Commencement of industrial production for tax relief depends on first commercial manufacture, with development rebate deducted first.

Relief under section 84 attached from the assessment year relevant to the year in which the industrial undertaking first began commercial manufacture or production. Because the first thirty hooker cells were installed and used in the previous year ended 31 March 1957, commencement was treated as having occurred in 1957-58, not 1958-59, and no relief was available on the later-year basis. The undertaking was a single commercial unit, so later completion of additional cells did not justify partial or fractional relief. Profits for the relief had to be computed after deducting development rebate, leaving no entitlement on the resulting figures.

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Issues: (i) Whether the assessee's industrial undertaking first began to manufacture or produce articles in assessment year 1957-58 or 1958-59 for the purpose of relief under section 84 of the Income-tax Act, 1961; (ii) whether the assessee could claim partial relief in respect of the thirty hooker cells completed in the later year; (iii) whether development rebate had to be deducted while computing the profits and gains of the undertaking for relief under section 84.

Issue (i): Whether the assessee's industrial undertaking first began to manufacture or produce articles in assessment year 1957-58 or 1958-59 for the purpose of relief under section 84 of the Income-tax Act, 1961.

Analysis: Relief under section 84 became available for the assessment year relevant to the previous year in which the undertaking began to manufacture or produce articles. The finding was that commercial production had already commenced when the first thirty hooker cells were installed and used in the previous year ended 31 March 1957. The fact that the rectifier and remaining cells were completed later did not postpone the commencement of the undertaking for the purpose of the statutory relief.

Conclusion: The first eligible assessment year was 1957-58, not 1958-59, and the assessee was not entitled to relief in assessment year 1962-63 on this issue.

Issue (ii): Whether the assessee could claim partial relief in respect of the thirty hooker cells completed in the later year.

Analysis: The undertaking had already commenced as a single commercial unit in 1957-58 when the initial cells enabled production. Later additions were only an expansion of the same undertaking. The statutory benefit could not be split up or allowed fractionally with reference to successive additions of machinery or cells.

Conclusion: Partial relief was not admissible, and the claim based on the later-installed thirty hooker cells failed.

Issue (iii): Whether development rebate had to be deducted while computing the profits and gains of the undertaking for relief under section 84.

Analysis: The profits and gains eligible for the special relief had to be computed after giving effect to development rebate. The principle applied was that deductions forming part of the statutory computation of business income must be made before determining whether any profits remain on which the relief can operate. The earlier decision governing similar special-deduction computation was applied, and the contrary view was rejected.

Conclusion: Development rebate was required to be deducted before computing the relief, and the assessee was not entitled to relief on the resulting figures.

Final Conclusion: The appeal failed on all the questions decided, as the assessee's undertaking had commenced earlier than claimed and no separate or residual relief was available after the statutory computation of profits and gains.

Ratio Decidendi: For relief under section 84, the relevant commencement is the point at which the undertaking first begins commercial manufacture or production, and the eligible profits must be computed after statutory deductions such as development rebate are given effect.

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