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TMI Blog1974 (12) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... 15C(1) for the assessment years 1958-59 to 1961-62 in respect of the textile department unit ? (2) Whether wealth-tax payable by the assessee is an allowable expenditure in the computation of the business income under the Income-tax Act ? " Now, as far as question No. 2 which is referred to us at the instance of the assessee is concerned, counsel have stated that the matter is concluded by the amendment made to the Indian Income-tax Act, 1922, by section 4 of the Income-tax (Amendment) Act of 1972 (No. 41 of 1972), and further that the point is also concluded by a decision of this court given on 19th July, 1974, in Income-tax Reference No. 34 of 1965 : Commissioner of Income-tax v. Elphinstone Spg. Wvg. Mills Co. Ltd. [1975] 100 ITR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red consisted of braiding machines used for twisting of yarn. In the assessment years with which we are concerned the assessee claimed exemption under section 15C for all the units set up at Ghatkopar. The Income-tax Officer and the Appellate Assistant Commissioner held that the textile department unit was not entitled to the benefit of exemption under section 15C in view of the fact that some items of machinery belonging to the old Sewri factory had been transferred to and used in the new factory. The relevant statutory provision which was considered by these two authorities and subsequently by the Tribunal was section 15C(2)(i) ; this reads as follows : " 15C. (2) This section applies to any industrial undertaking which-- (i) is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of Shri Palkhivala and direct the Income-tax Officer to give benefit of section 15C to the textile department as in the case of other units erected at Ghatkopar. " In the impugned order the Tribunal has referred to and relied on the approach commended by this court in Commissioner of Income-tax v. Gaekwar Foam and Rubber Co. Ltd. [1959] 35 ITR 662 (Bom), where it was observed that the exemption provisions in section 15C of the Act must, as far as possible, be liberally construed and in favour of the assessee, provided that in doing so no violence was being done to the language used. The principle was subsequently reiterated by a later judgment of this High Court in Capsulation Service Pvt. Ltd. v. Commissioner of Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 13 to 14 lakhs as found by the Tribunal) is taken into consideration, it is clear that the old machinery of the Sewri factory transferred to the new undertaking, whether the original cost or the written down value be regarded as reflecting its real value, formed but a small and insignificant part of the new department. Can the new textile department at Ghatkopar be then said to be formed by transferring to it the old Sewri machinery ? A very similar question came to be considered by the Delhi High Court in Commissioner of Income-tax v. Ganga Sugar Corporation Ltd. [1973] 92 ITR 173 (Delhi). In the case before the Delhi High Court the assessee, which carried on the business of manufacturing sugar, had a plant operated by steam for manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we consider the value of the Sewri machinery transferred to the textile department at Ghatkopar in conjunction with the entire cost in the setting up of the Ghatkopar unit (textile department) or only the machinery imported and installed therein, the value of the transferred machinery forms but a small fraction of the assets employed in the textile department at Ghatkopar. In my view, the word " formed " to be found in the clause which is under consideration must be given its due significance. The relief under section 15C cannot be denied to an assessee merely because some existing building, plant or machinery is transferred to and utilised in the formation of the new undertaking irrespective of the importance and essentiality of the old b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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