H. R. KHANNA, C. J.

( 1 ) THIS judgment would dispose of two Income-tax References Nos. I and 17 of 1967 in each of which the following identical question has been referred to this Court by the Income-tax Appellate Tribunal under section 66 (1) of the Indian Income-tax Act, 1922, (hereinafter referred to as the Act) at the instance of the Revenue :-

"whether, on the facts and in the circumstances of the case, the assessee company is entitled to exemption from tax on the profits or gains derived from the plant and machinery installed by it at a cost of Rs. l,10,00,000. 00 under section 15c of the Income-tax Act, 1922?"

( 2 ) REFERENCE No. 1 relates to assessment year 1959-60 whereas Reference No. 17 pertains to assessment years 1960-61, 1961-62 and 1957-58 The assessee in these References is Ganga Sugar Corporation Ltd. and the learned counsel for the parties are agreed that the decision in Reference No. 1 of 1967 would also cover the question which is the subject matter of the other Reference. In the circumstances, we may deal with the facts as given in Reference No. 1.

( 3 ) THE assessee company carles on the business of manufacturing sugar. At the time of its incorporation in 1934 it installed a complete plant for manufacturing sugar, having a daily crushing capacity of 400 tons of sugar-cane. The said plant was operated by steam engine. During the course of the years the assessee company made additions and alterations in the said plant, as a result of which the crushing capacity was increased to 1050 tons of sugar-cane per dav by 1955. In the assessment year 1957-58,, the assessee company installed a new plant for manufacturing sugar with a daily crushing capacity of 4000 tons of sugar-cane. The new plant is operated by electricity. The total cost of the installation of this plant and machinery was of the order of Rs. l,10,00,000. 00. The old building was completely over-hauled and new buildings were constructed for housing this plant. The land on which the new plant was set up had been acquired by the assessee company in 1934. According to the assessee company, scrap and old material worth Rs. 72,617. 00 out of the old factory were used in the construction of the new factory As against that, according to the Revenue articles worth Rs. l,56,352. 00 out of the old factory were used in the new factory. Both the old and the new factories were run simultaneously in the assessment year 1957-58. In the assessment year 1958-59, the old factory was completely scrapped off and only the new factory was run.

( 4 ) THE assessee company claimed the benefit of partial exemption of its income from tax under section 15c of the Act in the assessment year in question. The Income-tax Officer disallowed the claim of the assessee in this respect on the ground that what the assessee had done was to expand its factory by installing new machinery, most of which. he held, was in replacement of the old machinery. It was observed that as the assessee company had not dismantled scrap of the old machinery and that as the business had continued without break since 1948, the assessee company was not entitled to the exemption from lax under section 15c of the Act. The order, of the Income-tax Officer was affirmed on appeal by the Appellate Assistant Commissioner.

( 5 ) THE assessee company preferred further appeal before the Tribunal. The Tribunal held that in order to claim the benefit of section 15c of the Act, it was not essential to show that the industrial undertaking had been newly established.

( 6 ) THE Tribunal referred to the facts of the case and pointed out that the old unit had not been touched at all and entirely a new and self-contained unit run by electricity had been set up. Reference was also made to the fact that both the units had run simultaneously for some time. whereafter, the old unit had been scrapped off.

( 7 ) ON consideration of the facts the Tribunal held that. it was a case of new and distinct industrial undertaking having bee

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