1996 (12) TMI 4 - SC - Income Tax

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 - held that the assessee would be entitled to relief under sections 80E and 80-I of the Income-tax Act 1961 for the assessment years 1966-67 and 1967-68 respectively on the income earned by it from import and sale of spare parts from abroad

Summary

Issues:
Interpretation of the words "attributable to" in section 80E/80-I of the Income-tax Act, 1961.

Detailed Analysis:

The Supreme Court considered an appeal by an assessee against the decision of the Madras High Court regarding the interpretation of the words "attributable to" in section 80E/80-I of the Income-tax Act, 1961. The case involved the assessee, engaged in manufacturing trucks and spare parts, importing spare parts and selling them alongside the vehicles. The Income-tax Officer initially denied relief under section 80E/80-I, stating that the import and sale of spare parts were not attributable to the assessee's industry. The Tribunal ruled in favor of the assessee, prompting the reference to the High Court, which decided against the assessee. The Supreme Court noted a similar case for subsequent years where the High Court ruled in favor of the assessee, citing a previous decision by the Supreme Court (Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84) as precedent.

The Court examined sections 80E and 80-I, which provided deductions for profits attributable to a priority industry. The priority industry was defined in section 80B(7) and included the business of manufacturing specified articles. The Court found that the profits from import and sale of spare parts were attributable to the priority industry carried on by the assessee. The Court highlighted the interconnected nature of spare parts sales with the main business of manufacturing and selling trucks, emphasizing commercial expediency. Referring to the precedent case, the Court emphasized the broader scope of "attributable to" compared to "derived from," indicating that the legislature intended to cover receipts beyond the direct conduct of the specified business.

Ultimately, the Supreme Court allowed the appeals, set aside the High Court's judgment, and ruled in favor of the assessee, stating that the profits from import and sale of spare parts were indeed attributable to the priority industry. The Court concluded that the broader interpretation of "attributable to" supported the assessee's case, aligning with the decision of the Madras High Court in a later case. The judgment favored the assessee, with no costs awarded.