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Commissioner Of Income-Tax, Gujarat-Iv. v. Suessin Textile Bearing Ltd.

Gujarat High Court

Sep 24, 1980

Judgment

Subsequent
References

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Judicial Opinion Summary

Factual and Procedural Background

The assessee is a limited company engaged in manufacturing ball-bearings and machinery used in textile spinning. The assessment year under consideration was 1962-63 (previous year ended 30 September 1961). The assessee filed a revised return on 15 January 1963 claiming relief under section 84 of the Income-tax Act, 1961.

The Income-tax Officer (ITO) rejected the s. 84 claim on the ground that the assessee was not a "new industrial undertaking" within the meaning of s. 84; the ITO relied on the Tribunal's decision for the assessee's assessment year 1961-62. The assessee appealed to the Appellate Assistant Commissioner (AAC), who, following the earlier Tribunal decision, allowed the relief and directed the ITO to grant it. The revenue appealed to the Income-tax Tribunal (the Tribunal), which upheld the AAC's decision after being drawn to the Tribunal's earlier decision for assessment year 1961-62. The revenue then referred the following question to the High Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to the relief under section 84 of the Income-tax Act, 1961, as claimed by it?"

The Bombay High Court had decided a reference concerning the assessee's assessment year 1961-62 (CIT v. Suessin Textiles Ball Bearing & Products (P.) Ltd. [1979] 118 ITR 45), and other references for subsequent years were stated to be pending. The central factual dispute relevant to s. 84 was that, although the plant and machinery installed by the assessee were undisputedly new, the assessee had taken on lease office premises (a portion of the Bank of Baroda building) and a portion of the Laxmi Woollen Mills estate (where the factory was set up), both of which had been previously used by others; the ITO treated that prior use as disqualifying under clause (ii) of sub-s. (2) of s. 84 (which forbade formation "by the transfer to a new business of a building, machinery or plant previously used for any purpose").

Legal Issues Presented

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to the relief under section 84 of the Income-tax Act, 1961, as claimed by it?

Arguments of the Parties

Revenue's Arguments (as presented in the opinion)

The revenue (through Mr. Raval) contended that the assessee contravened clause (ii) of sub-s. (2) (referred to in the opinion as clause (ii) of sub-s. (4) of s. 84 in later references) because it had taken on lease/rent premises (office and a shed/factory area) that had previously been used by other persons; that prior use should disqualify the assessee from claiming s. 84 relief.
The revenue relied on a number of High Court decisions (including the Bombay High Court decision in respect of the assessee for 1961-62 — CIT v. Suessin Textiles Ball Bearing & Products (P.) Ltd. — and earlier Bombay decisions such as Capsulation Services Pvt. Ltd. v. CIT) to support the contention that prior use of premises/machinery by others prevents the grant of relief under s. 84.
Mr. Raval cited additional High Court authorities (Punjab & Haryana, Punjab, Bombay, Assam, Madras) and cases concerning reconditioning of machinery to bolster the revenue's position.

Assessee's Position (as presented in the opinion)

