Reconstruction of business test under section 15C: genuine asset purchase of a going concern did not defeat exemption.

Section 15C relief was available because the company was not formed by splitting up or reconstructing an existing business. The transaction was a genuine sale of the vendor firm's assets, plant, machinery, furniture, tools and goodwill; debts, liabilities and outstandings were not taken over, and the vendor's business ceased after the sale. Reconstruction requires continuity of the same business by substantially the same persons in altered form, which was not shown on these facts. The company was therefore entitled to the exemption claimed under section 15C.

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Issues: Whether the assessee company was entitled to exemption under section 15C of the Income-tax Act as a newly established industrial undertaking, or whether the taking over of the vendor firm's business amounted to reconstruction of a business already in existence.

Analysis: The exemption under section 15C was available only where the undertaking was not formed by the splitting up or reconstruction of a business already in existence or by transfer to a new business of building, machinery or plant used in a business carried on before the relevant date. On the facts, the transaction was found to be an out-and-out sale of assets, plant, machinery, furniture, tools and goodwill, while the credits, outstandings, debts and liabilities were not taken over. The business of the vendor firm ceased after the sale, and there was no material to show that the same persons continued substantially the same business in altered form. Reconstruction requires continuity of the same business and substantially the same persons, whereas a genuine sale excludes that concept.

Conclusion: The assessee company was not formed by reconstruction of a business already in existence and was entitled to the relief claimed under section 15C.

Ratio Decidendi: A mere purchase of the assets and goodwill of an existing business does not amount to reconstruction unless substantially the same business is continued by substantially the same persons in altered form.

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