TMI Blog1964 (2) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing industrial gases. Pending the installation of the factory the assessee up to the preceding assessment year was having dealings only in carbide, machinery parts and other industrial gases. During the accounting period the installation of the factory had been completed, and the assessee started the manufacture of industrial gases. The activities of the assessee with regard to the manufacturing business and commercial dealings were found to be carried on as two completely separate units for which separate sets of account books were also maintained. The result of the manufacturing unit was a loss and there was substantial profit in its commercial dealings. In view of the loss in the manufacturing unit the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial activities could not be deemed to be profits or gains derived from any industrial undertaking within the meaning of section 15C(1). The Tribunal was of the view that the commercial activities of the assessee were entirely separate from its business of manufacturing industrial gases and did not fall in any of the categories mentioned in sub-clause (ii) of sub-section (2) of section 15C. The Tribunal held that the benefits of section 15C were allowable to a new industrial undertaking which satisfied the conditions laid down in sub- clause (ii) of sub-section (2) of that section. The assessee's claim for exemption was, therefore, disallowed. The following questions of law have been framed by this court: (1) On the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parate businesses. The main object, Mr. Mitra states, of the assessee company is to produce and sell gas and an essential part of its undertaking is to create a market for gas manufactured by it. In creating such market until its factory was set up the assessee-company sold some of the contemplated products in the year of account before its production began. In other words, merchanting of other people's products and of its own products on the facts of the present case should be treated as one and the same business. Before we proceed any further it would be convenient to set out in full section 15C of the Indian Income-tax Act as it stood at the material time and underline the portions thereof more relevant for our purposes: 15C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt following the previous year in which the assessee begins to manufacture or produce articles and for the four assessments immediately succeeding. Our attention has been invited to two decisions of the Madras High Court on section 15C of the Act. I shall first briefly refer to the facts in these two cases and the decisions given therein. In Ashok Motors Ltd. v. Commissioner of Income-tax [1961] 41 I.T.R. 397the assessee was a public limited company, which commenced business in February, 1948, as a dealer in Austin cars and trucks and spares. Early in 1949, it began to import parts from abroad and assemble cars at its factory. The assessee derived profits from its industrial undertaking as well as other trade activities. The total p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h company under the terms of which it became entitled to import parts and components for assembling cars and tractors. The assessee imported spare parts, used some of them for assembling cars and sold some as spare parts. In computing the relief to which the assessee was entitled under section 15C, the Income- tax Officer excluded the profit derived by the company from the sale of spare parts. The assessee contended that the business of importing and selling spare parts was part of the industrial undertaking of the company, that the purchase of spare parts was obligatory under the terms of the agreement and, as such, the profit derived from the sale of spare parts were entitled to exemption under section 15C. The Madras High Court holds tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posite business, part of which is done through the industrial undertaking and the rest is non-industrial in character, the exemption under section 15C is confined only to the profits derived from the industrial undertaking: Commissioner of Income-tax v. Standard Motor Products of India Ltd. [1962] 46 I.T.R. 814, 818, 819; Ashok Motors Ltd. v. Commissioner of Income-tax [1961] 41 I.T.R. 397, 403, 405. (4) There is no difference in this legal position even if the non-industrial portion of the business activities of the assessee is allied to or intimately associated with the business carried on through the industrial undertaking: Commissioner of Income-tax v. Standard Motor Products of India Ltd. [1962] 46 I.T.R. 814, 818, 819 (5) For pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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