Tax exemption condition held directory where strict registration timing would defeat industrial incentive scheme and penalise genuine delay.

Section 4-A(5)(c) of the U.P. Sales Tax Act, 1948 was construed in light of the incentive scheme's object of promoting new industries. The court reasoned that exemption conditions are not invariably mandatory and must be read with the statute's purpose and practical consequences. Requiring immediate registration under the Factories Act, 1948 was treated as an unreasonable barrier where delay was beyond the unit's control and would undermine the exemption policy. The registration requirement was therefore treated as a safeguard to verify genuineness, not a rigid precondition. On that basis, clause (c) was held directory and exemption was available from the date of first sale.

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Issues: Whether section 4-A(5)(c) of the U.P. Sales Tax Act, 1948, requiring registration under the Factories Act, 1948 for the full exemption period, is mandatory or directory, and whether the exemption eligibility must run from the date of first sale.

Analysis: The provision was examined in the context of the object of section 4-A, namely, to encourage setting up of new industries. The Court held that conditions for tax exemption are not automatically mandatory in every case and must be construed in light of the statute's purpose, design, and consequences. It noted that insisting on immediate registration under the Factories Act would penalise genuine new units for bureaucratic delay beyond their control and would defeat the incentive scheme. The requirement of registration was treated as only a safeguard to ensure genuineness of the unit, not as a substantive precondition that must invariably control the commencement of exemption. On that reasoning, clause (c) was held to be directory.

Conclusion: Section 4-A(5)(c) is directory and not mandatory, and the assessee is entitled to exemption from the date of first sale.

Ratio Decidendi: A condition in a tax incentive provision is directory where treating it as mandatory would frustrate the legislative object of promoting industry and would impose unfair consequences for delays beyond the assessee's control.

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