Second-hand machinery did not defeat industrial exemption where the transfer bar covered only used plant from the assessee's own business.

Section 15C(2)(i) was construed as denying exemption only where a new industrial undertaking arose from splitting up, reconstruction, or transfer of plant or machinery previously used in another business. The High Court held that "transfer" in this context meant movement of used machinery from the assessee's own old business to the new undertaking, not a purchase of second-hand machinery from the open market. On that interpretation, acquisition of a second-hand steam engine did not disqualify the assessee, and the exemption was available.

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Issues: Whether purchase of a second-hand steam engine from the open market disentitled the assessee to exemption under section 15C(2)(i) of the Indian Income-tax Act, 1922.

Analysis: The provision was intended to encourage new industrial undertakings and to deny the benefit only where the undertaking was formed by splitting up, reconstruction, or transfer to the new business of plant or machinery previously used in another business. The expression "transfer" in this context was construed as a transfer of used machinery from the assessee's old business to the new undertaking, not as a purchase of second-hand machinery from the open market. On that reading, the mere acquisition of some second-hand machinery did not attract the disqualification in clause (i).

Conclusion: The assessee was entitled to the exemption under section 15C(2)(i); the question was answered in the affirmative in favour of the assessee.

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