The assessee claimed relief under s. 84 by revised return; it was common ground that the plant and machinery installed were new.
The assessee's case before the Tribunal and AAC was that it had set up a new industrial undertaking by installing new plant and machinery and had invested capital in that new undertaking; the fact that office or shed premises had earlier been used by others did not, in their submission, disentitle the assessee to relief under s. 84.
The Tribunal and AAC accepted that the plant and machinery were new and treated the assessee as entitled to relief under s. 84.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195 (SC)	Explains object of s.15C (and its equivalents) to encourage new industrial undertakings; sub-s. (2) has negative and positive aspects; "reconstruction" and "splitting up" should be read as referring to the assessee's own business; fresh/substantial capital must be employed; the new undertaking must be separate and distinct.	The court treated this Supreme Court decision as the principal authoritative guide to interpret s.84 and applied its principles to conclude the assessee was entitled to relief; other contrary High Court decisions were subordinated to this Supreme Court authority.
Nagardas Bechardas & Brothers P. Ltd. v. CIT [1976] 104 ITR 255 (Guj)	Emphasises legislative object to encourage new undertakings; rejects narrow application of "reconstruction" that defeats that object; "business already in existence" should be given its ordinary commercial meaning.	The decision was approved by the Supreme Court (in Textile Machinery) and relied upon by the court to support a broad purposive interpretation of s.84.
CIT v. Ganga Sagar Corporation Ltd [1973] 92 ITR 173 (Delh)	Held that setting up another independent industrial unit by a company already running one does not attract the concept of "reconstruction"; the new unit retains separate identity and s.15C should encourage new industries irrespective of the promoter's prior experience.	Quoted with approval by higher authority and used to support the proposition that prior experience of the promoter/assessee does not disqualify a genuinely new unit from relief.
CIT v. Suessin Textiles Ball Bearing & Products (P.) Ltd. [1979] 118 ITR 45 (Bom)	Bombay High Court decision (in respect of the assessee for 1961-62) that followed an earlier Bombay decision (Capsulation Services) on interpretation of s.15C(2)(i); in context, it led to denial of relief in the earlier year.	The revenue relied on this decision; the court in the present opinion found that the Bombay High Court had overlooked the impact of the Supreme Court decision in Textile Machinery and therefore did not follow it for the present case.
Capsulation Services Pvt. Ltd. v. CIT [1973] 91 ITR 566 (Bom)	Earlier Bombay decision on interpretation of s.15C(2)(i) relied upon by the Bombay High Court in the assessee's earlier year.	Referenced as part of the line of Bombay decisions which the present court considered to have been overtaken or affected by the Supreme Court's Textile Machinery ruling.
Monogram Mills Co. Ltd. v. CIT (Income-tax Reference No. 174 of 1975; decided 12 Aug 1980) [reported in [1982] 135 ITR 122 (Guj)	Considered the effect of subsequent legislative exposition; treated legislative amendments as reinforcing the construction that rented premises do not contravene the negative condition.	The court followed Monogram Mills to hold that the Tribunal was right in concluding the assessee did not contravene clause (ii) of s.84 and was entitled to relief.
Chandulal Harjiwandas v. CIT [1967] 63 ITR 627 (SC)	Principle that a provision enacted with a particular object should be interpreted so as not to nullify that object.	Adopted as a guiding principle for a purposive interpretation of s.84/related provisions to preserve their object (encouraging new industrial undertakings).
CIT v. T. Maneklal Mfg. Co. Ltd [1978] 115 ITR 725 (Bom)	Emphasises desirability of uniform construction across High Courts for an all-India statute; other High Courts' views should be followed unless overriding reasons exist.	The court agreed with the uniformity principle but found overriding reasons (the Supreme Court decision in Textile Machinery) to take a different view from the Bombay High Court decisions.
CIT v. Kopran Chemical Co. Ltd [1978] 112 ITR 893 (Bom)	One of several High Court decisions cited by the revenue (specific principle not elaborated in the opinion).	Cited by revenue, but the court held that the Supreme Court authority and subsequent legislative history governed the present interpretation.
Steelsworth Ltd. v. CIT [1968] 69 ITR 366 (Assam)	One of several High Court decisions cited by the revenue (specific principle not elaborated in the opinion).	Cited by revenue; court preferred Supreme Court precedent over conflicting High Court precedents.
CIT v. Fenner Cockill Ltd. [1969] 74 ITR 394 (Mad)	Decision regarding reconditioning of machinery (cited by the revenue).	Cited by revenue but not accepted as overruling or displacing the Supreme Court's approach in Textile Machinery.
Phagoo Mal Sant Ram v. CIT [1969] 74 ITR 734 (P&H), Webbing & Belting Factory P. Ltd. v. CIT [1961] 43 ITR 234 (Punjab Bench), CIT v. Hindustan Milk Food Manufacturers Ltd. [1974] 96 ITR 278 (P & H)	Additional High Court authorities cited by the revenue (specific principles not detailed in the opinion).	Cited by revenue; the court considered these authorities but concluded that the Supreme Court decision and subsequent legislative changes provided controlling guidance.
CIT v. Sainthia Rice and Oil Mills [1971] 82 ITR 778 (Cal)	Calcutta High Court decision aligning with the view taken in the present opinion on the interpretation of s.15C conditions.	Noted as a High Court decision taking the same view as the present court; supportive of the court's interpretation.
Saurashtra Cement & Chemical Industries Ltd. v. CIT [1980] 123 ITR 669 (Guj)	Division Bench view that once relief under s.84 has been started with reference to the year of installation, relief in subsequent years cannot be denied unless the original finding is disturbed.	The court observed Saurashtra Cement did not apply to the facts here (because relief was not granted in the year of installation in the assessee's earlier year), but cited Satellite Engineering to allow relief in subsequent years if justified.
CIT v. Satellite Engineering Ltd. [1978] 113 ITR 208 (Guj)	Division Bench held that relief not granted in one year can be granted in subsequent years; each year must be computed afresh.	Applied by the court to support the view that relief under s.84 could be claimed and granted in assessment year 1962-63 and subsequent years even though earlier year relief was denied.

