Section 84 relief turns on production of the final product, not an intermediate marketable commodity in an integrated manufacturing process.

Section 84 relief depended on when the new industrial undertaking began manufacturing or producing the relevant articles, namely the final product for which it was set up. The Gujarat HC held that production of cellulose pulp, though marketable, was only an intermediate stage in an integrated process for making sodium carboxy methyl cellulose and did not itself start the statutory period. Because there was no phased programme making cellulose pulp an independent stage of production, the commencement date remained the start of final product production in 1962-63, and relief for assessment year 1966-67 was available.

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Issues: Whether the assessee was entitled to relief under section 84 of the Income-tax Act, 1961 for assessment year 1966-67, and whether manufacture of an intermediate marketable product amounted to commencement of manufacture or production of articles for the purposes of that relief.

Analysis: Relief under section 84 was available only to a newly established industrial undertaking that had begun to manufacture or produce articles within the statutory period, and the relevant inquiry was when the undertaking began producing the end product for which it had been set up. The undertaking was established for production of sodium carboxy methyl cellulose, while cellulose pulp was only a component used in that process. Although cellulose pulp was found to be a marketable commodity, the plant for its manufacture was not an independent undertaking but part of the integrated project for producing the final product. The commencement of production of cellulose pulp did not, by itself, amount to commencement of production of the relevant articles within the meaning of section 84, especially where there was no phased programme showing separate commercial stages of production.

Conclusion: The assessee was entitled to relief under section 84 for assessment year 1966-67, because the relevant commencement date was when production of the final product, C.M.C., began in assessment year 1962-63, not when cellulose pulp production started in March 1961.

Ratio Decidendi: For the purpose of section 84, the expression "manufacture or produce articles" refers to the final product of the new industrial undertaking, and the production of an intermediate marketable commodity does not start the statutory period unless the undertaking is set up on a phased programme in which that commodity itself is the intended output of the relevant stage.

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