1976 (11) TMI 6 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to relief u/s 15C of the Indian Income-tax Act, 1922.
2. Interpretation of the term "transfer" in the context of s. 15C.
3. Nature of the agreement between the assessee-company and Progressive Chemical Corporation Private Ltd.

Summary:

1. Entitlement to Relief u/s 15C:
The primary issue was whether the assessee-company was entitled to the relief contemplated u/s 15C of the Indian Income-tax Act, 1922. The ITO initially granted the rebate for the years 1960-61 and 1961-62. However, the Commissioner, using his powers u/s 33B, withdrew this relief, arguing that the assessee-company was not entitled to it due to a transfer of assets from Progressive Chemical Corporation Private Ltd. The Tribunal later reversed the Commissioner's decision, restoring the ITO's original order.

2. Interpretation of "Transfer" in s. 15C:
The court examined the meaning of "transfer" in the context of s. 15C. Referring to the case of Capsulation Services Pvt. Ltd. v. CIT [1973] 91 ITR 566 (Bom), it was established that "transfer" should not be restricted to physical transfer but should include any conveyance by which the assessee obtains a property as its own asset. The court rejected the revenue's argument that any physical transfer of assets would disentitle the assessee from exemption under s. 15C and also rejected the Tribunal's view that only a transfer of ownership would have such a consequence.

3. Nature of the Agreement:
The court analyzed whether the agreement between the assessee-company and Progressive amounted to a lease or a licence. The agreement allowed the assessee to use Progressive's factory and machinery, but Progressive retained control and continued using the premises for its purposes. The court noted that the agreement did not create an interest in the property for the assessee but was merely a licence to use the property. The court referred to the definitions and distinctions between a lease and a licence, emphasizing that the substance of the agreement and the intention of the parties were crucial. The agreement did not confer exclusive possession to the assessee, and Progressive retained significant control over the premises.

Conclusion:
The court concluded that there was no transfer of any building or machinery to the assessee-company, and thus, the assessee was entitled to the relief u/s 15C. The question referred to the court was answered in the affirmative and in favor of the assessee. The revenue was directed to pay the costs of the reference to the assessee.