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TMI Blog1973 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 allowed 23,18,515 ----------------- Loss on account of unabsorbed depreciation C/F 10,80,729 ----------------- 1958-59 Business income 48,54,243 Less : Depreciation allowed 18,50,111 --------------- 30,04,132 Less : Loss of 1955-56 allowed to be set off un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 product. He took the view that as soon as the assessee-company started manufacturing crude penicillin it could be said that the assessee began to manufacture or produce articles, viz , penicillin, though the actual finished products took some time to come into existence. The Accountant Member, however, disagr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking ; (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 the capital employed in the undertaking. Appropriate rules have been made for computing the capital employed. Relief under this section is available for the first five years after production commences. The question that arises for consideration in this case depends upon the correct interpretation of the expression " ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 be difficult to take the view that the assessee-company has begun to manufacture or produce articles, meaning thereby articles which will ultimately be useful for manufacturing or producing finished products with the object of selling for which the assessee-company was incorporated. In our view, if regard be had to the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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