Strict construction of industrial tax exemption confined relief to profits derived from the undertaking itself, not separate allied business income.

Profits exemption under section 15C was confined strictly to income derived from the industrial undertaking itself. The court held that the manufacture and sale of industrial gases and the separate commercial sale of equipment and allied goods constituted distinct undertakings because each could operate independently of the other. Applying a strict construction of section 15C, it further held that profits from the non-industrial business were not exempt merely because they were incidental or associated with the factory activity. The commercial activity was not essential to the existence of the industrial undertaking, so the exemption did not extend to it and the reference was answered against the assessee.

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Issues: (i) Whether the manufacture and sale of industrial gases and the sale of equipment for use of such gases constituted two separate undertakings. (ii) Whether the profits from the sale of gases and equipment were exempt under section 15C of the Indian Income-tax Act, 1922.

Issue (i): Whether the manufacture and sale of industrial gases and the sale of equipment for use of such gases constituted two separate undertakings.

Analysis: The exemption under section 15C was confined to profits derived from the industrial undertaking itself and did not extend to income from non-industrial business carried on by the assessee. The commercial dealings in machinery parts and other allied goods were found capable of being carried on independently of the factory and were not carried on through the industrial undertaking. The factory, when set up, could function even if the commercial business ceased, and the commercial business could continue even if the factory was never installed.

Conclusion: The activities constituted separate undertakings.

Issue (ii): Whether the profits from the sale of gases and equipment were exempt under section 15C of the Indian Income-tax Act, 1922.

Analysis: Section 15C was construed strictly. The benefit was limited to profits directly derived from the industrial undertaking and not to profits merely incidental, ancillary, or associated with it. The real test was whether the non-industrial activity was essential to the subsistence of the industrial undertaking. On the facts, the assessee's commercial activity was not essential to the existence of the factory-based undertaking and did not merge with it for the purpose of exemption.

Conclusion: The profits from the sale of gases and equipment were not exempt under section 15C.

Final Conclusion: The reference was answered against the assessee, and the Tribunal's view denying exemption was sustained.

Ratio Decidendi: For section 15C, exemption is limited strictly to profits derived from the industrial undertaking itself, and income from a separate non-industrial business remains taxable even if it is allied to or associated with the undertaking.

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