Case: Ashok Leyland Limited Vs. Commissioner of Income Tax

The assessee is engaged in the business of manufacturing Ashok Leyland trucks and also spare parts of those vehicles. It was also importing the spare parts from abroad and selling the same to the persons who have purchased the trucks from it. As and when the manufacture of spare parts by the assessee increased, there was a corresponding reduction in the quantum of imports of spare parts. Some profit was earned by the assessee on the sale of spare parts also besides the profit accruing from the sale of vehicles. The volume of turnover and income relating to sale of spare parts is of course far smaller compared to the turnover and income arising from the sale of vehicles. The question is whether the assessee is entitled to relief under section 80E (for the assessment year 1966-67) and section 80-I (for the assessment year 1967-68) on the income earned by it from import and sale of spare parts. The Income-tax Officer took the view that the import and sale of spare parts is not attributable to the industry carried on by the assessee and, therefore, the income arising therefrom does not qualify for the benefit of section 80E/80-I. The Tribunal, however, held in favour of the assessee whereupon the aforesaid question was referred to the High Court at the instance of the Revenue. The High Court has disagreed with the view taken by the Tribunal and has answered the question in favour of the Revenue and against the assesseeIt is brought to our notice by learned counsel for the appellant-assessee that for the subsequent assessment years 1968-69 and 1969-70, an identical reference was made under section 256 and on this occasion the High Court has answered the very same question, between the very same parties, in favour of the assessee and against the Revenue following the decision of this court in Cambay Electric Supply Industrial Co. Ltd. v. CIT 1978 (113) ITR 84.  The later decision of the High Court is reported in CIT v. Ashok Leyland Ltd. 1981 (130) ITR 900 (Mad) . Learned counsel for the assessee commended the reasoning of the said decision for our acceptance

Reasoning: We are of the opinion that reading the relevant portion of sub-section (1) of section 80-I along with the definition of "priority industry" in section 80B(7), it must be held that the profits and gains arising from import and sale of spare parts was attributable to the industry (priority industry) carried on by the assessee. On the facts found by the Tribunal it is difficult to disassociate the said activity from the main activity carried on by the assessee, viz., manufacture and sale of the Ashok Leyland trucks. It was intimately connected with the priority industry set up and being run by the assessee. The decision of this court in Cambay Electric Supply Industrial Co. Ltd. 1978 (113) ITR 84 , clearly supports the assessees case. In that case, the question was whether the balancing charge arising as a result of the sale of old machinery and buildings and worked out in accordance with section 41(2) had to be taken in the account and included in the profits and gains of the business carried on by the assessee. The following observations are relevant for our purposes (at page 93)" As regards the aspect emerging from the expression attributable to occurring in the phrase Profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the Legislature has deliberately used the expression attributable to and not the expression derived from. It cannot be disputed that the expression attributable to is certainly wider in import than the expression derived from. Had the expression derived from been used it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the Legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression derived from, as, for instance, in section 80J. In our view, since the expression of wider import, namely, attributable to, has been used, the Legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity. " *In our opinion, the said observations conclude the issue, as has been rightly held in the later decision of the Madras High Court