New industrial undertaking test: separate electrolysis plant producing marketable caustic soda qualifies for section 15C relief.

An electrolysis plant established in a separate building under a separate licence, with separate capital and producing caustic soda as an independently marketable raw material, was treated as a new industrial undertaking for section 15C purposes. The relevant test was whether the unit was formed by splitting up or reconstructing an existing business; mere consumption of the product in the assessee's paper business did not, by itself, make the unit part of that business. Reading section 15C in its broad commercial sense and to promote new industry, the plant was held not to be a mere reconstruction of the earlier business, and relief was available.

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Issues: Whether the electrolysis plant set up by the assessee for manufacture of caustic soda was a new industrial undertaking within the meaning of section 15C of the Indian Income-tax Act, 1922, so as to qualify for relief.

Analysis: The relevant inquiry was whether the plant was formed by splitting up or reconstruction of an existing business. The plant was set up in a separate building under a separate licence, employed separate capital, and produced caustic soda as an independent marketable raw material. The fact that the product was consumed in the assessee's paper business did not by itself make the undertaking part of the existing business. The expressions used in section 15C were to be understood in their broad commercial sense, and the purpose of the provision was to encourage new industries. On the facts, the new plant was not a mere reconstruction of the earlier paper business.

Conclusion: The electrolysis plant was a new industrial undertaking and the assessee was entitled to relief under section 15C.

Ratio Decidendi: A separately established unit producing an independently marketable raw material is a new industrial undertaking for section 15C purposes unless it is shown to be formed by splitting up or reconstruction of an existing business.

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