Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | income tax |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Allowed |
Headnote | Income Tax Act, 1922 : Section 15C-lndustrial undertaking established by taking on lease building previously used for other business-Transfer of machinery or plant of very nominal value--Whether the undertaking entitled to claim benefit of exemption. Interpretation of Statutes : Taxing statute--Provision granting incentives for promoting economic growth and development-To be liberally construed. The appellant-Company, which was formed for exploiting the manufacturing licence issued by the Government in favour of its promoter Corporation, entered into an agreement with the promoter Corporation to secure and take over from the promoter Corporation the rights under the licence to manufacture tempo vehicles and to take over its factory as a going concern with its assets, liabilities, machinery, power, quotas etc. Clause 10 of the agreement provided that the transferee, the appellant Company, should be in possession of the premises of the factory and the building on payment of monthly rent as a lessee. Tools and implements valued at Rs. 3,500 of the promoter Corporation, were also transferred to the company. After the take-over, the licence was endorsed by the appropriate authority of the Government of India in favour of the assessee company. In assessment proceedings for the year 1960-61, the appellant Company, the assessee claimed benefit of partial exemption from payment of tax under Section 15C of the Act of 1972 as the Company was a new undertaking. The Income Tax Officer rejected the claim on the ground that though the undertaking was new, it was not entitled to the benefit, as it was formed by splitting up of business already in existence and also by transfer to the new business of the building and machinery previously used in the other business. However, the Income Tax Officer observed that it could not be held, on the facts of the case, that it was a case of reconstruction of the business already in existence. On appeal by the assessee-Company, the Apellate Assistant Commissioner held that taking premises on lease could not be held to amount transfer of the building as the building in which the undertaking was set up was not purchased but taken on lease. only and that since, admittedly, the value of the building could not be included in the capital computation for the purposes of Section 15C, the value of which would be negligible as compared to the value of the assets installed; the assessee was entitled to claim the benefit. In further appeal, the Income Tax Appellate Tribunal agreed with the order of the Appellate Authority and rejected Revenue's contention that since the premises in question were earlier used for the purpose of business, the assessee was disentitled from claiming the benefit as the newly established undertaking must also refer to a building previously used by the assessee himself in any other business'. It held that lease could not be held to be transfer, and that an industrial undertaking to be covered in the mischief of Clause (i) or sub-section (2) of Section 15C should. have been 'formed' by transfer of building, plant or machinery, which was substantial and prominent in the formation of the undertaking; in other words, the part played by such transfer should have been such that the industry without it could not have come into being, and that it could not stand to reason that a big industrial undertaking should be denied the benefit of Section 15C, only because it took the business premises on lease or used its implements and tools worth a small amount previously used for the purposes of business. On a reference made by the department, the High Court answered the question of law raised by the department in its favour and against the assessee. Hence the appeals by the assessee; On the question whether the assessee was entitled to claim partial exemption from payment of tax under Section 15C of the Income Tax Ac:t, 1922 on profits and gains derived from an ifidustrial undertaking established in a building taken on lease used for other business, and whether the assessee-Company, which had been found by the Tribunal, to be a new Company, could be denied the benefit as visualised in Section 15C(1) because of operation of clause (i) of sub-section (2). |
Judge | Hon'ble Mr. Justice R.M. Sahai |
Neutral Citation | 1992 INSC 125 |
Petitioner | Bajaj Tempo Ltd., Bombay |
Respondent | Commissioner Of Income Tax, Bombay City-iii, Bombay |
SCR | [1992] 2 S.C.R. 765 |
Judgement Date | 1992-04-24 |
Case Number | 1211 |
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