Court grants relief under section 84 for Raipur plant, emphasizing legislative intent.

The High Court held that the assessee was entitled to relief under section 84 for the assessment years 1964-65, 1965-66, and 1966-67 in respect of the Raipur plant. The Court emphasized the legislative intent to incentivize newly established industrial undertakings and interpreted the provisions liberally to encourage such ventures. The Court found that the Raipur unit met the conditions under section 84 for the relevant assessment years, allowing the relief. However, the Court declined to address the deduction claim of Rs. 6,000 as revenue expenditure for the assessment year 1966-67 as the assessee did not pursue the issue.

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Issues Involved:
1. Entitlement to relief under section 84 of the Income-tax Act, 1961, for the assessment years 1964-65, 1965-66, and 1966-67 in respect of the Raipur plant.
2. Deduction as revenue expenditure of the payment of Rs. 6,000 made to the Central Electronic Research Institute for the assessment year 1966-67.

Issue-wise Detailed Analysis:

1. Entitlement to Relief under Section 84 for Assessment Years 1964-65, 1965-66, and 1966-67:

Facts:
- The assessee-company manufactures electrodes and welding equipment and had a manufacturing unit at Bhandup. A new plant was set up at Bilaspur, Raipur, which began production on 24-7-1962.
- The total cost of the Raipur plant was Rs. 10,50,997, with Rs. 2,51,556 worth of plant and machinery transferred from the Bhandup factory.
- Additional buildings and machinery were added in the previous year relevant to the assessment year 1964-65, bringing the total value to Rs. 12,58,672.
- The assessee claimed relief under section 84 for the assessment year 1964-65, which was initially omitted by the ITO and later rejected under section 154.

Contentions:
- The assessee argued that the relief should be considered for the assessment year 1964-65 as the construction was completed in that year.
- The revenue contended that the relief under section 84 should be considered with reference to the year the unit began to manufacture, i.e., the assessment year 1963-64, and the four succeeding years.

Tribunal's Decision:
- The Tribunal concluded that the relief under section 84 could not be available for the assessment year 1964-65 and the succeeding years as the unit began production in the previous year relevant to the assessment year 1963-64, where the value of old assets exceeded 20% of the total investment.

High Court's Analysis:
- The High Court noted that the legislative intent behind section 84 was to provide a tax incentive to newly established industrial undertakings.
- The Court emphasized that the provisions should be construed liberally to encourage new industrial undertakings.
- The Court examined whether the Raipur unit complied with the condition in section 84(2)(ii), considering the Explanation and sub-section (7).
- It was held that the condition prescribed in section 84(2)(ii) should be considered for each of the five relevant assessment years, not just the year of commencement.
- The Court found that in the assessment years 1964-65 to 1966-67, the value of previously used plant and machinery did not exceed 20% of the total value, thus complying with the Explanation.

Conclusion:
- The High Court concluded that the assessee was entitled to the relief under section 84 for the assessment years 1964-65, 1965-66, and 1966-67 in respect of the Raipur plant.
- Question No. 1 was answered in the affirmative and in favor of the assessee.

2. Deduction as Revenue Expenditure of Rs. 6,000 for Assessment Year 1966-67:

Facts:
- The assessee claimed a deduction of Rs. 6,000 paid to the Central Electronic Research Institute for acquiring the technical process of flash gun as revenue expenditure.

Tribunal's Decision:
- The claim was rejected by the income-tax authorities and the Tribunal, which held that the payment was in the nature of capital expenditure.

High Court's Analysis:
- The High Court noted that the assessee did not wish to pursue this question.

Conclusion:
- The High Court declined to answer Question No. 2 as the assessee did not desire it to be answered.

Costs:
- The High Court ordered that there would be no order as to costs, considering all the facts and circumstances of the case.

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