TMI Blog1977 (4) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the assessment year 1964-65 also?" The assessee entered into a contract with the Government of India, Ministry of Railways, to manufacture and deliver 250 railway wagons at a specified price. Being a new industrial undertaking, the assessee claimed relief under section 84 of the Income-tax Act, 1961. The assessee was granted the relief under section 84 of the Income-tax Act or its earlier counterpart, as the case may be, up to the assessment year 1963-64. When the question of the availability of the relief to the assessee came up for consideration for the assessment year 1964-65, the Income-tax Officer took the view that the manufacture of railway wagons had begun in the calendar year 1958, relevant for the assessment year 1959-60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context of this case runs as follows : "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, 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." The question that arises is as to when the assessee-undertaking began to manufacture or produce articles? From the year in which it began to manufacture or produce articles it would be eligible for the relief for the next four assessment years as provided in cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nspection and despatched on August, 14, 1959. On an analysis of the above, the Tribunal came to the conclusion that the assessee had manufactured only a proto-type wagon in the calendar year 1958 for the approval of the Director of Inspection as per the terms and conditions of the contract and only after getting this approval it went in for the bulk production in the year 1959. Thus, on the basis of this finding which is not challenged before us, we have to consider the question whether the assessee had commenced the manufacture or production of articles in 1958, when the proto-type was produced or in 1959 when the commercial production began. There can be no dispute about the fact that the article that is relevant in the context of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as entitled to the exemption under section 15C of the Indian Income-tax Act, 1922, for the assessment year 1960-61, it was held that production of articles by the assessee had begun only in August, 1955, and that the benefit of the exemption under section 15C arose to the assessee for the first time in the assessment year 1956-57, and the assessee was entitled to the exemption under section 15C for the assessment year 1960-61 also. In coming to the above conclusion, the Bombay High Court observed as follows : "The word 'articles' used in this expression has to be interpreted regard being had to the object with which this section was enacted. Undoubtedly, the object was to encourage establishment of new industrial undertakings and such obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enicillin 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 object with which the section was enacted, then the word, 'articles' in section 15C(2)(ii) can only be interpreted to mean articles which are definitely capable of being used by the assessee-company fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the relief under section 84 for this assessment year also. Our attention was drawn to a decision of a Bench of this court in Madras Machine Tools Manufacturers Ltd. v. Commissioner of Income-tax [1975] 98 ITR 119 (Mad). That was a case on slightly different facts. In that case the assessee had obtained an industrial licence for the manufacture of centre lathes and bench grinders, and a few machines were installed in June, 1957. Power supply was sanctioned only in August, 1958, and thereafter further machines were installed. The accounts of the company which was started on April 11, 1957, were closed for the first time on May 31, 1958. During the first period, a small amount of Rs. 3,397 was shown as receipts by sales and repair char ..... X X X X Extracts X X X X X X X X Extracts X X X X
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