The expression "reconstruction" in Section 15c (2) (i) of the Income-tax Act, 1922, means the reconstruction of a business already in existence and not the reconstruction of a company.

( 1 ) THIS income-tax reference under Section 66 (1) of the Indian Income-tax Act, 1922, refers the three following questions for determination by the court. The questions are :" (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the steel foundry division was an industrial undertaking to which Section 15c of the Indian Income-tax Act, 1922, applied? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the jute mill division set up by the assessee-company was an industrial undertaking to which Section 15c of the Indian Income-tax Act, 1922, applied? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the claim for deduction of wealth-tax paid during the accounting year was admissible in computing the assessee's profits from its business ?"

( 2 ) WE can straightaway dispose of the third question as we find it is already covered by the decision in Travancore Titanium Products Ltd. v. Commissioner of Income-tax, where the Supreme Court held that the amount of wealth-tax paid by an assessee on his net wealth under the Wealth-tax Act, 1957, was not a permissible deduction under Section 10 (2) (xv) of the Indian Income-tax Act, 1922. Following the decision we answer the third question in the negative and in favour of the revenue.

( 3 ) WE are, therefore, left with the first two questions. The Central controversy in these two questions is, about the meaning to be given to the expression "industrial undertaking'' in Section 15c of the Indian Income-tax Act, 1922, and, in particular, the meaning to be given to the words "reconstruction of business already in existence" in Section 15c (2) (i) of the Income-tax Act, 1922. To appreciate the controversy and its different aspects it will be necessary to set out the relevant facts.

( 4 ) THE assessee is the Textile Machinery Corporation Ltd. , which is a heavy engineering concern manufacturing boilers, machinery parts, wagons, etc. The assessment years concerned in this reference are 1958-59 and 1959-60 for which the corresponding accounting years are the calendar years 1957 and 1958, respectively. For its assessments for the years 1958-59 and 1959-60 the assessee claimed exemption of tax under Section 15c of the Income-tax Act, 1922, in respect of the profits and gains derived from its steel foundry division and a similar claim for relief under Section 15c in respect of its profits and gains derived from its jute mill division for the year 1959-60 only. "4. The Income-tax Officer found that the castings made by the steel foundry division were being used mostly by other existing divisions of the assessee itself. According to the Income-tax Officer the assessee was manufacturing some castings which it was previously buying from the market. As no profit could be made on such departmental transfers and as in the opinion of the Income-tax Officer it could not be said that the assessee started a new industrial undertaking which manufactures or produces articles so as to entitle it to relief under Section 15c, he rejected the assessee's claim for both the years. So far as the claim under Section 15c in the jute mill division for the assessment year 1959-60 was concerned, the Income-tax Officer found that out of the total sales of this department of Rs. 13,03,509 sales to the boiler division amounted to Rs. 11,89,812. The raw materials were supplied by the boiler division and after machining and forging the parts were given to the boiler division. The Income-tax Officer's opinion was that this kind of an activity was in the nature of job-work and he considered the jute mill division to be merely an expansion of the existing activities in the heavy engineering concern of the assessee and, therefore, came to the conclusion that the assessee was not entitled to any relief under Section 15c. "

( 5 ) ON appeal by the assessee befo