MIS. ASHOK LEYLAND LTD. MADRASversusCOMMISSIONER OF INCOME TAX, MADRAS

                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.

         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.
c
          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.

            "Whether on the facts and in the circumstances of the case, it has ,
E           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 benefit of Sections 80-E/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         B
  the view taken by the Tribunal and has answered the question in favour of
  the Revenue and against the asscssee.

       It is brought to our notice by the learned counsel for the appellant-
 assessee that for subsequent assessment years 1968-69 and 1969-70, an
 identical reference was made under Section 256 and on this occasion the C
 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 Company
 Limited v. The Commissioner of Income-Tax,. Gujarat-II, Ahmedabud, 113
 l.T.R. 84. The later decision of the High Court is reported in Commissioner D
 of Income Tax, Tamil Nadu-III v. Ashok Leyland Limited, 130 l.T.R. 900.
 The learned counsel for the assessee commended the reasoning of the said
 decision for our acceptance.

       Section 80-E and 80-1 were couched in identicaI terms. They provided
 for certain deduction from the profits and gains of a company attn'butable       E
 to priority industry. In so far as relevant Section 80-1(1) reads :

         "....(1) In the case of a company to which this section applies, where
         the gross total income includes any profits and gains attributable .
         to any priority industry, there shall be allowed, in accordance with
          and subject to the provisions of this Section, a deduction from such    F
          profits and gains of an amount equal to eight per cent thereof in
          computing the total income of the company...

          .........................................................
                                                                 "
                                                                                  G
       The expression "priority industry'' occurring in the said Section was
 defined in sub-section (7) of Section 80-B. It reads :

         '"priority industry' means ~he business of generation or distribution        ~
         of electricity or any other form of power or of construction,
         manufacture or production of any one or more of the articles or H
     470                    SUPREME COURT REPORTS(1996] SUPP. 10 S.C.R.
A             things specified in the list in the (Sixth) Schedule or the business
              of any hotel where such business is carried on by an Indian
              company and the hotel is for the time being approved in this behalf ,,
              by the Central Government;"

B        The industry being carried on by the assessee is admittedly a priority
  industry as defined in Section 80-B (7). The only question is whether the
  profits and gains arising from import and sale of spare parts can be said
  to be "attributable to ......... priority industry'' being carried on by the asses-
  see. The Tribunal has found that the assessee commenced manufacturing
  Ashok Leyland trucks in collaboration with a foreign company Leyland
C from about 1966 onwards. There was a phased programme for the
  manufacture of necessary spare parts. It was found that some of the
  purchasers of the trucks from the assessee found it difficult during some
  years to get the requisite spare parts either because the spare parts
  manufactured by the assessee were not sufficient to meet the demand or
D because the assessee did not manufacture those particular spare parts. In
  the said circumstances and as a matter of Commercial expediency, the
  assessee imported such spare parts and sold them during the accounting
  years relevant to the assessment years concerned herein. It is on these facts
  that the questio.n referred has to be answered. We are of the opinion that
  reading the relevant portion of sub-section (1) of Section 80-I alongwith
E the definition of "priority industry" in Section 80- B(7), it must be held that


                                                                                        -
  the profit 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
F and sale of the Ashok Leylands 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 clearly supports the assessee's 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
G in the profits and gains of the business carried on by the assessee. The
   following observations are relevant for our purposes :

              "8. As regards the aspect emerging from the expression "at-
              tributable to" occurring in the phrase "profits and gains attributable
.H            to the business or the specified industry (here generation and
       ASHOKLEYLAND LTD. v. C.l.T. [B.P. JEEVAN REDDY, J.)              471

        distribution of electricity) on which the learned Solicitor General A
        relied, it will be pertinent to observe that the Legislature has
        deliberately used the expression "attributable to" and not the ex-
        pression "derived from". It cannot be disputed that the expression
        "attributable to" is certainly wider in import than the expression
        "derived from" been used it could have with some force been B
        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 dis-
        tribution 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 C
        used the expression "derived from", as for instance in Section 80-J.
        In our view, since the expression of wider import, namely, "at-
        tributable to" has been used, the Legislature intended to cover
        receipts from sources other than the actual conduct of the business
        of the generation and distribution of electricity."                  D
       In our· opinion the said observations conclude the issue, as has been
rightly held in the later decision of the Madras High Court.

       Accordingly these appeals are -allowed, the judgment under appeal
is set aside and the question referred to the High Court is answered in the . E
affirmative i.e., in favour of the assessee and against the Revenue. No costs.

H.K                                                       Appeals allowed.