Industrial undertaking exemption limited to profits directly derived from the undertaking, not allied spare-parts trading income.

Relief under section 15C is confined to profits or gains directly derived from the industrial undertaking itself, and the provision must be strictly construed. Income arising from a source distinct from the undertaking cannot qualify merely because it is commercially connected with the manufacturing business. On that principle, profits from the purchase and sale of spare parts not manufactured in India were treated as a separate trading activity, and the assessee's contractual obligation to import and sell those parts did not bring the income within the industrial undertaking. The exemption was therefore unavailable, and the issue was decided against the assessee and in favour of the Revenue.

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Issues: Whether profits arising from the purchase and sale of spare parts, not manufactured in India, formed part of the income derived from an industrial undertaking so as to qualify for relief under section 15C of the Indian Income-tax Act.

Analysis: Relief under section 15C is confined to profits or gains derived from the industrial undertaking itself. The provision is intended to encourage new industrial undertakings, but its language requires a strict construction. Income referable to a source distinct from the undertaking cannot be brought within the exemption merely because it is connected with, or commercially convenient to, the manufacturing business. The fact that the assessee had contractual obligations to import and sell spare parts did not convert that separate trading activity into part of the industrial undertaking. The decisive test is whether the profits are derived from the undertaking, not whether the ancillary activity is commercially allied to it.

Conclusion: The profits from purchase and sale of spare parts were not eligible for relief under section 15C and the question was answered against the assessee and in favour of the Revenue.

Ratio Decidendi: Exemption for profits of an industrial undertaking is available only to income directly derived from the undertaking itself, and not to income from a separate though allied trading activity.

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