Commencement of manufacture under tax exemption rules starts only with usable commercial production, not trial or intermediary output.

Section 15C relief for a new industrial undertaking begins only when the undertaking first reaches regular manufacture or production of articles capable of use in the intended finished commercial product. Mere preparation of an intermediary or trial product, requiring further testing before it can become saleable, does not mark the commencement of manufacture or production. Applying that construction, the undertaking was treated as having begun production only when usable finished goods were first made, so exemption was available for the relevant assessment year.

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Issues: Whether the assessee was entitled to exemption under section 15C of the Indian Income-tax Act, 1922, for the assessment year 1960-61 on the footing that manufacture or production had begun only when the saleable finished product became capable of being produced.

Analysis: Section 15C granted relief to new industrial undertakings for the first five assessment years beginning with the year following the previous year in which the assessee began to manufacture or produce articles. The decisive question was when such manufacture or production can be said to have commenced. Mere preparation of an intermediary or trial product, which had to undergo testing before it could be used for the final saleable product, was held insufficient to mark the beginning of manufacture within the meaning of the provision. The expression "articles" was construed in the context of the statutory object, namely encouragement of new industrial undertakings by exempting profits once the undertaking reached a stage where it could produce a usable finished product capable of being sold.

Conclusion: The assessee began to manufacture or produce articles only when it commenced regular production of the usable product, and the exemption under section 15C was therefore available for the assessment year 1960-61. The answer to the referred question was in the affirmative, in favour of the assessee.

Ratio Decidendi: For the purpose of section 15C, manufacture or production begins only when the undertaking first produces articles that are actually capable of being used for the intended finished product and commercial production, not when only a trial or intermediary product is made.

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