TMI Blog1962 (2) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry parts and components for assembling cars and tractors. The company started manufacturing cars and tractors on and from May 1, 1950. The capital employed by the company is ₹ 14,38,760. The company imported spare parts from the United Kingdom under the terms of the agreement aforesaid and not merely used the spare parts for assembling cars but also sold them as spared. In the year of assessment 1952-53 ( previous year ending December 31, 1951) under the Indian Income-tax Act the company returned an income of ₹ 6,67,850. The Income-tax Officer computed the profit arising out of the dealing in spare parts, not manufactured by the company but imported from the United Kingdom, at ₹ 33,337. The assessee company preferred an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to relief under section 15C of the Indian Income-tax Act in respect of the profits arising from purchase and sale of spare parts as such? Section 15C, in so far as it is relevant for the disposal of this reference, reads as follows: (1) Save as otherwise hereinafter provided, the tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking to which this section applies as do not exceed six per cent. per annum on the capital employed in the undertaking, computed in accordance with such rules as may be made in this behalf by the Central Board Of Revenue. (2) This section applies to any industrial undertaking which... (iii) employs ten or more workers in a manufacturing pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring process in this country is part and parcel of its income from an industrial undertaking, there being no dispute that the assembling of cars and tractors by the assessee constitutes it as an industrial undertaking within the meaning of section 15C. Learned counsel for the department submits that the answer to the question referred must be against the assessee in view of the decision of this court is Ashok Motors Ltd. v. Commissioner of Income-tax [1961] 41 I.T.R. 397. In that case the assessee was a dealer in Austin cars and trucks and spare. It commenced to import parts from abroad and assemble cars at its factory. The department proceeded on the basis that the assessee did not derive the income solely from the industrial undertaking b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sell spare parts. He argues that the business of the industrial undertaking itself would not be advanced unless it trades in spare parts as well. He would suggest, therefore, that since this business is intimately connected with the industrial undertaking, the advancement of which cannot be secured except by its engaging in this additional business, the two should be treated as forming part and parcel of the same industrial undertaking. We are not satisfied that his argument is correct.....assuming that he assembles and sells 1,000 cars of a particular make in the course of a year in the functioning of his industrial undertaking, but he purchases and sells spare parts needed for 10,000 or more cars, his main business would really be that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be eligible for the exemption. The words of the statute indicate clearly that unless and until the income, profits or gain are derived from the industrial undertaking the exemption cannot be invoked. Any income which is referable to a source different from that of the undertaking cannot be saved from taxation under section 15C and it is impossible to bring it within that provision merely because the assessee happens to derive income from an industrial undertaking as well. For purposes of section 15C there can be no merger of several business activities into the industrial undertaking, however much they may be closely allied to or intimately associated with the latter. The exemption has to be strictly construed, and the language of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclusively to purchasing, importing, assembling, manufacturing and marketing such units, components thereof and spare parts therefor manufactured and/ or supplied by Standard excluding such parts thereof as are not permitted by law to be imported into India. 6. The All India Company will order and purchase all motor vehicles, component parts and spare parts from Standard and will sell them under the following terms and conditions..... It may be that as part of the programmer of manufacture and sale of cars and tractors the assessee had to incur the contractual obligations as laid upon it under the terms of the above agreement. But this contractual obligation cannot really constitute the business of the assessee by purchase and sal ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
