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Issues Involved:
1. Entitlement to relief under Section 84 of the Income-tax Act, 1961, for the assessment years 1966-67 and 1967-68. 2. Legality of the Tribunal's decision to remit the matter back to the Income-tax Officer for recomputation of the relief. Issue-wise Detailed Analysis: 1. Entitlement to Relief under Section 84 of the Income-tax Act, 1961: The assessee, a public limited company incorporated on April 12, 1962, for manufacturing starters and switches used in fluorescent lamps, claimed relief under Section 84 of the Income-tax Act, 1961, for the assessment years 1966-67 and 1967-68. The claim was based on the acquisition and installation of new machinery. The Income-tax Officer rejected the claim, stating that the factory commenced production on June 1, 1962, using old machinery, and thus did not satisfy the conditions for Section 84. The Appellate Assistant Commissioner upheld this decision. The Income-tax Appellate Tribunal found that: - The machinery purchased from M/s. Parmanand Maneklal Pvt. Ltd. was previously used. - The land and building purchased from M/s. Equitorial Pvt. Ltd. were not previously used. - The assessee was not entitled to the benefit in 1962 as the value of the previously used transferred asset exceeded the statutory percentage. - In the assessment years in question, the total value of the transferred machinery fell below the statutory percentage, entitling the assessee to relief. - The alternative contention of the assessee was not acceptable as the manufacturing activity commenced in 1962. The Tribunal remitted the matter back to the Income-tax Officer for recomputation of the relief, considering the observations and the decision in Commissioner of Income-tax v. Elecon Engineering Co. Ltd. [1976] 104 ITR 510. The High Court held that the legislative intent behind Section 84 was to provide a "tax holiday" to newly established industrial undertakings, encouraging substantial investment of new capital. The court emphasized that the condition in Section 84(2)(ii) read with the Explanation to sub-section (3) must be satisfied during the five-year period commencing from the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles. The court concluded that the assessee was entitled to relief under Section 84 for the assessment years 1966-67 and 1967-68, as the conditions were met during this period. 2. Legality of the Tribunal's Decision to Remit the Matter Back to the Income-tax Officer for Recomputation: The revenue questioned whether the Tribunal was right in remitting the matter back to the Income-tax Officer for recomputation of the relief. The High Court referred to its decision in Elecon Engineering Co. Ltd.'s case [1976] 104 ITR 510 (Guj), which covered the controversy. The court affirmed the Tribunal's decision, stating that the recomputation should consider the observations made by the Tribunal and the High Court's decision. Conclusion: The High Court answered both questions in the affirmative, in favor of the assessee and against the revenue. The Commissioner was directed to pay the costs of both references to the assessee.
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