COMMISSIONER OF INCOME TAX Vs. WHEELS INDIA LIMITED

JUDGEMENT

(1.) TWO questions of law have been referred to us by the Income-tax Appellate Tribunal in this reference under the I.T. Act 1961. The first question of law is as follows :

(2.) THE answer to this question is covered by a previous decision of this court dated October 13, 1981, in CIT v. Wheels India Ltd., T.C. Nos. 1438 to 1448 of 1977 [1983] 141 ITR 748 (infra) and by T.C. Nos. 539 to 546 of 1977 (CIT v. Sundaram Clayton Ltd. [1982]. 136 ITR 315). Following those decisions, we answer the question of law against the Department.

(3.) THE question really is covered by a decision of the Supreme Court in Cambay Electric Supply Industrial Co Ltd. v. CIT [1978] 113 ITR 84. In that case, the Supreme Court had to deal with the construction of the expression "profits and gains attributable to priority industry", which occurs in s. 80E of the I.T. Act, 1961. It may be observed that s. 80E was later substituted by s. 80-I, which is the provision under discussion in the present case. In the case before the Supreme Court, the claim for relief under s. 80E was made by an electricity supply company. It was admitted by the Department in that case that profits and gains from the generation and distribution of electricity would fall within the ambit of the expression "profits and gains attributable to a priority industry". THE assessee in that case claimed that the amounts which were included in their total income by way of re-capture of depreciation allowance (which had been granted in respect of plant and machinery which were subsequently sold) would also come in for relief under s. 80E, because the amount of balancing charge must also be dealt with as profits and gains attributable to a priority industry. THE Supreme Court accepted this contention. THEy rejected the submission made on behalf of the Revenue that the balancing charge under which depreciation already granted is re-captured on sale of the plant and machinery cannot be regarded as the profits of the business as such but was merely an adjustment made for the purpose of assessment to income-tax. THE Supreme Court considered the expression "attributable to" as having a meaning winder than any other expression which might be thought of in connection with the emergence of profits from any business. THE following passage may be quoted from the judgment to set down the Supreme Court's construction of the crucial words of the section (p. 93) :