New industrial undertaking relief survives transfer of some machinery when earlier production was only experimental and preparatory.

A new industrial undertaking may qualify for the section 15C concession even where an earlier experimental or preparatory unit carried on restricted-scale production and some machinery was later transferred to the new factory. The provision was treated as an incentive for new industrial enterprises and therefore construed liberally. On that approach, the Ghaziabad unit was regarded as the relevant new enterprise, while the earlier Bela Road activity was only testing and training, not the commencement of the same business in the legal sense. The transfer of part of the equipment did not by itself defeat the concession, and the assessee's claim succeeded.

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Issues: Whether the assessee's Ghaziabad factory was an industrial undertaking entitled to the concession under section 15C of the Income-tax Act, 1922, despite earlier experimental production at Bela Road and transfer of some machinery or plant from the earlier premises.

Analysis: The concession under section 15C was intended to encourage new industrial enterprises, and the provision had to be construed liberally. The earlier manufacture at Bela Road was treated as experimental and preparatory, undertaken on a restricted scale for training and testing the venture, while the Ghaziabad unit represented the new enterprise. The transfer of some machinery or plant did not by itself disqualify the undertaking, particularly where the transferred items formed only a part of the equipment of the new factory and the earlier production did not amount to the establishment of the same business in its relevant legal sense.

Conclusion: The assessee was entitled to the concession under section 15C. The answer to the referred question was in the affirmative.

Final Conclusion: The reference was answered in favour of the assessee, and the claim to the statutory industrial undertaking concession succeeded.

Ratio Decidendi: A new industrial undertaking does not lose the benefit of an incentive provision merely because some machinery or plant previously used in an experimental or preparatory venture is transferred to it, if the later unit is in substance a new enterprise and the earlier activity was not the relevant business commencement.

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