RAJAPALAYAM MILLS LTD. vs COMMISSIONER OF INCOME TAX, MADRAS

The Supreme Court held that under Section 15C of the Income Tax Act, 1922, an assessee can only claim exemption for profits derived from a new industrial undertaking if there are actual profits in the relevant assessment year. The Court clarified that if there are no profits or gains from the new unit, no exemption can be claimed, as the provision is designed to encourage new industrial ventures by allowing a tax exemption of up to 6% of the capital employed. The appeals were allowed, overturning the decisions of the lower authorities which had denied the exemption.