Dipak Kumar Sen, J.
1. The facts in the present proceedings which have been found or admitted are as follows :
2. N. Guru Investment Pvt. Ltd., Calcutta, the assessee, a private limited company, started to function in the assessment year 1966-67, the accounting year being the calendar year 1965. The assessee was incorporated in May, 1964, and had taken over an existing business on the 1st January, 1965. The said business consisted of manufacture of precision instruments and had been started in 1961. Under a deed dated the 2nd November, 1965, the business was taken over by the assessee with retrospective effect as from the 1st January, 1965.
3. In its assessment to income-tax the assessee claimed benefit under s, 84 of the I.T. Act, 1961, as it stood at that time, on the ground that it was a newly established industrial undertaking. The ITO found that the assessee had been formed by reconstruction of a business already in existence and that the previous proprietor of the business and his nominees held substantial shares in the assessee-company. The other shareholders of the assessee were also the creditors of the previous business. He, therefore, held tljat the assessee was not entitled to the benefits under the said Section 84.
4. On an appeal preferred by the assessee against this decision, the AAC held that as the business had been started in 1961, the accounting year being the fifth and the final year for claims under Section 84 the ITO should allow relief under the said section if the other conditions laid down in the said section were satisfied. The contention of the assessee that there was no reconstruction of the business when the assessee took over the same was rejected.
5. The assessee preferred a further appeal to the Tribunal. The Tribunal found that the assessee had been constituted with the purpose, inter alia, of taking over an existing business and that it had acquired all rights therein including licences, tenancy rights, right to use the trade name as also all the assets and liabilities thereof. The substance of the transaction between the assessee and the previous unit of business was a sale and it could not be said that the same business was being carried on substantially by the same persons. The Tribunal concluded that the taking over of the business by the assessee did not amount to reconstruction of a business already in existence. The Tribunal held that as the AAC had allowed the benefit under the said section for the year of assessment it was not necessary to go further into the question whether such benefit should be allowed to the assessee in subsequent years. The Tribunal observed that the ITO would have to consider the question in future years de novo on the basis that there was no reconstruction of the business already in existence.
6. On the application of the CIT, West Bengal-IV, Calcutta, under Section 256(1) of the I.T, Act, the Tribunal has drawn up a statement of case and has referred the following questions of law to this court for its opinion:
'1. Whether, on the facts and in the circumstances of the case and on a proper construction of section 84(2)(i) of the Income-tax Act, 1961, the Tribunal was right in holding that the industrial undertaking of the assessee was not formed by the reconstruction of a business already in existence -
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in directing that for subsequent years the Income-tax Officer would have to proceed on that basis ?'
7. To appreciate the controversy involved it is necessary to refer to Section 84 as it stood at the relevant time :
'84. Income of newly established industrial undertakings or hotels.--(1) Save as otherwise hereinafter provided, income-tax shall not be payable by an assessee on so much of the profits and gains derived from any industrial undertaking or business of a hotel or from any ship, to which this section applies, as does not exceed six per cent. per annum on the capital employed in such undertaking or business or ship, computed in the prescribed manner.
(2) This section applies to any industrial undertaking which fulfils all the following conditions namely:
(i) it is not formed by the splitting up, or the reconstruction, of a business already in existence ;
(ii) it is not formed by the transfer to a new business of a building, machinery or plant previously used for any purpose ;.....'
8. The Tribunal has found as a fact that the transaction of the assessee by which it acquired the existing business did not amount to a reconstruction of the business already in existence. This finding of fact has not been challenged by the revenue. Mr. Suhas Sen, learned counsel for the revenue, therefore, tried to fall back on Clause (ii) of Section 84(2) and sought to contend that in the instant case the industrial undertaking of the assessee had been formed by transfer to a new business of buildings, machinery and plant previously used. This aspect of the matter was never raised on behalf of the revenue before the Tribunal. In any event, by reason of the language in which the question No. 1 has been framed it is in our view not open to the revenue to agitiate this question in the present reference. Accordingly, we answer question No. 1 in the affirmative and in favour of the assessee.
9. So far as question No. 2 is concerned, Mr. Sen submitted that in view of the aforementioned observations of the Tribunal in its order as to how the ITO would deal with the claim of the assessee under Section 84 in future, he will not press for an answer to the same. Accordingly, we decline to answer question No. 2.
10. The reference is disposed of accordingly. There will be no order as to costs.
Bimal Chandra Basak, J.
11. I agree.