Court's Reasoning and Analysis

The court's analysis proceeded along the following lines, strictly reflecting the reasoning in the opinion:

The court accepted as common ground that the plant and machinery installed by the assessee were new and that the assessee had taken on lease office premises (a portion of the Bank of Baroda building) and a portion of Laxmi Woollen Mills' estate (factory premises) that had been previously used by other persons.
The court examined the relevant statutory text of s. 84 as it stood at the relevant time, particularly sub-s. (2) (referred to in the opinion) which excluded undertakings "formed by the splitting up, or the reconstruction of, a business already in existence" and "formed by the transfer to a new business of a building, machinery or plant previously used for any purpose."
The court relied primarily on the Supreme Court's decision in Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195 for the correct approach to interpreting the negative conditions: these negative conditions must be read as referring to the assessee's own previously existing business (i.e., "of the assessee") so that "reconstruction" and "splitting up" envisage continuation or reorganisation of the same business of the same persons.
On the meaning of "reconstruction" and "splitting up", the court adopted the Supreme Court's treatment (and earlier authorities) that these concepts involve substantially the same business or employment of assets of the old business by the same persons; consequently, the negative conditions are intended to exclude cases where a new undertaking is merely a resuscitation or rearrangement of the assessee's own existing business.
Applying the principle of noscitur a sociis and the contextual reading urged by the Supreme Court, the court held that the third negative condition (transfer to a new business of building, machinery or plant previously used for any purpose) must be understood in the same sense — that is, the prior use must be in respect of the assessee's own earlier business to attract the negative condition.
The court observed practical realities in metropolitan and industrial centres where premises are commonly previously occupied by others; it concluded that, as a matter of common sense and commercial expediency, prior occupation of premises by third parties should not automatically disqualify a genuinely new undertaking set up by the assessee.
The court reinforced its interpretative conclusion with a review of the subsequent legislative history: with effect from 1 April 1967 the Legislature introduced a proviso deeming the condition not contravened if the industrial undertaking is set up in rented premises; later enactments (s.80J and its amendments) and eventual omission of references to "building" (with effect from 1 April 1976) were cited as legislative confirmation of the interpretation that prior use of premises by others should not bar relief.
The court considered and addressed Mr. Raval's reliance on various High Court cases (notably the Bombay High Court decision in respect of the assessee for 1961-62 and earlier Bombay authorities) but concluded that those decisions did not properly take into account the Supreme Court's decision in Textile Machinery; thus the Supreme Court authority and the subsequent legislative exposition control.
The court referred to and followed this court's earlier decision in Monogram Mills Co. Ltd. v. CIT which had considered the effect of the legislative changes and supported the view that the assessee had not contravened the clause in question.
On the facts found in the present case — new plant and machinery, a genuinely new undertaking established by investment of capital, and only leased/rented premises which had been previously used by others — the court concluded that the requirements and object of s.84 were satisfied and that the Tribunal was right to confirm the AAC and to allow the relief.

Holding and Implications

Holding: The court answered the referred question in the affirmative — i.e., it held in favour of the assessee and against the revenue, concluding that the Tribunal was right in law in holding that the assessee is entitled to relief under section 84 for the assessment year in question.

Consequences / Immediate Effect: The Tribunal's and AAC's decisions in favour of the assessee were affirmed. The court directed that the Commissioner (revenue) pay the costs of the reference to the assessee.

The opinion grounds its decision on established Supreme Court authority (Textile Machinery Corporation Ltd. v. CIT), the legislative history of the relevant provisions (including a proviso deeming the condition not contravened where premises are rented), and this court's earlier treatment (Monogram Mills). The decision applies those authorities to the facts and does not purport to create a new principle beyond that interpretative application.

Show all summary ...

1. In this case, at the instance of the revenue, the following question has been referred to us for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to the relief under section 84 of the Income-tax Act, 1961, a claimed by it ?"

2. The facts leading to this reference are that the assessee is a limited company and is carrying on the business of manufacturing ball-bearings and other machineries used in textile spinning departments. The assessment year under consideration is 1962-63, the previous year being the year ending September 30, 1961. The assessee claimed relief under s. 84 of the I.T. Act, 1961, in the revised return which it filed on January 15, 1963. The ITO negatived the claim by holding that the assessee could not be termed as a new industrial undertaking within the meaning of s. 84 of the I.T. Act, 1961. In coming to this decision, he also relied on the decision of the Tribunal for the assessment year 1961-62 in the case of this very assessee.

3. The assessee took the matter in appeal and the AAC following the decision of the Tribunal for the earlier year held that relief under s. 84 was admissible to the assessee. He, accordingly, directed the ITO to allow the necessary relief as claimed by the assessee under s. 84. Thereafter the matter was taken in appeal before the Tribunal by the revenue and at that stage, the attention of the Tribunal was drawn to the decision of the Bombay Bench of the Tribunal in the case of this very assessee for the assessment year 1961-62. This decision was also followed by the Tribunal in respect of this very assessee for the assessment years 1963-64, 1964-65 and 1965-66. It was pointed out to the Tribunal that the facts stated in the order of the Tribunal relating to the assessment year 1961-62 would govern the facts of the case in the instant case also and, following that decision, the Tribunal upheld the decision of the AAC. Thereafter, at the instance of the revenue, the question hereinabove set out has been referred to us.

