1. The Income-tax Appellate Tribunal has referred, under Section 66(1) of the Indian Income-tax Act, 1922, the following question of law:
'Whether, on the facts and in the circumstances of the case, the factory at Cossipore can be said to have been formed by the reconstruction of business already in existence or by the transfer to it of machinery and plant previously used in any other business so as to fall within the scope of Section 15C(2)(i) of the Indian Income-tax Act, 1922?'
2. In this reference we are concerned with the assessment years 1957-58 to 1961-62. The relevant year ended on 31st October, preceding the relevant assessment years. The assessee was incorporated as a public limited company on June 12, 1945. In the same year it took on lease a factory situated at Hazra Road and started manufacturing switch boards, transformers, etc., and thereafter purchased the said factory in the year 3946 and continued to carry on business therein.
3. In 1956 the assessee started a new factory at Cossipore by purchasing new machinery and plant of the value of over Rs. 6 lakhs and started manufacturing therein the same types of goods as were being manufactured in the factory at Hazra Road. Those two factories were run simultaneously by the assessee for three months and in 1957 the assessee closed down the factory at Hazra Road. Thereafter, the assessee purchased machinery from time to time and installed them at Cossipore factory and the cost of such installations came to about Rs. 39 lakhs on October 31, 1960. As the assessee did not produce proper materials before the Tribunal it was presumed by the Tribunal that the factory at Hazra Road was dismantled by the assessee and its machinery were used at Cossipore factory.
4. For the relevant assessment years the relief claimed by the assessee under Section 15C(1) of the Indian Income-tax Act, 1922, in respect of the factory at Cossipore was disallowed by the Income-tax Officer on the grounds stated in the assessment orders but those grounds were not accepted by the Appellate Assistant Commissioner who, however, dismissed the appeals filed by the assessee on different grounds stated in his orders. The Appellate Tribunal, however, after allowing the appeals filed by the assessee, has referred the above question of law at the instance of the revenue on the facts hereinbefore stated in the statement of the case.
5. On the facts found by the Tribunal it has been contended before us by Mr. B. L. Pal, the learned counsel for the revenue, that the factory at Cossipore was not a new industrial undertaking and it was formed by the reconstruction of the business already in existence at the factory at Hazra Road, for the machinery at Hazra Road factory were used at Cossipore factory and the same types of goods were manufactured in that factory and, therefore, it was merely an expansion ,of the same business and hence the assessee was not entitled to the benefit of Section 15C(1) of the Act,
6. We are concerned with Sub-sections (1) and (2)(i) of Section 15C of the Act in this reference and these two sub-sections have already been considered by our court and the High Courts at Bombay, Madras and Delhi respectively in the cases of Commissioner of Income-tax v. Textile Machinery Corporation, : 80ITR428(Cal) . Commissioner of Income-tax v. Indian Aluminium Co. Ltd., : 88ITR257(Cal) . Commissioner of Income-tax v. Orient Paper Mills Ltd., : 94ITR73(Cal) . Commissioner of Income-tax v. Gaekwar Foam and Rubber Co. Ltd.,  85 ITR 662 . Rajeswari Mills Ltd. v. Commissioner of Income-tax,  50 ITR 29 . and Commissioner of Income-tax v. Ganga Sugar Corporation Ltd., : 92ITR173(Delhi) .
7. Our country needed the development of commerce and the expansion of industry after we became free from the foreign rule. In this background Section 15C(1) of the Act was introduced to. encourage the establishment of new industrial undertakings by giving some tax reliefs to the assessee. This relief is available to each and every new industrial under-laking provided the conditions laid down in Sub-sections (2)ii) and 2(iii) are fulfilled, but it is not available where an industrial undertaking has been 'formed by splitting up, or the reconstruction, of business already in existence or by the transfer to a new business of building, machinery or plant previously used in any other business' as laid down in Subsection 2(i) of Section 15C of the Act.
