1. The short question in this reference is, whether reconditioned machinery, which has been imported from abroad, is within the ambit of Section 15C(2)(i) of the Indian Income-tax Act, 1922. We are of opinion that it is. The reference relates to the assessment year 1961-62. The assessee, a registered limited liability company, was primarily engaged in the manufacture of certain types of V Belts and other rubber goods used in the textile industry. During the previous year ended March 31, 1961, it started the manufacture of some other industrial rubber goods, such as synthetic rubber coats, aprons, etc., under a separate industrial licence granted to it by the Government. The new unit was run in the name of 'Resilla division'. Separate trading and profit and loss accounts were prepared for these two items of business. The assessee purchased machineries worth Rs. 2,36,885 from an overseas company, which were admittedly second-hand but reconditioned. The assessee incurred an expenditure of Rs. 7,511 as erection charges. The Appellate Assistant Commissioner, who disagreed with the Income-tax Officer, allowed exemption under Section 15C and the Commissioner failed before the Tribunal, The question we are asked to consider at his instance is :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee was entitled to exemption under Section 15C in respect of the Resilla division?'
2. The view of the Appellate Assistant Commissioner was that, though the machinery was second-hand, it was reconditioned and it was, therefore, as much new as any other machinery. He also considered that the plant and machinery were substantially renovated and there was no transfer of any machinery or plant previously used in this country. The Tribunal, we think, rightly sustained that view.
3. Section 15C, which was introduced in 1949, provides for exemption from tax of newly established industrial undertakings. From Sub-section(1) of the section it is clear that the exemption is available in respect of so much of, the profits or gains derived from any industrial undertaking to which the section applies as do not exceed six per cent. per annum on the capital employed in the undertaking computed in accordance with the rules. Sub-section (2) prescribes the conditions for the applicability of the section. The first of them is relevant here which is that the industrial undertaking is not formed by the splitting up or the re-construction of business already in existence or by the transfer to a new business of building, machinery or plant 'previously used in any other business.' The last words within quotation were substituted in 1959 for the words 'used in a business which was being carried on before the first day of April, 1948'. Resilla division is not said to be a business already in existence or was the result of splitting up of any existing industrial undertaking. But what is stated for the Commissioner is that the machinery being second-hand, it was well within the description of machinery previously used in a business. In a sense, no doubt, the machinery could possibly have been used in the United Kingdom from which it was imported. But the finding of both the Appellate Assistant Commissioner as well as the Tribunal is that the machinery was re-conditioned and it was as new as a reconditioned machinery could be. It is not suggested for the revenue that the machinery as reconditioned and before its import into this country was ever used in any business. That will suffice to answer the reference. The Tribunal has gone further and thought that the user of the machinery must also be in any other business carried on in this country. We do not have to decide this point on the particular facts of this case.
4. We answer the question against the revenue with costs. Counsel's fee Rs. 250.