RAMANUJAM J.

The original assessments of the assessee-company for the years 1965-66 and 1966-67 were completed on October 31, 1966, and April 13, 1967, respectively. Later, the ITO reopened the assessments under s. 147(b) of the I.T. Act, 1961, and completed the reassessments on May 8, 1969. The assessment for the year 1967-68 is an original assessment which was completed on September 2, 1969. In the first two assessments, the ITO had allowed the claim of the assessee to relief under s. 84 in respect of Rubber Reclamation Factory. Later, in his reassessments, the ITO had held that the assessee was not entitled to the relief under s. 84 on the ground that the profits of the Rubber Reclamation Division had arisen from working of machineries not exclusively owned by the assessee and that of the total value of the machinery employed in the Division, not less than 20% was of the machinery taken on lease from Messrs. Rubber Products Company, Coimbatore, which had used these machineries previously in its own business. According to the ITO, the assessee was not entitled to any relief at all under that section in respect of the profits in respect of the Rubber Reclamation Division. For the same reason, he disallowed the relief claimed by the assessee in the original assessment dated September 2, 1969, for the year 1967-68 The assessee appealed to the AAC who found that the Rubber Reclamation Division was formed along with the Chain Division during 1960, that the land was purchased on November 9, 1959, that the construction of the building was started in 1961, and completed stage by stage, that the application for electricity was made on September 1, 1960, that the transformer was energised on February 21, 1962, that the letter from the assessee to the Superintending Engineer also indicated that the factory had commenced production with effect from August 1, 1962, that some of the machineries had been purchased on June 25, 1962, September 26, 1962 December 12, 1962, and December 30, 1962, and that the formal inauguration had also been done on February 12, 1963. On these facts, the AAC held that the Rubber Reclamation Division was commenced on February 12, 1963, and that as the second-hand machinery was not transferred to the Rubber Reclamation Division at the time of its formation, the assessee was entitled to relief under s. 84The Revenue took the matter in appeal to the Tribunal. The Tribunal held that normally the formation of the company will include purchase of the land, construction of the factory building, installation of the machineries and on completion of these stages, the company can be taken to have been set up. The Tribunal further held that the Rubber Reclamation Unit was formed by the transfer of the machines previously used and, therefore, the condition in s. 84(2)(ii) was not satisfied and, therefore, the assessee was not entitled to claim relief under s. 84. In this view, the Tribunal allowed the departmental appeal. Aggrieved by the order of the Tribunal, the assessee has sought and obtained a reference on the following two questions

"1. Whether, on the facts and in the circumstances of the case, there was transfer within the meaning of section 84(2)(ii) of machinery by Rubber Products Company, Coimbatore, to the new industrial undertaking of the assessee under the agreement dated April 1, 1963, for the assessment years 1965-66, 1966-67 and 1967-68 ?

(2) Whether, on the facts and in the circumstances of the case, the assessee was not entitled to relief under section 84 merely because some machinery whose value was not below 20% of the total machinery had been used by Rubber Products Company of Coimbatore prior to the agreement dated April 1, 1963, for the assessment years 1965-66, 1966-67 and 1967-68 ?" *

For a proper disposal of this reference, it is necessary to consider the scope and object of s. 84 which is the predecessor of the present s. 80J. The said s. 84, so far as relevant for the purpose of this c