Licence to use factory premises is not a transfer of plant or machinery, preserving section 15C relief.

Relief under section 15C of the Indian Income-tax Act, 1922 was not lost merely because the assessee-company carried on manufacturing in another concern's premises and used its plant and machinery under an unexecuted arrangement. The disqualifying condition applies only where there is a transfer creating an interest in the building, plant or machinery previously used in another business. On the facts, the owner retained possession, keys and effective control, and the assessee had only a limited right to run the factory. The arrangement was therefore a licence, not a lease or transfer of proprietary interest, and the assessee remained entitled to section 15C relief.

---

---

Issues: Whether the assessee-company was entitled to relief under section 15C of the Indian Income-tax Act, 1922, where it carried on manufacturing activity in premises and on plant and machinery belonging to another concern under an unexecuted draft arrangement.

Analysis: Relief under section 15C is denied only where the new business takes over a building, plant or machinery previously used in another business by way of a transfer that creates an interest in property in favour of the new undertaking. The character of the arrangement depends on substance and the real intention of the parties, not on the label used. If the arrangement merely permits use of the premises and machinery while legal possession and effective control remain with the owner, it is a licence and not a lease. On the facts, the assessee was given only a limited right to run its factory subject to the owner's control, the owner retained possession and keys, could use the premises and machinery itself, and there was no conveyance of any proprietary interest to the assessee.

Conclusion: The arrangement did not amount to a transfer of any building, plant or machinery to the assessee-company, and the assessee remained entitled to the relief under section 15C.

Final Conclusion: The reference was answered in favour of the assessee, and the exemption under section 15C was upheld.

Ratio Decidendi: For section 15C, the disqualifying transfer must create an interest in the property of the previously used building or machinery; a mere licence to use premises or equipment, without transfer of proprietary interest or effective possession, does not attract the prohibition.

---