1996 (12) TMI 386 - SC - Income Tax

Supreme Court clarifies 'attributable to' in Income Tax Act, allows tax benefits for spare parts sales.

M/s. ASHOK LEYLAND LIMITED, MADRAS Versus COMMISSIONER OF INCOME TAX, MADRAS

The Supreme Court analyzed the interpretation of 'attributable to' in Section 80-E/80-I of the Income Tax Act. The Court held that the income from ... - Issues:Interpretation of the words 'attributable to' in Section 80-E/80-I of the Income Tax Act.Analysis:The case involved an appeal against the decision of the Madras High Court regarding the interpretation of the words 'attributable to' in Section 80-E/80-I of the Income Tax Act. The question at hand was whether the assessee, engaged in manufacturing vehicles and importing spare parts for sale, was entitled to relief under Section 80-E and 80-I for the income earned from the import and sale of spare parts. The Income Tax Officer contended that the spare parts' income was not attributable to the industry carried on by the assessee, thus not qualifying for the tax benefits. However, the Tribunal ruled in favor of the assessee. The High Court disagreed with the Tribunal's decision, prompting the appeal to the Supreme Court.For subsequent assessment years, a similar question arose, and the High Court ruled in favor of the assessee based on a previous decision. The relevant sections, 80-E and 80-I, provided deductions for profits and gains attributable to a priority industry. The priority industry, as defined in Section 80-B(7), included the business of manufacturing specified articles. The Tribunal found that the import and sale of spare parts were intimately connected to the main activity of manufacturing vehicles, as some spare parts were not manufactured by the assessee, necessitating imports for commercial expediency.The Supreme Court analyzed the legislative intent behind the words 'attributable to,' emphasizing their wider import compared to 'derived from.' Referring to a previous case, the Court concluded that the spare parts' income was indeed attributable to the priority industry carried on by the assessee. The Court highlighted that the spare parts' activity was integral to the assessee's main business of manufacturing vehicles, aligning with the definition of a priority industry. Therefore, the Court allowed the appeals, set aside the High Court's judgment, and ruled in favor of the assessee, granting them the tax benefits under Sections 80-E and 80-I.