9911796707
TMI Blog1976 (11) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ovt. of India. The company proposed to carry on its business in collaboration with a well-known German concern, viz., M/s. Farbenfabriken Bayer A. G., Leverkusen, West Germany. On the formation of the company and the subsequent grant of a licence to carry on the business by the Government, the assessee-company investigated into the possibility of immediately starting the business. Due to difficulties in obtaining land and construction materials as also to save time, the assessee decided to enter into an agreement with another company called the Progressive Chemical Corporation Private Ltd. (hereinafter referred to as Progressive ")." Progressive " had its own premises and machinery and at those premises it was carrying on the business of manufacture of some chemicals. A draft agreement was drawn up between " Progressive " and the assessee-company and, although it was not executed, it was on the basis of the terms and conditions thereof that the assessee subsequently carried on its business in the manufacture of chemicals in the factory premises belonging to " Progressive ". As a matter of fact, on 26th September, 1960, the draft agreement with " Progressive " was placed before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithdrawn and the assessments enhanced Pro tanto. By its letter dated 4th January, 1963, the assessee-company objected to the Commissioner making the proposed revision and by the said letter the relevant facts pertaining to the incorporation, formation and the activities of the assessee-company were set out. It was also pointed out that because of the difficulties in obtaining land and cement for the construction of new premises an ad hoc arrangement with " Progressive " had been entered into. In the said letter, it was contended that the assessee's undertaking was a completely new one, that the company had not purchased the premises of " Progressive " or its plant and machinery and that the arrangement contemplated was a leave and licence agreement. It was, accordingly, submitted that there was no transfer of the building, plant and machinery belonging to " Progressive " to the assessee-company and, therefore, the assessee-company was entitled to the benefit of the provisions of s. 15C. The Commissioner, after considering the submissions of the assessee, held by his order dated 4th February, 1963, that the entire profits and gains of the assessee-company for these two years were li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w business of building previously used in any other business " occurring in s. 15C(2)(i) ? It had been contended before the Division Bench by the assessee that even if the word " transfer " was capable of being construed in a broader sense for the purposes of this section, it could only mean the transfer of ownership of a building and not when rights other than those of ownership in a building were transferred. It was further submitted that in no event the creation of a monthly tenancy could be regarded as transfer within the meaning of the said section of the Indian I.T. Act, 1922. These submissions were not accepted and Kantawala J. (as he then was) speaking for the Bench went on to observe as follows (p. 574): " The next contention on behalf of the assessee was that the words transfer to a new business of building implied that there is a transfer of ownership of the building. The submission was that if a right or interest in or to a building, other than that of ownership, was transferred, then it cannot be regarded as falling within the ambit of these words. The argument was that when a monthly tenancy is created the entire bundle of rights which go to constitute ownership are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to say : " If the building was taken on licence, then there was no transfer of building and in such a case an industrial undertaking, though it may be liable to pay compensation, will not be deprived of the relief granted by sub-section (1) of section 15C. However, if a right or interest therein in the nature of a tenancy right was created, the relief granted by sub-section (1) was taken away. " As far as this court is concerned, therefore, the question is now decided. It is not possible to accept the submission made by the revenue that any physical transfer of the assets of another concern would disentitle the assessee from exemption under s. 15C, nor would it be possible to accept the submission of the assessee, which found favour with the Tribunal, that such consequence would only follow if there was transfer by way of transmission of ownership. The question that remains to be determined is then whether there has been transfer in favour of the assessee-company of any interest in the property of " Progressive "? It was submitted by Mr. Dastur appearing on behalf of the assessee that having regard to the terms of the agreement, which was not executed but in fact was acted upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in whether a document creates a licence or lease, the substance of the document must be preferred to the form; (2) the real test is the intention of the parties whether they intended to create a lease or a licence; (3) if the document creates an interest in the property, it is lease ; but if it only permits another to make use of the property, of which the legal possession continues with the owner, it is a licence; and (4) if under the document a party gets exclusive possession of the property, 'prima facie', he is considered to be a tenant; but circumstances may be established which negative the intention to create a lease judged by the said tests, it is not possible to hold that the document is one of licence. Certainly it does not confer only a bare personal privilege on the respondent to make use of the rooms. It puts him in exclusive possession of them, untrammelled by the control and free from the directions of the appellants. The covenants are those that are usually found or expected to be included in a lease-deed. The right of the respondent to transfer his interest under the document, although with the consent of the appellants, is destructive of any theory of licence. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said sheds and structures and take over at break-up value the same on payment of the breakup value thereof which may be agreed upon by and between the parties thereto ....... 8. Notwithstanding anything herein contained it is hereby agreed that the licensor shall be entitled at any time during the continuance of these presents to put up on the vacant part of the said premises any sheds, structures, rooms or other constructions as the licensor may deem fit as well as to sub-let, assign or part with possession of the said vacant premises with or without such new construction put up thereon by the licensor as aforesaid as also to sell any part of the machinery mentioned in the Second Schedule hereunder written." If these are considered along with the obligations cast on the assessee company in cl. 6(e) of the draft agreement, it would seem that the assessee company has not been given any unfettered right in the vacant portion of land or pertaining to the factory, but that such right is subject to the effective control of " Progressive ". Even as far as the factory and the machinery are concerned, cls. 3 and 4 have to be read together and the intention of the parties has to be g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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