M/S. ASHOK LEYLAND LTD.,CHENNAI vs. DCIT, NCC-8(1), LTU-II,, CHENNAI

आयकर अपीलीय अिधकरण, ‘बी’
यायपीठ, चे ई।
IN THE INCOME TAX APPELLATE TRIBUNAL
‘B’ BENCH: CHENNAI

ी एबी टी. वक
, ाियक सद एवं
एवं
एवं
एवं

ी अिमताभ शुा, लेखासद केसम

BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER

आयकरअपीलसं./ITA No. 2377/Chny/2024
िनधारणवष/Assessment Year: 2017-18

M/s. Ashok Leyland Ltd.,
No.1, Sardar Patel Road,
Guindy, Chennai-600 032. v.
The DCIT,
NCC-8(1), LTU-II,
Chennai-600 034. [PAN: AAACA 4651 L]

(अपीलाथ/Appellant)

(यथ/Respondent)

अपीलाथ क ओर से/ Appellant by :
Mr.R. Vijayaraghavan,
Advocate &
Mr. Vikram Vijayaraghavan,
Advocate
यथ क ओर से /Respondent by :
Mr.Nathala Ravi Babu, CIT
सुनवाईकतारीख/Date of Hearing
:
04.12.2024
घोषणाकतारीख /Date of Pronouncement
:
12.02.2025

आदेश / O R D E R
PER ABY T. VARKEY, JM:

This appeal has been preferred by the assessee-company against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC,
(hereinafter referred to as ‘Ld.CIT(A)‘), Delhi dated 19.07.2024 for the Assessment Year (hereinafter referred to as ‘AY‘) 2017-18. 2. Ground No.1 raised by the assessee is general in nature, which was therefore not pressed by the Ld. AR and is therefore dismissed.

ed by the assessee is against the he AO u/s 14A read with Rule 8D. C nt involved, the Ld. AR did not pre e requested that it should not be we dismiss this ground of appeal a nd for the relevant year considering against the action of the lower auth nt of deduction claimed in respect re incurred at the approved in-hou of the Act, which was not approved cernible from records is that, the arch expenditure, both revenue & c
D facility. The assessee had accor
Rs.769,77,45,394/- being 200% of t in terms of Form 3CLA issued by t ssessment, required the assessee to the relevant AY 2017-18, which the at that material time, had not yet gly, in absence of Form 3CL, denie

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
disallowance of Considering the ess this ground e treated as a as the assessee g the smallness horities denying t of research &
use R&D facility by the DSIR in e assessee had capital, at their rdingly claimed the expenditure he auditor. The o file Form 3CL assessee failed issued the said ed the claim for weighted deduction u/s normal deduction @ 10
of the total deduction cl
AO allowed normal 100
and denied weighted co aggrieved by the orde appeal before the Ld. CI
4.2
Before the Ld. CIT the AO had made certa which resulted in highe assessee furnished the the revenue and capital quantified at Rs.318,82
assessee accordingly pr aforesaid certified amo
After verifying the cont
Ld. CIT(A) agreed with AO’s computation of di extent of Rs.1,99,99,96
expenditure aggregating certified by DSIR in Fo weighted deduction u/s ITA N
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35(2AB) of the Act, but at the sam
00% in terms of Section 35 of the A laimed by the assessee of Rs.769,7
0% deduction to the extent of Rs.3
omponent of 100% of Rs.3,86,88,7
r of the AO, the assessee carried
IT(A).
T(A), the assessee firstly brought to in calculation errors in computing th er disallowance of Rs.1,99,99,964/
Form 3CL, which was issued by the expenditure approved for weighted
,79,000/- and Rs.42,99,54,000/- re rayed that atleast the weighted com unt ought to be allowed u/s 35(2A tents of Form 3CL as well as the c the assessee that there was a calc sallowance and therefore directed
64/-. The Ld. CIT(A), further noted t g to Rs.23,14,39,967/-, other expe orm 3CL. Accordingly, the Ld. CIT(
35(2AB) for the amount certified in No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
e time, allowed
Act. Hence, out
7,45,394/-, the 86,88,72,661/-
72,661/-. Being the matter in o his notice that he disallowance
/-. Further, the e DSIR, wherein d deduction was espectively. The mponent for the AB) of the Act.
alculations, the culation error in deletion to the that, apart from enses had been (A) allowed the n Form 3CL and restricted the denial of expenses not approv aggrieved by the disallo now in appeal before us
4.3
Having considered findings of the lower a Act, provides that, an relation to expenditure by the prescribed autho
Section 35 provides tha its report in relation to as prescribed. Rule 6(7
by the IT(10th Ame from01.07.2016 provid
35(2AB) of the Act sha authority, i.e. DSIR, sh
CCIT. The relevant Rule
“(7A) Approval development faci
35 shall be subjec
(a) The facility s promotion, qual changes, routine
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weighted component of deduction t ved by DSIR being Rs.23,14,39
owance retained by the Ld. CIT(A), s.
d the submissions of the assessee, authorities, we note that, Section 3
assessee shall be allowed weighte incurred on the in-house R&D facili ority, i.e. DSIR. Sub-clause (4) of C at, the prescribed authority, i.e. DS the approval of the research facilit
7A)(b) of the Income-tax Rules,196
endment) Rules, 2016 applicabl des that, the approval of expe ll be subject to the condition that, hall submit itsreport in Form 3CL to e is reproducedhereunder:
of expenditure incurred on in-house r ility by a company under sub-section (2A ct to the following conditions, namely :—
should not relate purely to market res ity control, testing, commercial produ data collection or activities of a like nature

