comapany for the assessment years 1955-56 to 1959-60, and the said figures of total income are determined as under : Rs. 1955-56 Business loss 3,30,422 Less : Depreciation 7,00,174 ---------------- Total Loss C/F 10,30,596 ---------------- 1956-57 Business income 4,77,688 Less : Depreciation allowed 36,91,322 ----------------- Loss on account of unabsorbed depreciation C/F 32,13,634 ----------------- 1957-58 Business income 12,37,786 Less : Depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61 also. On a further appeal by the revenue before the Tribunal, the Judicial Member of the Tribunal and the Accountant Member were unable to agree as regards the conclusion. The Judicial Member was of the view that the assessee-company was not entitled to the benefit under the provisions of section 15C in the assessment year 1960-61, while the Accountant Member was of a contrary view. Ultimately, the matter was referred to the President, who concurred in the view that was taken by the Accountant Member. The Judicial Member in his order, inter alia, held that it cannot be denied that when the assessee-company started to manufacture crude penicillin it began to manufacture or produce penicillin as the process of manufacturing crude penicillin cannot be separated from the process of manufacturing the final product of saleable penicillin, i.e., sterile penicillin. He, therefore, pointed out that it would be difficult to consider the several stages in the manufacture of an article as independent and entirely unconnected operations which have no connection with the finished product. According to him, all the stages constituted only one individual process of manufacture of the finished p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or begins to manufacture or produce, articles in any part of the taxable territories at any time within a period of thirteen years from the 1st day of April, 1948, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking ; (iii) employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power : Provided that the Central Government may, by notification in the Official Gazette, direct that the exemption conferred by this section shall not apply to any particular industrial undertaking . . . . . . . (6) The provisions of this section shall apply to the assessment for the financial year next following the previous year in which the assessee begins to manufacture or produce articles and for the four assessments immediately succeeding." The object of section 15C is to encourage establishment of new industrial undertakings. The profits of the industrial undertaking to which this section applies are exempt from tax to the extent of 6 per cent. per annum on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced by it, it will be idle formality to say that it had started manufacture or production of articles simply because trial products are prepared with a view to verify whether they can be ultimately used in the preparation or manufacture of the final products. It is undoubtedly true that commencement of operations for manufacture of crude penicillin took place on December 14, 1954, and there was some closing stock of crude penicillin at the end of March, 1955, but even the assessee-company itself did not know whether the crude penicillin manufactured or produced by it would at all be useful to them for the production or manufacture of sterile penicillin which is only a saleable product in the market. Facilities for testing crude penicillin are not available in this country and samples were required to be sent to U.S.A. and U.K. with a view to find out its quality. It was only in the month of June, 1955, that a certificate as to the quality of the crude penicillin was received by the assessee-company and regular production was thereafter commenced only from and after August, 1955. If, on testing, the crude penicillin, which was sent for a certificate, was found useless it will b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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