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Issues involved: Interpretation of section 15C of the Indian Income Tax Act, 1922 regarding partial exemption for industrial undertakings formed by transfer of buildings previously used in other businesses.
Judgment Summary: The High Court of Bombay considered a case where an assessee claimed partial exemption under section 15C of the Income Tax Act for setting up a factory in leased premises previously used by other businesses. The Income Tax Officer (ITO) initially rejected the claim, but the Appellate Authority Commission (AAC) overturned this decision. The Income Tax Appellate Tribunal then ruled that the building used must have been previously used by the assessee and that a lease did not qualify as a transfer under section 15C(2)(i). The Tribunal referred the matter to the High Court, questioning the interpretation of the provision. The High Court analyzed previous judgments and held that the transfer of a building to a new business need not be from the assessee's own previous business, but could include buildings used by others. The Court emphasized that the word "transfer" should be given its normal meaning, encompassing cases where a building is leased for a new business. The Court also noted that the value of the transferred asset, in this case, being a lease, was not a determining factor for claiming exemption under section 15C. The Court distinguished a previous decision where it was held that the importance or essentiality of the transferred assets should not affect the eligibility for exemption under section 15C. The Court reframed the questions raised by the parties to clarify the interpretation of the provision. Ultimately, the Court ruled that the building need not have been previously used by the assessee, and a lease could qualify as a transfer under section 15C(2)(i), upholding the Tribunal's decision in favor of the revenue. In conclusion, the Court answered the reframed questions, confirming that a building need not have been used by the assessee previously, and a lease could constitute a transfer under section 15C(2)(i). Each party was directed to bear their own costs in the matter.
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