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Issues:
1. Interpretation of section 15C of the Indian Income-tax Act, 1922 regarding exemption for profits or gains derived from industrial undertakings. 2. Determination of eligibility for exemption under section 15C based on the specific financial details of the new industrial unit. 3. Analysis of the treatment of unabsorbed depreciation and development rebate in relation to the claim for exemption under section 15C. Analysis: The judgment by the High Court of Madras, delivered by Justice Ramaprasada Rao, pertains to the interpretation and application of section 15C of the Indian Income-tax Act, 1922, concerning the exemption of profits or gains from industrial undertakings. The case involved a public limited company engaged in the manufacture and sale of yarn, which had set up a new industrial unit meeting the requirements of section 15C(2) during the accounting year ending March 31, 1959. The primary issue revolved around the eligibility of the assessee for exemption under section 15C for the assessment year 1961-62. The Income-tax Officer initially rejected the claim, citing a discrepancy between the income of the new unit and the unabsorbed depreciation and development rebate. The Appellate Assistant Commissioner disagreed, emphasizing that the new unit's positive income in the previous year precluded the need to carry forward the depreciation for the current year. However, the Appellate Tribunal overturned the decision, reinstating the Income-tax Officer's position. The crux of the matter lay in whether the new unit's profits alone should determine eligibility for exemption under section 15C, irrespective of the overall income of the assessee. The Tribunal referred a legal question to the High Court on this issue. The court delved into the legislative intent behind section 15C, highlighting that the exemption was tied to the profits and gains of the new industrial undertaking, distinct from those of the assessee. The judgment stressed the need for the new unit to operate independently for the purpose of claiming exemption under section 15C, without conflating its finances with those of the assessee. In analyzing the financial specifics, the court noted that the new unit did not generate taxable income during the relevant assessment year, rendering it ineligible for exemption under section 15C. The judgment underscored the statutory requirement for the new unit to earn a profit on its own merit to avail of the exemption, without relying on the overall income of the assessee. Ultimately, the court upheld the Income-tax Officer's computation of the new unit's profits, concurring with the Tribunal's decision. The judgment concluded that the assessee was not entitled to the exemption under section 15C for the assessment year in question, based on the specific financial circumstances of the new industrial unit.
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