8. We may briefly summarise here the principles laid down by the above decisions as follows : The terms 'industrial undertaking' and 'formed by the splitting up, or the reconstruction, of business already in existence' should be understood in bread commercial sense from a commonserise point of view and they must be given their 'ordinary commercial meaning' ; manufacture of the same type of goods in an existing undertaking and in a new undertaking is not a determining factor ; the keeping of one account in respect of the old and the new undertaking is of no consequence; the relevant date for determining the question as to whether the new undertaking was 'formed by the splitting up, or the reconstruction of, business already in existence or by the transfer to a new business of building, machinery or plant previously used in any other business' is the date of establishment of the new undertaking ; and the assessee will be entitled to the benefit of section I5C(1) of the Act if the value of the transferred machinery or plant of an existing business to a new industrial unit is 'a small fraction of the total expenditure involved in the setting up of the new unit'.
9. By applying those principles in the facts of the instant reference before us we are to see whether on the relevant date the factory at Cossipore was a new born baby or an old baby with a new jacket. It has been found by the Tribunal that the factory at Cossipore was installed with new machinery of the value of about Rs. 6 lakhs and it was ran simultaneously with the factory at Hazra Road for a few months and, therefore, it was held by the Tribunal that the factory at Cossipore was a new and an independent unit, for it could not be said that it was 'formed by the transfer of the existing machinery'. The Tribunal has also said that 'where the old machinery is an insignificant part of the new unit set up, it will not be proper to say that there has been formation of an industrial undertaking by the transfer of assets of an existing business' and has held that the assessee was entitled to the benefit of Section 15C(1) of the Act, for the value of the machinery at Hazra Road factory was very small compared to the value of the machinery installed at Cossipore factory.
10. We will now advert to the case of Commissioner of Income-tax v. Ganga Sugar Corporation Ltd, There the assessee carried on the business of manufacturing sugar and had a plant which was operated by steam for manufacturing sugar and in 1955 that plant had a crushing capacity of 1,050 tons of sugarcane per day. In the accounting period relevant to the assessment year 1957-58 the assessee installed at a cost of Rs. 11 million a new plant operated by electricity for manufacturing sugar with a daily crushing capacity of 4,000 tons. The old building was completely overhauled and new buildings were constructed for housing that plant on the land which was acquired in 1934. The value of scrap and material of the old unit in the erection of the new plant was a small fraction of the expenditure involved in the setting up of the new plant. Both the old and the new factories were run simultaneously in the assessment year 1957-58 and one account was kept by the assessee and thereafter in the next assessment year the old factory was completely scrapped and only the new factory was run. On those facts it was held by the learned Chief Justice, Mr. Khanna (as he then was),that the new unit was a distinct and separate unit and it was not formed by the reconstruction of the business already in existence and the assesses was entitled to the benefit under Section 15C(1) of the Art.
11. The Tribunal has found that the factory at Cossipore and the factory at Hazra Koad were run simultaneously for some time and no part of the machinery of Hazra Road factory was transferred to Cossipore factory on the relevant date, namely, the date on which the Cossipore factory was established. These two factories were run as separate and independent units for some time. In these circumstances, it cannot be said that the existing business at Hazra Road was transferred to the Cossipore factory on the relevant date. Further, the cost of installation of the Cossipore factory far exceeded the value of the machinery that, were later on transferred to the factory at Cossipore. No doubt, the same type of goods were manufactured in both the factories for some time, but that by itself is of no consequence as said by this court in the case of Commissioner of Income-tax v, Indian Aluminium Co. Ltd. and by Khanna C.J., before whom the assessee maintained one account in respect: of two units of its business, and the assessee before us has done the samething for some lime.
12. In this view of the matter we are unable to accept the contentions of Mr. Pal, and, therefore, our answer to the question referred to this court by the Tribunal is in the negative and in favour of the assessee.
13. In the facts and circumstances of the case, we make no order as to costs.
R.N. Pyne, J.