Indian Kanoon - Search engine for Indian Law

1. This is a reference made to the High Court under S. 66(1) of the Indian Income tax Act, 1922. The question of law referred to High Court for its opinion thereon is as follows :-

"Whether, on the facts and in the circumstances of the case, the assessee company was entitled to the relief contemplated under S. 15C of the Indian Income-tax Act, 1922 ?"

A few facts may be stated :

2. We are concerned in this reference for the years 1960-61 and 1961-62, the corresponding accounting period being the years ending 31-3-1960 and 31.3.1961 respectively. The assessee company was incorporated on 9th September 1958 as a private limited company for the purposes of various objects mentioned in the Memorandum of Association and in particular in clause III thereof. The company duly applied to the proper authorities for the grant of an industrial licence, which licence was subsequently granted by the Government of India. The company proposed to carry on its business in collaboration with a well-known German concern viz. M/s. Farbenfabriken Bayer A.G., Leverkusen, West Germany. On the formation of the company and the subsequent grant of a licence to carry on the business by the Government, the assessee company investigated into the possibility of immediately starting the business. Due to difficulties in obtaining land and construction materials as also to save time, the assessee decided to enter into an agreement with another company called the Progressive Chemical Corporation Private Limited (hereinafter referred as "Progressive"). Progressive had its own premises and machinery and at those premises it was carrying on the business of manufacture of some chemicals. A draft agreement was drawn up between progressive and the assessee company and although it was not executed, it was on the basis of the terms and conditions thereof that the assessee subsequently carried on its business in the manufacture of chemicals in the factory premises belonging to Progressive. As a matter of fact on 26th September 1960 the draft agreement with Progressive was placed before the Board of Directors of the assessee company when it was decided that they should await the opinion of one Director (then out of station) before the draft could be approved. It is the position admitted before the Tribunal that the draft agreement had not been executed although it is also the finding of the Tribunal that the assessee carried on its activities in these premises on the basis of the terms and conditions contained in the draft agreement.