1. In this Reference the real question which this Court is called upon to decide is from what date can the business of the assessee be said to have been set up for the purposes of S. 3(1)(d) of the Income-tax Act, 1961. In other words, since when can the assessee's business be said to be established and was ready to commence the manufacturing activities. But the necessary facts and a finding on a very important and relevant aspect of the matter does not appear in the Tribunal's order from out of which the Reference has arisen, and that is why we are required to send the matter back to the Tribunal by way of calling a finding on that relevant aspect.
2. Admittedly, the assessee's business was to manufacture industrial solvents; the construction of the building and erection of plant and machinery were all over by the end of Dec. 1960 or Jan. 1961. In Jan. 1961 the assessee had acquired 5,000 gallons of denatured spirit alcohol as a raw product for the production of ether. It also appears that on 42 different occasions during the relevant accounting year, the assessee company had charged its plant and machinery with 4,980 gallons of denatured spirit and attempted to get the finished product; but as to what happened to these trials and upto what period of time they were unsuccessful and since when they became successful, the finding of the taxing authority and that of the Tribunal are not very clear. The I.T.O. has stated in his order that because of certain defects in the plant and machinery in respect whereof the assessee company had correspondence with Shri Ram Institute of Delhi, the experts who had advised in the installation of the machinery, those attempts ended in failure. The I.T.O. has referred to a letter dated 26th July 1961 from the Managing Director of the Assessee Company to Shri Ram Institute, wherein the assessee company stated that upto the date of the writing of the letter sufficient trials had been given, but the trials resulted in failure. The ITO has also referred to another letter dated 15-9-1961 written by the Managing Director of the assessee company to Shri Ram Institute wherein the Managing Director wrote that during the first trial on 6th Sept. only two percent conversion was obtained and subsequent trial on 9th September gave 52 to 55% conversion. The accounting year of the assessee ended on 30th September, 1961, and from this correspondence the Income Tax Officer has drawn the inference that the trials which were commenced from the middle of March and continued right upto September 1961, had proved unsuccessful. The Appellate Assistant Commissioner in his order has observed that the plant was charged with 200 gallons of spirit on 5-2-1961 for trial production; that the first few trials, it was admitted, were unsuccessful, and that, therefore the assessee company had to contact the suppliers of the plant and machinery as well as the Secretary, National Research Corporation of India, with a view to over some the initial difficulties. So far as the Tribunal is concerned, it has merely recorded a finding to the effect that the Company got the finished product, though not in a marketable state. It is true that the question whether the trials were successful or unsuccessful the in direction of producing finished goods of marketable quality may not assume much significance, but it cannot be disputed that it is very material to know as to from which exact date or month the assessee could be said to be in a position to produce finished products irrespective of whether the products were marketable or not so as to claim that it had set up its business in the sense that it was ready to commence production. On this aspect of the matter neither the A.A.C. nor the Tribunal has given any finding nor is any material or evidence on record referred to, and as stated earlier, the Tribunal has merely recorded a finding to the effect that 'The Company got the finished product but it was not in a marketing state' without reference to any exact date or month when the Company got sizable or reasonable quantity of finished products. We would not have sent the matter back if there was material available on record from which we ourselves could come to any particular conclusion on this aspect; but there is no material on record before us which can throw any light on this aspect of the matter and, therefore, it has become necessary for us to send the matter back to the Tribunal. The matter is, therefore, remanded back to the Tribunal with a direction that the Tribunal should submit a supplementary statement of case recording its finding as to from what date or month between February 1961 and September 1961 the assessee Company had obtained reasonable quantity of finished products irrespective of whether they were in a marketable state or not. The Tribunal should also annex copies of material on which it will be recording its finding on the point. As this is an old reference of 1967, the submission of the supplementary statement of case should be expedited by the Tribunal and the same may be submitted to this Court within three months from the date of the receipt of papers by the Tribunal.