Section 15C relief applies despite some second-hand machinery, unless the new undertaking is formed by material transfer of used assets.

Relief under section 15C of the Indian Income-tax Act, 1922 was available to a newly established industrial undertaking unless it was formed by splitting up or reconstruction of an existing business, or by transfer of previously used building, machinery or plant in a material sense. The court noted that the machinery said to have come from the earlier business had been sold, left idle, or acquired only after production began, and that the reconditioned machine was of insignificant value. Mere acquisition of some second-hand machinery did not disqualify the undertaking from relief, and the assessee was held entitled to section 15C relief.

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Issues: Whether the assessee-company was entitled to relief under section 15C of the Indian Income-tax Act, 1922, despite acquisition of some second-hand machinery.

Analysis: Relief under section 15C was available to a newly established industrial undertaking unless it was formed by splitting up or reconstruction of an existing business or by transfer to the new business of building, machinery or plant previously used in a business carried on before 1 April 1948. The findings accepted that the machinery alleged to have been transferred from the earlier business had either been sold off, remained idle and unused, or was acquired only after production had begun. The reconditioned machine was of insignificant value and, even if previously used, did not show that the undertaking was formed by transfer of previously used machinery.

Conclusion: The assessee-company was entitled to relief under section 15C, and the question referred was answered in the affirmative in favour of the assessee.

Ratio Decidendi: An industrial undertaking is not disqualified from section 15C relief merely because it acquires some second-hand machinery; the disqualification applies only where the undertaking is formed by the transfer of previously used machinery to the new business in a material sense.

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