4. It may be pointed out that the reference against the decision of the Bombay Bench of the Tribunal for the assessment year 191-62 was made to the Bombay High Court and the decision of the Bombay High Court is to be found in CIT v. Suessin Textiles Ball Bearing & Products (P.) Ltd. [1979] 118 ITR 45. We are informed that the references against the decision of the Tribunal for the assessment years 1963-64, 1964-65 and 1965-66 are pending. The main ground why the ITO declined to grant relief under s. 84 to the assessee was that the assessee had taken on hire a building for office purposes and it had also taken on rent a shed for installing machinery and that both the office space and the shed where the machinery was installed had been used by other persons for their own purposes prior to the renting of these spaces - office space and the shed - by the assessee.

5. The Tribunal has pointed out in its order that the facts that the plant and machinery were new has not been disputed. It is also common ground that the assessee-company took on lease for its office purposes a portion of the Bank of Baroda building which was earlier thereto used by someone else for the purposes of office. Similarly, it was also common ground that the assessee took a portion of Laxmi Woollen Mills Estate where it has set up the factory. The said portion was earlier used by someone else for the purpose of his business and it is on these facts that the question arises whether the assessee is disqualified for claiming relief under s. 84 of the I.T. Act, 1961.

6. Section 84, as it stood at the relevant time, read as follows :

"Save as otherwise hereinafter provided, income-tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking or business of a hotel or from any ship, to which this section applies, as does not exceed six per cent. per annum on the capital employed in such undertaking or business or ship, computed in the prescribed manner :

sub-section (2) of this section provided :

"This section applies to any industrial undertaking which fulfils all the following conditions, namely :

(i) it is not formed by the splitting up, or the reconstruction of, a business already in existence;

(ii) it is not formed by the transfer to a new business of a building, machinery or plant previously used for any purpose ..."

7. Clauses (iii) and (iv) of sub-s (2) of s. 84 as it stood then, are not material for our purposes. It may be pointed out that with effect from April 1, 1967, that is, for the assessment year 1967-68 onwards, the second proviso to sub-s (2) of s. 84 was in these terms :

"Provided further that the condition in clause (ii) shall be deemed not to have been contravened if the industrial undertaking is set up in rented premises."

8. It may further be pointed out that ss. 81 to 85C were deleted by the Finance (No. 2) Act of 1967, with effect from April 1, 1966, and in place of s. 84, s. 80J was enacted providing for the same type of relief but instead of the word "relief" the word "deduction" was used in s. 80J and the second proviso to sub-s. (4) of s. 80J provided :

"...... where any building or any part thereof previously used for any purpose is transferred to the business of the industrial undertaking, the value of the building or part so transferred shall not be taken into account in computing the capital employed in the industrial undertaking."

9. Thereafter, s. 80J was further amended with effect from 1st April, 1976, and after that amendment, condition No. (ii) read :

"It is not formed by the transfer to a new business of machinery or plant previously used for any purpose."

10. and reference to "building" was omitted altogether. Formerly, the words were "a building taken on rent or lease" which were deleted by the amendment which came into effect from April 1, 1976.

11. As has been pointed out by the Supreme Court in Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195, the provisions of s. 15C were enacted after the Second World War in order to encourage setting up of new industrial undertakings. Section 15C was enacted and inserted in the Indian I.T. Act, 1922, to encourage setting up of new industrial undertakings by offering tax incentives and the period of tax incentives was increased from time to time and the period to be counted was from April 1, 1948. section 15c provided for a fractional exemption from tax of profits of a newly established undertaking for five assessment years as specified therein and this provision extended the benefits to the actual manufacture or production of articles commencing from April 1, 1948. After the country had gained independence in 1947, it was most essential to give fillip to trade and industry from all quarters. That seems to be the background for the insertion of s. 15C.

12. It has also been stated that s. 15C of the Act of 1922, s. 84 of the Act of 1961 and s. 80J, which has now replaced s. 84, were all parts of the scheme of tax holiday to new industrial undertakings, and, in our opinion, unless this object of encouraging the setting up of new industrial under-takings by giving tax relief with reference to the investment of capital in the new business is borne in mind, it is not possible to interpret the conditions which have been laid down in s. 15C and which were subsequently laid down by s. 84, sub-s (4). Section 84(4) is equivalent to s. 15C(2) of the Act of 1922. At p. 202 of the report in Textile Machinery Corporation's case [1977] 107 ITR 195, the Supreme Court pointed out :

"sub-section (2) of section 15c has a negative as well as a positive aspect. Negatively, the new industrial undertaking of the assessee should not be formed -

(1) by the splitting up of a business already in existence, (2) by the reconstruction of a business already in existence, or (3) by the transfer to a new business of building, machinery or plant used in a business which was being carried on before April 1, 1948."

