Distinct industrial undertaking test determines section 15C relief where new plant and machinery show a genuine new unit.

For relief under section 15C of the Indian Income-tax Act, 1922, the decisive test is whether a new unit is a distinct industrial undertaking established with substantial new plant and machinery, rather than a continuation, reconstruction, or transfer of an existing business. Manufacture of the same goods, common accounts, or later use of some old machinery are not conclusive by themselves. On the facts stated, the Cossipore factory was set up as a separate unit with substantial new machinery, and any later transfer of old machinery was only insignificant. It therefore did not fall within the exclusion in section 15C(2)(i), and relief under section 15C(1) was available.

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Issues: Whether the Cossipore factory was formed by reconstruction of an existing business or by transfer of previously used machinery so as to fall within the exclusion in section 15C(2)(i) of the Indian Income-tax Act, 1922, and whether the assessee was entitled to relief under section 15C(1).

Analysis: The applicable test is whether the new unit, viewed in a broad commercial sense, was a distinct industrial undertaking established on the relevant date, or merely a continuation, splitting up, reconstruction, or transfer of an existing business. Manufacture of the same goods in both units, common accounts, or later transfer of some old machinery are not decisive by themselves. The material consideration is whether the new unit was set up with substantial new plant and machinery and whether any transferred machinery formed only an insignificant part of the new undertaking. On the facts found, the Cossipore factory was initially established with new machinery of substantial value, ran as a separate unit along with the old factory for some time, and any later use of machinery from the old factory was not enough to show that the new unit had been formed by reconstruction or transfer of an existing business.

Conclusion: The Cossipore factory was a new and independent industrial undertaking and did not fall within section 15C(2)(i); the assessee was entitled to relief under section 15C(1).

Ratio Decidendi: For relief under section 15C, the decisive question is whether the new unit is a distinct industrial undertaking set up with substantial new assets, and not one formed by reconstruction of an existing business or by transfer of previously used machinery that constitutes more than an insignificant part of the new unit.

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