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Issues Involved:
1. Whether the entire income of the assessee for the assessment years 1951-52 and 1953-54 is exempt under section 15C of the Income Tax Act. 2. Whether the carry forward of Rs. 2,48,483 for the assessment year 1950-51 is deductible only against the profits of the succeeding year 1951-52 identifiable as from the industrial undertaking section. Detailed Analysis: Issue 1: Exemption of Entire Income under Section 15C The court examined whether the assessee's entire income for the assessment years 1951-52 and 1953-54, being less than six percent of its capital, is exempt under section 15C of the Income Tax Act. The assessee, a public limited company dealing in motor vehicles and spare parts, claimed that the total income should be exempt from tax under section 15C, which provides tax exemption for newly established industrial undertakings. The Department contended that the income was not solely derived from the industrial undertaking but also from trading activities and commissions from foreign companies. The court clarified that section 15C applies only to profits derived from the industrial undertaking and not from other business activities. The court stated, "The exemption must be confined to the profits or gains derived from the undertaking." The court rejected the argument that the industrial undertaking should be treated as a unit of assessment, emphasizing that the exemption is granted to the assessee, not the undertaking. The court concluded that only the profits from the industrial undertaking are eligible for exemption, stating, "The conclusion is irresistible that in the case of even such composite business carried on by the assessee, it is only the profits of the industrial undertaking that would be eligible for the exemption." Therefore, the first question was answered against the assessee. Issue 2: Carry Forward of Unabsorbed Depreciation The second issue involved the treatment of unabsorbed depreciation of Rs. 2,48,483 from the previous year (1950-51) in the assessment year 1951-52. The court examined how this unabsorbed depreciation should be dealt with under section 15C. The Income Tax Officer had applied the unabsorbed depreciation against the profits from the industrial undertaking, leaving a balance of Rs. 4,715, which was exempted from tax. The remaining profit from non-industrial activities was taxed. The court noted that section 15C(3) requires the profits of the industrial undertaking to be computed in accordance with section 10, which involves deducting the unabsorbed depreciation. The court explained that this involves a notional deduction of the unabsorbed depreciation more than once but effectively only once in determining the taxable profits. The court stated, "The procedure adopted is in conformity with the section." The court rejected the assessee's demand to exempt the entire sum of Rs. 1,95,979, which was the total profit minus the unabsorbed depreciation, and confirmed that only the amount of Rs. 4,715 was correctly exempted. Thus, the second question was also answered against the assessee. Conclusion The court concluded that the assessee's entire income is not exempt under section 15C, and only the profits derived from the industrial undertaking are eligible for exemption. Additionally, the unabsorbed depreciation must be deducted in computing the profits of the industrial undertaking, and only the resultant amount within the six percent limit of the capital employed is exempt. Both questions were answered against the assessee, and the assessee was ordered to pay the costs of the Department, with a counsel's fee of Rs. 250.
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