13. The Supreme Court agreed that it was not possible to exclude any new industrial undertaking other than the three categories mentioned above. The case before the Supreme Court in Textile Machinery Corporation's case [1977] 107 ITR 195 was of type No. (2) mentioned above, namely, that the new industrial undertaking of the assessee should not be formed by the reconstruction of a business already in existence and in that context it mentioned positively that the new industrial undertaking must produce result, that is to say, it has to manufacture or produce articles at any time within a period of 13 years from April 1, 1948. The further requirement under sub-s. (2) is with regard to the personnel in the undertaking, namely, that ten or more workers have to work in the manufacturing process carried on with the aid of power or twenty or more workers have to carry on work without the aid of power. The above element with regard to the number of workers engaged in the undertaking would go to show that even small industrial undertakings, newly started, are within the exemption clause, where, for example, twenty workers may complete the industrial process without the aid of power. There is no controversy about the positive aspect. At p. 203, Goswami J., speaking for the Supreme Court observed :

"Again the new undertaking must not be substantially the same old existing business. The third excluded category mentioned above is significant. Even if a new business is carried on but by piercing the veil of the new business it is found that there is employment of the assets of the old business, the benefit will not be available. From this it clearly follows that substantial investment of new capital is imperative. The words 'the capital employed' in the principal clause of section 15C are significant, for, fresh capital must be employed in the new undertaking claiming exemption. There must be a new undertaking where substantial investment of fresh capital must be made in order to enable earning of profits attributable to that new capital .... Manufacture or production of articles yielding additional profit attributable to the new outlay of capital in a separate and distinct unit is the heart of the matter, to earn benefit from the exemption of tax liability under section 15c. sub-section (6) of the section also points to the same effect, namely, production of articles. The answer, in every particular case, depends upon the peculiar facts and conditions of the new industrial undertaking on account of which the assessee claims exemption under section 15C. No hard and fast rule can be laid down. Trade and industry do not run in earmarked channels and particularly so in view of manifold scientific and technological developments. There is great scope for expansion of trade and industry. The fact that an assessee by establishment of a new industrial undertaking expands his existing business, which he certainly does, would not, on that score, deprive him of the benefit under section 15C. Every new creation in business is some kind of expansion and advancement. The true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business."

14. Thus, when it came to construe conditions (i) and (ii) out of the three conditions, the Supreme Court read into those conditions that the new industrial undertaking must not be formed by the splitting up of the business of the assessee already in existence not must it be formed by reconstruction of the business of the assessee already in existence. The words "of the assessee" have been read into this section by the Supreme Court in order to give effect and substance to the provisions of the section was enacted. So far as the word "reconstruction" was concerned, the Supreme Court approved of the following passage from the decision of Buckley J., in In re South African Supply and Cold Storage Co. [1904] 2 Ch 268 (Ch D) in a company matter (p. 205 of 107 ITR) :

"What does "reconstruction" mean ? To my mind it means this. An undertaking of some definite kind is being carried on, and the conclusion is arrived at that it is not desirable to kill that undertaking, but that it is desirable to preserve it in some form, and to do so, not by selling it to an outsider who shall carry it on - that would be a mere sale - but in some altered form to continue the undertaking in such a manner as that the persons now carrying it on will substantially continue to carry it on. It involves I think, that substantially the same business shall be carried on and substantially the same persons shall carry it on. But it does not involve that all the assets shall pass to the new company or resuscitated company, or that all the shareholders of the old company shall be shareholders in the new company or resuscitated company. Substantially the business and the persons interested must be the same."

