MIS. ASHOK LEYLAND LTD. MADRAS versus COMMISSIONER OF INCOME TAX, MADRAS

Citation: [1996] SUPP. 10 S.C.R. 467 · Decided: 19-12-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Appeal(s) allowed

Judgment (excerpt)

MIS. ASHOK LEYLAND LTD. MADRAS 
A 
v. 
COMMISSIONER OF INCOME TAX, MADRAS 
DECEMBER 19, 1996 
B 
[B.P. JEEVAN REDDY AND K.S. PARIPOORNAN, JJ.] 
Income Tax Act, 1961 Sections 80-B, 80-E, BO-I-Manufacturing of 
Tmcks 'pri01ity' industry under section 80-B(7}--Profits on sale of imp01ted 
spare parts-!'Attributable to p1iority industry" and is a part of the main activity, C 
viz., manufacture and sale of tmcks-Assessee entitled to relief under sections 
80-E and 80-I of the Act. 
The appellant-assessee manufactures trucks and also spare parts in 
collaboration with a foreign company. It also imported spare parts from 
abroad. The assessee claimed relief under section 80-E (for the assessment D 
year 1966-67) and under section 80-I for the assessment year 1967-68 on 
the income earned by it from the sale of those imported parts. The Income 
Tax Officer took the view that the income from the sale of spare parts is 
not attributable to the Industry carried out by the assessee and the benefit 
of Section 80-E/80-I can not be availed. The Tribunal on appeal held in E 
favour of the assessee and in reference the High Court, disagreed with the 
view of the Tribunal and answered the question in favour of the Revenue. 
Hence this appeal by the assessee. 
Allowing the appeal, this Court 
F 
HELD : 1. Section 80-E and 80-I of the Income Tax Act are couched 
in identical terms and provides for certain deduction from the profits and 
gains of a company attributable to 'Priority industry.' The Industry of the 
assessee is admittedly a 'priority industry' as defined in Section 80-B(7). 
Reading the relevant portion of sub-section (1) of Section 80-alongwith the 
definition of 'Priority Industry' in Section 80-B(7), it must be held that the G 
profits and gains arising from import and sale of spare parts is at· 
tributable to the "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 
trucks: [469-E; 470-B; 470-E-F] 
H 
467 
468 
SUPREME COURT REPORTS[1996) SUPP. 10 S.C.R. 
A 
Cambay Electric Supply Indust1ial Company Ltd. v. The Commissioner 
of Income Tax, 113 ITR 84, relied on. 
CIT Tamil Nadu II v. Aslwk Leyland Ltd., 130 ITR 900, approved. 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1295-96 
B (NT) of 1980. 
c 
From the Judgment and Order dated 4.2.78 of the Madras High 
Court in T.c: No. of 1975. 
Ms. Janaki Ramachandran for the Appellant. 
Dr. R.R. Mishra, S. Rajappa and S.N. Terdol for the Respondent. 
The Judgment of the Court was delivered by 
B.P. JEEVAN REDDY, J. : In these appeals preferred by the asses-
D sees against the decision of the Madras High Court, the words "attributable 
to" occurring in Section 80-E/80-I of the Income Tax Act fall for considera-
tion. The following question was referred to the High Court under Section 
256(1) of the Income Tax Act. 
E 
"Whether on the facts and in the circumstances of the case, it has , 
been rightly held that the assessee would be entitled to relief under 
Section 80-E and 80-I of the Income-Tax Act, 1961 for the assess-
ment years 1966-67 and 1967-68 respectively on the income earned 
by it, from import and sale of spare parts from abroad?" 
p 
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 
G 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 for smaller compared to the turnover and income arising from . , 
the sale of vehicles. The question is whether the assessee is entitled to relief 
under Selection 80-E (for the assessment year 1966-67) and 80-I (for the 
H assessment year 1967-68) on the income earned by it from import and sale 
ASHOKLEYLAND LTD. v. C.l.T. [B.P.JEEVANREDDY,J.] 
469 
· of spare parts. The Income Tax Officer took the view that the import and A 
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

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