TMI Blog1980 (9) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that the assessee could not be termed as a new industrial undertaking within the meaning of s. 84 of the I.T. Act, 1961. In coming to this decision, he also relied on the decision of the Tribunal for the assessment year 1961-62 in the case of this very assessee. The assessee took the matter in appeal and the AAC following the decision of the Tribunal for the earlier year held that relief under s. 84 was admissible to the assessee. He, accordingly, directed the ITO to allow the necessary relief as claimed by the assessee under s. 84. Thereafter, the matter was taken in appeal before the Tribunal by the revenue and at that stage, the attention of the Tribunal was drawn to the decision of the Bombay Bench of the Tribunal in the case of this very assessee for the assessment year 1961-62. This decision was also followed by the Tribunal in respect of this very assessee for the assessment years 1963-64, 1964-65 and 1965-66. It was pointed out to the Tribunal that the facts stated in the order of the Tribunal relating to the assessment year 1961-62 would govern the facts of the case in the instant case also and, following that decision, the Tribunal upheld the decision of the AA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of a building, machinery or plant previously used for any purpose... " Clauses (iii) and (iv) of sub-s. (2) of s. 84, as it stood then, are not material for our purposes. It may be pointed out that with effect from April 1, 1967, that is, for the assessment year 1967-68 onwards, the second proviso to sub-s. (2) of s. 84 was in these terms : " Provided further that the condition in clause (ii) shall be deemed not to have been contravened if the industrial undertaking is set up in rented premises. " It may further be pointed out that ss. 81 to 85C were deleted by the Finance (No. 2) Act of 1967, with effect from April 1, 1966, and in place of s. 84, s. 80J was enacted providing for the same type of relief but instead of the word " relief " the word " deduction " was used in s. 80J and the second proviso to sub-s. (4) of s. 80J provided: ".. ...... where any building or any part thereof previously used for any purpose is transferred to the business of the industrial undertaking, the value of the building or part so transferred shall not be taken into account in computing the capital employed in the industrial undertaking." Thereafter, s. 80J was further amended with eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new business of building, machinery or plant used in a business which was being carried on before April 1, 1948." The Supreme Court agreed that it was not possible to exclude any new industrial undertaking other than the three categories mentioned above. The case before the Supreme Court in Textile Machinery Corporation's case [1977] 107 ITR 195 was of type No. (2) mentioned above, namely, that the new industrial undertaking of the assessee should not be formed by the reconstruction of a business already in existence and in that context it mentioned positively that the new industrial undertaking must produce result, that is to say, it has to manufacture or produce articles at any time within a period of 13 years from April 1, 1948. The further requirement under sub-s. (2) is with regard to the personnel in the undertaking, namely, that ten or more workers have to work in the manufacturing process carried on with the aid of power or twenty or more workers have to carry on work without the aid of power. The above element with regard to the number of workers engaged in the undertaking would go to show that even small industrial undertakings, newly started, are within the exemption c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaking must not be formed by the splitting up of the business of the assessee already in existence nor must it be formed by reconstruction of the business of the assessee already in existence. The words " of the assessee " have been read into this section by the Supreme Court in order to give effect and substance to the provisions of the section and to interpret the section in the light of the object with which the section was enacted. So far as the word " reconstruction " was concerned, the Supreme Court approved of the following passage from the decision of Buckley J., in In re South African Supply and Cold Storage Co. [1904] 2 Ch 268 (Ch D) in company matter: " 'What does " reconstruction " mean? To my mind it means this. An undertaking of some definite kind is being carried on, and the conclusion is arrived at that it is not desirable to kill that undertaking, but that it is desirable to preserve it in some form, and to do so, not by selling it to an outsider who shall carry it on-that would be a mere sale-but in some altered form to continue the undertaking in such a manner as that the persons now carrying it on will substantially continue to carry it on. It involves I th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e [1977] 107 ITR 195 (SC) is concerned. We may point out that at p. 207 of the report in Textile Machinery Corporation's case [1977] 107 ITR 195 (SC), Goswami J., speaking for the Supreme Court, has approved, inter alia, the decision of this High Court in Nagardas Bechardas Brothers P. Ltd. v. CIT [1976] 104 ITR 255. In Nagardas Bechardas Brothers P. Ltd. v. CIT, a Division Bench of this High Court has considered the principle and object underlying the provisions of s. 15C of the 1922 Act and s. 84 of the 1961 Act which was replaced by s. 80J of the same Act. At p. 260 of the report it has been pointed