Commercial production date governs section 84 relief; later plant additions do not restart the relief period or bypass development rebate.

Section 84 relief depended on when the industrial undertaking first began commercial production, not on later machinery additions. The relevant commencement year was the year in which production started on a commercial scale, so a subsequent expansion did not create a fresh starting point for the relief period. Relief was available for the undertaking as a unit and could not be split by reference to later-installed Hooker Cells. In computing eligible profits, section 84 required profits to be worked out under Chapter IV-D, including development rebate under section 33, before any deduction for tax relief. On that basis, the relief period had already commenced earlier and no further relief was available for the later year or the additional plant.

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Issues: (i) Whether the first assessment year for relief under section 84 of the Income-tax Act, 1961 was 1957-58 or 1958-59, and whether the assessee could claim the relief for assessment year 1962-63; (ii) Whether the assessee could obtain relief under section 84 in respect of the 30 Hooker Cells installed during the previous year ended 31 March 1958; (iii) Whether development rebate had to be deducted while computing the profits and gains of the new industrial undertaking for the purpose of section 84, and whether any relief was allowable for that undertaking.

Issue (i): Whether the first assessment year for relief under section 84 of the Income-tax Act, 1961 was 1957-58 or 1958-59, and whether the assessee could claim the relief for assessment year 1962-63.

Analysis: The relevant test under section 84(7) was the year in which the industrial undertaking began to manufacture or produce articles. The undertaking had started commercial production with 30 Hooker Cells during the previous year ended 31 March 1957. The later addition of more cells only expanded the unit and did not postpone the commencement of production. Once production on a commercial scale began, the statutory period started to run from that year.

Conclusion: The first year was 1957-58, and the assessee was not entitled to relief under section 84 for assessment year 1962-63.

Issue (ii): Whether the assessee could obtain relief under section 84 in respect of the 30 Hooker Cells installed during the previous year ended 31 March 1958.

Analysis: Relief under section 84 was available to the industrial undertaking as a unit and not by splitting the undertaking according to later additions to its machinery. The undertaking had already begun to function and produce articles with 30 Hooker Cells in the earlier year. The statute did not permit a fresh or separate relief merely because additional cells were installed later.

Conclusion: The assessee was not entitled to split the relief by reference to the later 30 cells, and the claim failed.

Issue (iii): Whether development rebate had to be deducted while computing the profits and gains for the purpose of section 84, and whether any relief was allowable for the new industrial undertaking.

Analysis: Section 84(5) required computation of profits and gains in accordance with Chapter IV-D of the Act, and section 33 formed part of that computation. Development rebate therefore had to be taken into account while determining the profits of the undertaking. The statutory relief under section 84 could operate only on positive profits remaining after such computation. On that basis, the development rebate exhausted the available profit of the second plant.

Conclusion: Development rebate had to be deducted, and no relief was available under section 84 in respect of that undertaking for the relevant year.

Final Conclusion: The reference was answered against the assessee on all the substantial questions, leaving the revenue successful on the merits of the tax relief claims.

Ratio Decidendi: For the purpose of section 84, the relevant point is the commencement of commercial production by the industrial undertaking as a unit; later expansion does not postpone that date, and profits eligible for relief must be computed after giving effect to the deductions mandated by Chapter IV-D, including development rebate.

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