Court rules press division as 'industrial undertaking' under Income-tax Act, rejects reconstruction claim.

Commissioner Of Income-Tax Versus Hindustan Motors Limited

Commissioner Of Income-Tax Versus Hindustan Motors Limited - [1977] 107 ITR 164 Issues involved:
The judgment involves the interpretation of whether the press division set up by the assessee qualifies as an 'industrial undertaking' under section 15C of the Indian Income-tax Act, 1922, and section 84 of the Income-tax Act, 1961, for the purpose of claiming exemption on profits.

Judgment Details:

Issue 1:
The assessee, a manufacturer of motor cars, established a new industrial unit called "press division" for manufacturing "body panels" for motor cars. The Income-tax Officer disallowed tax relief under section 15C(1) and section 84 for the relevant assessment years, stating that the body panels were used as component parts of motor cars, not sold in the market. However, the Appellate Assistant Commissioner allowed the appeals, and the Appellate Tribunal upheld the decision. It was found that the conditions under section 15C(2)(ii) and (iii) were met, and the new unit was not formed by splitting up or reconstruction of an existing business.

Issue 2:
The contention was made that the new unit constituted a reconstruction of an existing business, citing precedents like Commissioner of Income-tax v. Textile Machinery Corporation. However, the court disagreed, emphasizing that the new unit was necessary for manufacturing motor cars, as the assessee was not a manufacturer of body panels. The court held that the new industrial undertaking did not fall under the expression "reconstruction of business already in existence" in the relevant sections. Precedents like Commissioner of Income-tax v. Electric Construction and Equipment Co. were considered, supporting the view that a new industrial undertaking should not be considered a reconstruction if essential for production.

In conclusion, the court rejected the revenue's contentions and ruled in favor of the assessee, affirming that the press division qualified as an 'industrial undertaking' under the specified sections. The court declined to award costs considering the circumstances of the case. Judge Hazra concurred with the judgment.