15. Therefore, so far as the second condition mentioned at page 202 of the report in Textile Machinery Corporation's case [1977] 107 ITR 195 (SC) is concerned, by the process of interpretation of the phrase "reconstruction of business" it means reconstruction of the existing business of the assessee because "reconstruction" connotes that substantially the same business and the same persons interested are continuing the business though in a different form. In the same manner, when the existing business of an assessee is spilt up, then only it can be said that a new industrial undertaking has been formed by the splitting up of the business of the assessee which is already in existence. It is only in case where the business has been formed by the splitting up of the business of the assessee which is already in existence or by reconstruction of the same business as before and by the same personnel but in a different form that it can be said that a new industrial undertaking was formed by the splitting up or reconstruction of the business already in existence. It is in this sense that the two negative conditions mentioned by the Supreme Court operate. The question then arises whether, in the third negative condition, the words, "by the assessee or of the assessee" should or should not be read while interpreting the third condition, the third condition being that the industrial undertaking should not be formed by transfer to a new business of building, machinery or plant used in a business which was being carried on before April 1,1948. Now, it is obvious that "transfer to a new business" in this context must be transferred to the new business of the assessee and "the business which was being carried on before April 1, 1948" must mean the business of the assessee. The principle of noscitur a sociis would apply so far as the interpretation of negative condition No. 3 mentioned by the Supreme Court at p. 202 of the report in Textile Machinery Corporation's case [1977] 107 ITR 195 (SC) is concerned.

16. We may point out that at p. 207 of the report in Textile Machinery Corporation's case [1977] 107 ITR 195 (SC), Goswami J., speaking for the Supreme Court, has approved, inter alia, the decision of this High Court in Nagardas Bechardas & Brothers P. Ltd v. CIT [1976] 104 ITR 255.

17. In Nagardas Bechardas & Brothers P. Ltd. v. CIT, a Division Bench of this High Court has considered the principle and object underlying the provisions of s. 15C of the 1922 Act and s. 84 of the 1961 Act which was replaced by s. 80J of the same Act. At p. 260 of the report it has been pointed out :

"The object of the legislature in providing for the concession contemplated by section 84 is obviously to encourage new industrial undertakings so that production of a particular type would increase. This object is achieved even if a new undertaking is established by a person who is already in the line. Therefore, to reject the claim to such concessions of the persons who are already in the line on the narrow ground that the establishment of the new unit is a mere 'reconstruction' of their existing business, without taking into consideration the nature of the existing business and the new one, would result in defeating the very object with which the section was framed."

18. It has also been pointed out that one of decisions approved of by the Supreme Court was also the decision of the Delhi High Court in CIT v. Ganga Sagar Corporation Ltd [1973] 92 ITR 173. In that case, Khanna C.J. of the Delhi High Court, as he then was, observed at pp. 179 and 180 of the report :

"The concept of reconstruction of business would not be attracted when a company which is already running one industrial unit sets up another industrial unit. The new industrial unit would not lose its separate and independent identity even though it has been set up by a company which is already running an industrial unit before the setting up of the new unit. The object of section 15C of the Act is to provide an incentive for the setting up of new industries so as to accelerate the process of industrialisation. It does not appear to have been the intention of the legislature, as envisaged by section 15C of the Act, that the benefit of the said section would be confined to the industrial undertakings of those parties who had not already set up such undertaking in the past but would parties who had not already set up such undertakings in the past but would parties who had not already set up such undertakings in the past but would not be extended to parties who have past experience of running similar undertakings."

19. At p. 260 of the report in Nagardas Bechardas & Brothers' case [1976] 104 ITR 255, the Division Bench of this High Court further observed :

"We find that the expression 'business already in existence' must be given its ordinary commercial meaning. In its ordinary commercial meaning, is it possible to say that manufacturing of molding was the assessee's business 'already in existence' before it established the new factory for the same ?"

20. Thus, in the decisions which have been approved by the Supreme Court in Textile Machinery Corporation's case [1977] 107 ITR 195 and in the decision of the Supreme Court itself, sufficient indications have been given that so far as "reconstruction of the business" is concerned or "splitting of business" is concerned, it must be splitting up of the business which was already being carried on by the assessee or the reconstruction of the business which was already being carried on by the assessee and the new industrial undertaking must have been formed as a result of the splitting up of the previously existing business of the assessee. Thus, so far as the first two clauses are concerned, the only conclusions possible looking to the object of the Legislature and the words used by the Legislature in the relevant provisions laying down the conditions then obtaining regarding s. 84 are that in the first two conditions the previously existing business must be of the assessee himself. Similarly, the previously existing business which is resuscitated or reconstructed or which is being split up must be of the assessee himself. If that is so, the position is very clear, namely, that so far as the third condition mentioned at p. 202 is concerned, namely, that the new industrial undertaking of the assessee should not be formed by the transfer to the new business of building, machinery or plant used by another prior to April 1, 1948, must apply in the context of the previous business being carried on by the assessee himself. These words must be held to take colour from the context in which they are appearing.

