Separate industrial unit qualifies for tax exemption where new plant, premises and books show no reconstruction of existing business.

A separately established press division with its own premises, new plant and machinery, and separate books of account was treated as a new industrial undertaking, not as a reconstruction or splitting up of an existing business. The relevant exemption was available because the unit satisfied the statutory conditions that no previously used building, machinery or plant had been transferred and that the new set-up operated as a distinct industrial unit. Its output being used internally as a component in the assessee's own motor cars did not alter that character, since the unit replaced outside purchases with in-house manufacture on a broad commercial view.

---

---

Issues: Whether the press division set up by the assessee was an industrial undertaking entitled to exemption under section 15C of the Indian Income-tax Act, 1922, and section 84 of the Income-tax Act, 1961, or whether it was formed by reconstruction of an existing business.

Analysis: The undertaking was established as a new unit with separate premises, new plant and machinery, and separate books of account. The conditions that the unit was not formed by splitting up or reconstruction of an existing business, and that there was no transfer of previously used building, machinery or plant, were found to be satisfied. The fact that the body panels manufactured by the new unit were consumed as component parts in the assessee's own motor cars did not alter the character of the unit, because the prior purchase of those materials from outside had been replaced by manufacture through a distinct and independent industrial set-up. On a broad commercial view, this did not amount to reconstruction of a business already in existence.

Conclusion: The press division was held to be a new industrial undertaking, and the assessee was entitled to exemption under the relevant provisions.

Ratio Decidendi: A separately established manufacturing unit with new plant, machinery, premises, and books of account is not treated as a reconstruction of an existing business merely because its output is used internally as a component in the assessee's final product.

---