M/S.WHEES INDIA LIMITED vs. THE DEPUTY COMMISSIONER OF

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TCA/685/2016HC Madras28 August 2025Bench: Honourable The CHIEF JUSTICE6 pages
AI SummaryAllowed

What did the High Court hold?

The High Court answered both questions of law in favour of the assessee. Regarding the second question, the Court, following its earlier decision in Commissioner of Income Tax vs. Ashok Leyland Ltd., held that in the case of an assessment under Section 115JA, the deduction claimed by the assessee under Section 80HHC must be worked out on the basis of the adjusted book profit under Section 115JA, and not on the basis of profits computed under the regular provisions of law. As a consequence of this finding, the Court held that the Tribunal was not justified in excluding 90% of duty drawback, labour charges, weighment charges, dividend income, interest income, and profit on sale of assets from the book profits under Section 115JA while computing the deduction under Section 80HHC. The reasoning was that the deduction under Section 80HHC is intrinsically linked to the book profits as adjusted under Section 115JA. The appeal was accordingly allowed, with no order as to costs. No issues were expressly left undecided.

What were the facts?

This case involves an appeal by M/s. Wheels India Limited (the assessee) against an order of the Income Tax Appellate Tribunal (ITAT), Madras 'A' Bench, dated March 8, 2013. The appeal was filed before the High Court of Judicature at Madras. The core of the dispute revolves around the computation of deduction under Section 80HHC of the Income Tax Act, 1961, in the context of an assessment under Section 115JA. The assessee challenged the ITAT's decision regarding the exclusion of certain income components from book profits for the purpose of calculating the Section 80HHC deduction.

What were the issues?

The High Court was required to decide two substantial questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that 90% of duty drawback, labour charges, weightment charges, dividend income, interest income, and profit on sale of assets should be excluded from the book profits under Section 115JA while computing deduction under Section 80HHC. 2. Whether, in the facts of an assessment order under Section 115JA, the deduction claimed by the assessee under Section 80HHC has to be worked out on the basis of adjusted book profit under Section 115JA and not on the basis of the profits computed under the regular provisions of law applicable to the computation of profits and gains of business. Contentions: Assessee: The assessee argued that the deduction under Section 80HHC should be calculated based on adjusted book profits under Section 115JA, and that certain income components should not have been excluded from book profits for this calculation. (Implied by the framing of the questions and the eventual ruling). Revenue: The Revenue contended that the ITAT's order was correct in excluding certain income components and that the deduction should not be based on adjusted book profits under Section 115JA. (Implied by the appeal being filed against the ITAT's order and the High Court's eventual ruling in favour of the assessee). The Revenue conceded on the second question of law, agreeing with the decision in Commissioner of Income Tax vs. Ashok Leyland Ltd. [2019] 110 taxmann.com 3 (Madras).

Which sections of the Income-tax Act were involved?

Section 115JA,Section 80HHC

AI-generated summary — verify with the full judgment below

TCA No.685 of 2016 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 28.08.2025 CORAM THE HON'BLE MR.MANINDRA MOHAN SHRIVASTAVA, CHIEF JUSTICE AND THE HON'BLE MR.JUSTICE SUNDER MOHAN TCA No.685 of 2016 M/s.Wheels India Limited, Padi, Chennai 600 050 : Appellant versus The Deputy Commissioner of Income Tax (LTU) 1775, Jawaharlal Nehru Inner Ring Road, Anna Nagar Western Extension, Chennai 600101 : Respondent Prayer: Appeal filed against the order of the Income Tax Appellate Tribunal, Madras “A” Bench, Chennai, dated 08.03.2013 in ITA No.1430/Mds/2010. For Appellant : Mr.R.Venkata Narayanan For M/s.Subbaraya Aiyar For Respondent : Ms.V.Pushpa, Senior Standing Counsel Page 1 of 6 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/09/2025 03:29:44 pm ) TCA No.685 of 2016 JUDGMENT (Delivered by the Hon'ble Chief Justice) Heard both sides. 2. At the time of admitting this appeal, the following substantial questions of law were framed: “(i)Whether on facts and in the circumstances of the case the Tribunal was right in holding that 90% of duty drawback, labour charges, weightment charges, dividend income, interest income and profit on sale of assets should be excluded from the book profits under Section 115JA while computing deduction under Section 80HHC. (ii)Whether in the facts of an assessment order under Section 115JA, deduction claimed by the assessee under Section 80HHC has to be worked out on the basis of adjusted book profit under Section 115JA and not on the basis of the profits computed under regular provisions of law applicable to computation of profits and gains of business.” Page 2 of 6 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/09/2025 03:29:44 pm ) TCA No.685 of 2016 3. At the outset, learned counsel for the Revenue would fairly submit that as far as the second question of law is concerned, the issue has already been decided by a Division Bench of this Court in the case

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of Income Tax vs. Ashok Leyland Ltd. [2019] 110 taxmann.com 3 (Madras); wherein it has been held that in the case of an assessment under Section 115JA, deduction claimed by the assessee under Section 80HHC has to be worked out on the basis of adjusted book profit under Section 115JA and not on the basis of the profits computed under regular provisions of law applicable to computation of profits and gains of business. 4. Having considered the submissions and going through the judgment of this Court in Ashok Leyland (supra), we are inclined to answer the second question of law in favour of the assessee and against the Revenue in the manner that deduction claimed by the assessee under Section 80HHC was liable to be worked out on the Page 3 of 6 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/09/2025 03:29:44 pm ) TCA No.685 of 2016 basis of adjusted book profit under Section 115JA and not on the basis of the profits computed under regular provisions of law applicable to computation of profits and gains of business. 5. As a consequence of the aforesaid decision and answer to the second question of law, the first question of law has to be answered necessarily in favour of the assessee that the Tribunal was not justified in holding that 90% of duty drawback, labour charges, weighment charges, dividend income, interest income and profit on sale of assets should be excluded from the book profits under Section 115JA while computing deduction under Section 80HHC. Accordingly, the first question of law is also answered in favour of the assessee and against the Revenue. 6. The appeal is accordingly allowed. There will be no order as to costs. (MANINDRA MOHAN SHRIVASTAVA, CJ.) (SUNDER MOHAN, J.) 28.08.2025 Index : Yes/No Page 4 of 6 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/09/2025 03:29:44 pm ) TCA No.685 of 2016 Neutral Citation : Yes/No tar To 1.The Deputy Commissioner of Income Tax (LTU) 1775, Jawaharlal Nehru Inner Ring Road, Anna Nagar Western Extension, Chennai 600101 2.The Income Tax Appellate Tribunal, Madras “A” Bench, Chennai Page 5 of 6 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/09/2025 03:29:44 pm ) TCA No.685 of 2016 THE HON'BLE CHIEF JUSTICE AND SUNDER MOHAN

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(tar) TCA No.685 of 2016 28.08.2025 Page 6 of 6 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/09/2025 03:29:44 pm )

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