TMI Blog1960 (10) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... n should be granted under section 15C of the Act to the extent of six per cent. of the capital employed in the industrial undertaking, though the above said income was not entirely derived from the industrial undertaking. It may be mentioned that the Department proceeded on the basis that the assessee did not derive the income solely from the industrial undertaking but that it was in part derived also from activities such as trade in purchase and sale of cars and spare parts and certain commission received from foreign companies who also supplied the goods to the assessee under the contract of agency. The assessee did not, however, maintain separate accounts for the industrial undertaking, and its nonindustrial activity. But certain figures were furnished by the assessee which were accepted by the Department as correctly representing the profits under the two heads.Appeals to the Assistant Commissioner and to the Tribunal failed. On the application of the assessee, the following questions have been referred to us: (1) The assessee trading in imported motor vehicles as also in such vehicles assembled in India out of imported parts in an industrial undertaking, whether the whole o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king. The principal ground that has been advanced before us is (which also appears to have been advanced before the Department though not with such clearness) that the industrial undertaking is the unit of assessment for the purpose of the Act and that being so, the section does not call for any distinction being made between the various parts of the business that might be carried on by the industrial undertaking or for the separation of that portion of the profits or gains referable to the industrial operations. In short, the learned counsel on behalf of the assessee contends that so long as there is an industrial undertaking which comes within the description contained in section 15C(2) of the Act, it is not open to the Department to question the source of the profits or gains, whether such profits or gains are derived from the industrial part or from other parts of the business carried on. On the question whether an industrial undertaking per se is the unit of assessment, there can hardly be any room for two opinions. It is not. Section 14 and the following sections of the Act deal with different classes of exemptions. Each one of these sections starts somewhat in this manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial undertaking, would not only be against the clear intendment of the section but would also be opposed to any principle that we can conceive. We have pointed out that the object of granting this exemption is to encourage the establishment of new industrial undertakings. That would be wholly defeated if the exemption is to be granted in respect of the profits derived from business of other kinds even though the same assessee conducts such businesses side by side with the industrial undertaking. When questioned further on this aspect of the matter, the learned counsel was compelled to concede that the argument he advances cannot be applied in its full amplitude. For instance, suppose an assessee who assembles cars, as in the present case, which business is an industrial undertaking, also buys and sells shares, and derives profits or gains from such business as well, a business which is wholly disassociated and has indeed no concern whatsoever with the business of the industrial undertaking, and assuming further that there is a loss in the industrial undertaking while a profit accrues in respect of the other business, the learned counsel was compelled to agree that it would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be dealt with. It is admitted that in the previous assessment year a sum of ₹ 2,48,483, was left over as unabsorbed depreciation to be carried forward. In the next assessment year 1951-52, the total profit of the composite business of the assessee came to ₹ 4,44,462. It is undeniable that this depreciation has to be set off against the profits of the later year in computing the profits and gains of business under section 10 of the Act. What has been done by the Income-tax Officer is to apply this unabsorbed depreciation, which it is admitted relates to the industrial undertaking, against the profits from the industrial undertaking which was computed at ₹ 2,53,190. That left a balance of profits of ₹ 4,715, which being less than six per cent. of the capital employed in the industrial undertaking, was exempted from tax. The other portion of the profit of the business of the assessee, that is, from the non-industrial and other activities, was computed at ₹ 1,91,264, which was brought to tax in its entirety. Now, it is seen from section 15C itself, sub-section (3) thereof, that the profits or gains of an industrial undertaking to which this section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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