21. As regards the question of the building where a new business or any existing business is being carried on, it must be pointed out that because of extreme shortage of space - for office space or space where industrial activity could be carried on - it is practically impossible in our metropolitan cities to find a space or place where, previous to the new business being started, another business was not being carried on or another business by somebody else other than the assessee was not being carried on. If that is so, practical commonsense and commercial expediency would necessitate the conclusion that in so far as a new undertaking is being carried on in a building which was previously being used by someone else or which was rented by someone else other than the assessee and the new undertaking being started for the first time by the assessee in the newly rented premises, then, the third negative condition cannot be said to be violated. Both as a matter of commonsense as well as from the point of view of commercial expediency and from what is happening in our metropolitan cities today and in major centres of industries today, it would be impossible to expect that a building should be a space which was not used at all at any previous time by someone else.

22. The conclusion that we have arrived at on a pure question of construction is reinforced by the subsequent legislative history regarding this aspect of the negative condition in s. 84. With effect from April 1, 1967, the Legislature amended s. 84 of the Act and provided in the shape of the second proviso to sub-s. (2) of s. 84 as follows :

"Provided further that the condition in clause (ii) shall be deemed not to have been contravened if the industrial undertaking is set up in rented premises."

23. And the second clause was :

"It is not formed by the transfer to a new business of a building, machinery or plant previously used for any purpose."

24. When the Legislature repealed ss. 81 to 85C with effect from 1st April, 1968, and enacted Chap. VI-A which contained ss. 80A to 80VV, in s. 80J, which corresponded to s. 84, in sub-s.(4), the original words were so far as condition (ii) was concerned "it is not formed by a transfer to a new business of a building not being a building taken on rent or lease, machinery or plant previously used for any purpose" and with effect from 1st April, 1976, even the words "a building not being a building taken on rent or lease" have been omitted altogether by the Legislature. Thus, the subsequent legislative history of this provision reinforces the conclusion that we are arriving at and that which was required to be reached as a result of interpretative provision has now been made specifically clear by the Legislature by making a suitable provision in that behalf.

25. In Income-tax Reference No. 174 of 1975, decided on August 12, 1980 [Monogram Mills Co. Ltd. v. CIT (since reported in [1982] 135 ITR 122 (Guj)], the relevant decisions regarding the effect of the subsequent legislative exposition have been considered by this court. Following the decision in that case and for the reasons recorded in that decision it is clear that the Tribunal was right when it came to the conclusion that the assessee had not contravened clause (ii) of sub-s (4) of s. 84 and that he was entitled to obtain relief it was seeking for.

26. It may be pointed out that Mr. Raval for the revenue has drawn our attention to a number of decisions of other High Courts and he has contented that in view of those decisions we should hold that in the instant case the assessee had contravened condition No. (ii) set out in s. 84, sub s. (4), as it stood at the relevant time. He has especially relied upon the decision of the Bombay High Court in the case of this very assessee (CIT v. Suessin Textile, Ball Bearing & Products (P.) Ltd. [1979] 118 ITR 45) as that was in respect of assessment year 1961-62. We have gone through the judgment of the Bombay High Court in [1979] 118 ITR 45 and we find that in that case the Bombay High Court followed its own earlier decision in Capsulation Services Pvt. Ltd. v. CIT [1973] 91 ITR 566. Now, after the decision of the Bombay High Court in [1973] 91 ITR 566 regarding the interpretation of s. 15C(2)(i), there has been the decision of the Supreme Court in Textile Machinery Corporation's case [1977] 107 ITR 195. With great respect to the learned judges of the Bombay High Court who decided the case reported in [1979] 118 ITR 45, the full impact of the decision of the Supreme Court in Textile Machinery Corporation's case [1977] 107 ITR 195 (SC) on the interpretation of s. 15C and the approach to the interpretation of s. 15C had been overlooked and it is because that impact has been over looked that the Bombay High Court apparently followed its own earlier decision in the case of Capsulation Services Pvt. Ltd. [1973] 91 ITR 566. Mr. Raval drew out attention to the decision of the Punjab & Haryana High Court in Phagoo Mal Sant Ram v. CIT [1969] 74 ITR 734, the decision of the Punjab High Court (Delhi Bench) in Webbing and Belting Factory P. Ltd. v. CIT [1961] 43 ITR 234 and of the Punjab and Haryana High Court in CIT v. Hindustan Milk Food Manufacturers Ltd. [1974] 96 ITR 278. He also drew our attention to the decision of the Bombay High Court in CIT v. Kopran Chemical Co. Ltd [1978] 112 ITR 893 and the decision of the Assam High Court in Steelsworth Ltd. v. CIT [1968] 69 ITR 366. there is also the decision of the Madras High Court in CIT v. Fenner Cockill Ltd. [1969] 74 ITR 394 regarding reconditioning the machinery from which Mr. Raval sought to gain support for his submissions but, in our view, in view of the decision of the Supreme Court in Textile Machinery Corporation's case [1977] 107 ITR 195, the correct, principles which are required to be followed while interpreting s. 15C of the 1922 Act and s. 84 (now s. 80J) of the Act of 1961, have been indicated and it is only in the light of this decision that the problem has to be approached.