out : " The object of the legislature in providing for the concession contemplated by section 84 is obviously to encourage new industrial undertakings so that production of a particular type would increase. This object is achieved even if a new undertaking is established by a person who is already in the line. Therefore, to reject the claim to such concessions of the persons who are already in the line on the narrow ground that the establishment of the new unit is a mere 'reconstruction' of their existing business, without taking into consideration the nature of the existin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of the previously existing business of the assessee. Thus, so far as the first two clauses are concerned, the only conclusions possible looking to the object of the Legislature and the words used by the Legislature in the relevant provisions laying down the conditions then obtaining regarding s. 84, are that in the first two conditions the previously existing business must be of the assessee himself. Similarly, the previously existing business which is resuscitated or reconstructed or which is being split up must be of the assessee himself. If that is so, the position is very clear, namely, that so far as the third condition mentioned at p. 202 is concerned, namely, that the new industrial undertaking of the assessee should not be formed by the transfer to the new business of building, machinery or plant used by another prior to April 1, 1948, must apply in the context of the previous business being carried on by the assessee himself. These words must be held to take colour from the context in which they are appearing. As regards the question of the building where a new business or any existing business is being carried on, it must be pointed out that because of extreme sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision reinforces the conclusion that we are arriving at and that which was required to be reached as a result of interpretative provision has now been made specifically clear by the Legislature by making a suitable provision in that behalf. In Income-tax Reference No. 174 of 1975, decided on August 12, 1980 [Monogram Mills Co. Ltd. v. CIT (since reported in [1982] 135 ITR 122 (Guj)], the relevant decisions regarding the effect of the subsequent legislative exposition have been considered by this court. Following the decision in that case and for the reasons recorded in that decision it is clear that the Tribunal was right when it came to the conclusion that the assessee had not contravened cl. (ii) of sub-s. (4) of s. 84 and that he was entitled to obtain relief it was seeking for. It may be pointed out that Mr. Raval for the revenue has drawn our attention to a number of decisions of other High Courts and he has contended that in view of those decisions we should hold that in the instant case the assessee had contravened condition No. (ii) set out in s. 84, subs. (4), as it stood at the relevant time. He has especially relied upon the decision of the Bombay High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bombay High Court has pointed out that the I.T. Act being an all India statute, uniformity in the construction of its statutory provisions is eminently desirable and the considered opinion of any other High Court should be followed unless there are overriding reasons for taking a divergent view. With utmost respect we are in full agreement with the sentiments expressed in this decision but we find that there are overriding reasons, namely, the decision of the Supreme Court in Textile Machinery Corporation's case [1977] 107 ITR 195, which compel us to take a view different from the view taken by the Bombay High Court in the case of the assessee in CIT v. T.Maneklal Mfg. Co. Ltd.[1978] 115 ITR 725(Bom). We may also point out that amongst the decisions of other High Courts, there is the decision of the Calcutta High Court in CIT v. Sainthia Rice and Oil Mills [1971] 82 ITR 778, which has taken the same view of the provisions of the conditions laid down in s. 15C of the Act of 1922 as we are taking in the instant case. It is true that in Chaturvedi's Book, Vol. II, at p. 1228, and in Palkhivala Kanga's Volume, 7th Edn., at p. 679, of the first volume, the decisions of different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be granted if the claim of the assessee to that relief is found to be justified. Under these circumstances, in view of the decision regarding the correct legal approach and correct principles which flow from the decision of the Supreme Court in Textile Machinery Corporation's case [1977] 107 ITR 195, it must be held in the instant case that on the facts as found in this case, namely, that plant and machinery were new and that only the company had taken the premises on lease for office purposes from a portion of the Bank of Baroda building which had been previously used by someone else and similarly it had taken a portion of Laxmi Woollen Mills' estate where it set up its factory and in the earlier years someone else had used that portion of Laxmi Woollen Mills' estate for his own purposes, cannot stand in the way of the assessee in the instant case once it is found that what it had set up was a new industrial undertaking of its own by installing new plant and machinery. It was entirely a new business of its own and it had invested capital for the purposes of that new business or new undertaking. Under these circumstances, the requirements of s. 84 and the object of granting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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