Industrial profit exemption applies to both firm and partners as separate assessees under the Income-tax Act.

A registered firm was held entitled to exemption under section 15C of the Income-tax Act, 1922 when computing tax under section 23(5)(a)(i), even though the same exempt profits were also considered in the partners' individual assessments. The legal basis was that the firm and its partners are distinct assessees; tax paid by partners is on their own total income and cannot be treated as tax paid on behalf of the firm. The scheme of the Act showed that exempt industrial profits should not suffer tax in the hands of any assessee, so the exemption could be claimed in each relevant assessment to the extent those profits formed part of that assessee's income.

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Issues: Whether a registered firm was entitled to exemption under section 15C of the Income-tax Act, 1922, in computing the tax payable by it under section 23(5)(a)(i), notwithstanding that the exempted profits had also been taken into account in the individual assessments of the partners.

Analysis: Section 15C granted relief to an assessee on profits derived from an industrial undertaking. A registered firm was an assessee within section 2(2), and after the amendment to section 23(5) it was directly liable to income-tax under section 23(5)(a)(i). The tax payable by the partners on their individual assessments was tax on their own total income and not tax paid on behalf of the firm. The firm and the partners were separate assessees, and the benefit of section 15C could therefore be claimed by each assessee in its or his own assessment to the extent the exempted profits formed part of that assessee's income. The legislative scheme showed an intention that exempted profits should not bear tax in the hands of any assessee.

Conclusion: The registered firm was entitled to claim exemption under section 15C in determining the tax payable by it under section 23(5)(a)(i), and the question referred was answered in the affirmative, in favour of the assessee.

Ratio Decidendi: Where a registered firm and its partners are distinct assessees, exemption granted on industrial profits is available in each assessment to the extent those profits are included in that assessee's income, and tax on the partners' separate liability cannot be treated as tax paid on behalf of the firm.

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