27. Mr. Raval also drew out attention to the decision of the Bombay High Court CIT v. T. Maneklal Mfg. Co. Ltd [1978] 115 ITR 725, where the Bombay High Court has pointed out that the I.T. Act being an all India statute, uniformity in the construction of its statutory provisions is eminently desirable and the considered opinion of any other High Court should be followed unless there are overriding reasons for taking a divergent view. With utmost respect we are in full agreement with the sentiments expressed in this decision but we find that there are overriding reasons, namely, the decision of the Supreme Court in Textile Machinery Corporation's case [1977] 107 ITR 195, which compel us to take a view different from the view taken by the Bombay High Court in the case of the assessee in CIT v. T. Maneklal Mfg. Co. Ltd. [1978] 115 ITR 725 (Bom). We may also point out that amongst the decisions of other High Courts, there is the decision of the Calcutta High Court in Cit v. Sainthia Rice and Oil Mills [1971] 82 ITR 778, which has taken the came view of the provisions of the conditions laid down in s. 15C of the Act of 1922 as we are taking in the instant case.

28. It is true that in Chaturvedi's Book, Vol. II, at p. 1228, and in Palkhivala & Kanga's Volume, 7th Edn., at p. 679, of the first volume, the decisions of the different High Court have been summered but neither of these learned commentators has expressed his positive view as to which out of the several views is the correct view and the reasons for that view. It has been pointed out by the Supreme Court in Chandulal Harjiwandas v. CIT [1967] 63 ITR 627 that when there is a particular object behind a particular section enacted in the I.T. Act, the section should be so interpreted as not to nullify that object. It is in the light of the object of the object behind the provisions of s. 84 and s. 80J of the 1961 Act and s. 15C of the Act of 1922 that we have to approach this problem of interpretation of the section.

29. The last submission of Mr. Raval was that there are two decisions of this High Court, one in Saurashtra Cement & Chemical Industries Ltd. v. CIT [1980] 123 ITR 669 and the other in CIT v. Satellite Engineering Ltd. [1978] 113 ITR 208 (Guj) and in the light of these two decisions the point should be decided in favour of the revenue. In Satellite Engineering Ltd. case [1978] 113 ITR 208 (Guj) it was pointed put by a Division Bench of this High Court that even if in an earlier year the ITO has not granted relief under s. 84 or s. 15C of the Act of 1922, in the subsequent years that relief can be granted and can be claimed and in each year it has to be computed once again. In Saurashtra Cement's case [1980] 123 ITR 669 another Division Bench of this High Court has taken the view that once the granting of relief under s. 84 has been started with reference to the year of installation, in subsequent year that relief cannot be denied unless the original finding and original conclusion as regards the year of installation is disturbed. We find no difficulty in the instant case because of either of these two decision. The Saurashtra Cement & Chemical Industries Ltd. case [1980] 123 ITR 669 (Guj) does not apply to the facts of this case because in the year of installation relief under s. 84 was not granted because that is the effect of the decision of the Bombay High Court in the case of this very assessee in CIT v. Suessin Textiles Ball Bearing & Products Ltd. [1979] 118 ITR 45. However, in view of what has been stated in Satellite Engineering's case [1978] 113 ITR 208 at p. 221, it must be held that in the subsequent years, that is in assessment year 1962-63 and in subsequent assessment years, relief under s. 84 can be claimed and should be granted if the claim of the assessee to that relief is found to be justified.

30. Under these circumstances, in view of the decision regarding the correct legal approach and correct principles which flow from the decision of the Supreme Court in Textile Machinery Corporation's case [1977] 107 ITR 195, it must be held in the instant case that on the facts as found in this case, namely, that plant and machinery were new and that only the company had taken the premises on lease for office purposes from a portion of the Bank of Baroda building which had been previously used by someone else and similarly it had taken a portion of Laxmi Woollen Mills' estate where it set up its factory and in the earlier years someone else had used that portion of Laxmi Woollen Mills' estate for his own purposes, cannot stand in the way of the assessee in the instant case once it is found that what it had set up was a new industrial undertaking of its own by installing new plant and machinery. It was entirely a new business of its own and it had invested capital for the purposes of that new business or new undertaking. Under these circumstances, the requirement of s. 84 and the object of granting relief under s. 84 which we have indicated above are fully satisfied in the instant case and hence the Tribunal was right in the instant case in confirming the view of the AAC and in deciding in favour of the assessee.

31. We, therefore, answer, the question referred to us in the affirmative, that is, in favour of the assessee and against the revenue. The Commissioner will pay the cost of this reference to the assessee.