A new industrial undertaking is not 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 if the value of the transferred machinery or plant is a small fraction of the total expenditure involved in the setting up of the new unit.

( 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,. Commissioner of Income-tax v. Indian Aluminium Co. Ltd. ,. Commissioner of Income-tax v. Orient Paper Mills Ltd. ,. Commissioner of Income-tax v. Gaekwar Foam and Rubber Co. Ltd. , [1959] 85 ITR 662 (Bom ). Rajeswari Mills Ltd. v. Commissioner of Income-tax, [1963] 50 ITR 29 (Mad ). and Commissioner of Income-tax v. Ganga Sugar Corporation Ltd. ,

( 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 ev