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
to the extent of 9,967/-. Being the assessee is , in light of the 35(2AB) of the ed deduction in ity as approved
Clause (2AB) of IR shall submit ty in such form
62 as amended e with effect enditure under the prescribed o the PCCIT or research and AB) of section search, sales uction, style
;

(b)The prescribed
(i) in relation to facility in Part A o
(ii) quantifying th development fac eligible for weigh the Act in Part B o
(ba) The report furnished electron
Commissioner of Principal Director tax having juri twenty days,—
(i) of the grant of clause (b);
(ii) of the submis clause (ii) of clau
(c) The company facility; which sh
No. 3CLA shall be of Scientific and in Explanation 2
furnishing the ret

d authority shall furnish electronically its re the approval of in-house research and of Form No. 3CL; he expenditure incurred on in-house r cility by the company during the previo ted deduction under sub-section (2AB) of of Form No. 3CL; in Form No. 3CL referred to in clause nically by the prescribed authority to the P
Income-tax or Chief Commissioner of In r General of Income-tax or Director Genera diction over such company within one f the approval, in a case referred to in sub sion of the audit report, in a case referre se (b); shall maintain a separate account for ea hall be audited annually and a report of a e furnished electronically to the Secretary,
Industrial Research on or before the due d
2 to sub-section (1) of section 139 of turn of income, for each succeeding year.”
above Rule, as introduced by 16 applicable with effect from 01
ailing in AY 2017-18 is that, furnishi site to claim the weighted compone ct. The reliance placed by the as this Tribunal in their own case in ea tinguishable as the AY involved w

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
port,—
development research and us year and section 35 of (b) shall be Principal Chief ncome-tax or al of Income- hundred and b-clause (i) of ed to in sub- ach approved audit in Form
, Department date specified the Act for y the IT(10th
1.07.2016, the ng of Form 3CL nt of deduction ssessee on the arlier AY 2011- was prior tothe insertion of the aforem position of law, the a relevant AY 2017-18. expenses to the tune o
Form 3CL, in light of Income-tax Rules,1962
deduction u/s 35(2AB) see no reason to interfe hence confirm the same
5. Ground No.4 is re
80-IC of the Act to the e
5.1
The facts as noted
Rs.235,18,59,051/- u/s by its eligible unit at accounts of the assesse apportioned and cred
Maintenance Charges (‘A aggregating to Rs.229.8
u/s 80-IC in relation revenues could not be the eligible undertaking
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mentioned Rule. Accordingly, due to foresaid decision is no longer ap
For the aforesaid reasons theref f Rs.23,14,39,697/- was not approv the restriction set out in Rule 6
2, the Ld. CIT(A) had rightly de to the extent of Rs.23,14,39,967/- ere with the order of Ld. CIT(A) on e. This ground therefore stands dism egarding the disallowance of deduct extent of Rs.23,99,06,451/-.
d are that, the assessee had claime
80-IC of the Act, in respect of the Pantnagar. Upon examination of t ee, the AO noted that the assessee dited revenue from spare parts
AMC’) revenue including interest an 85 crores to the eligible unit and cla thereto. According to the AO, t said to have been derived from th and therefore held that they were No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
o the change in plicable in the fore, since the ved by DSIR in 6(7A)(b) of the enied weighted
-. We therefore this aspect and missed.
ion claimed u/s ed deduction of profits derived he stand-alone e had inter alia s and Annual nd other income imed deduction these items of e operations of not eligible for deduction u/s 80-IC of eligible turnover of P revenues) and worked turnover at Rs.211,19,5
u/s 80-IC of the Act to Ld. CIT(A) upheld the before us.
5.2
We have heard b before us. From the or following items of incom turnover/income of the u/s 80-IC of the Act was (i)
Revenue from sale
(ii)
AMC Charges
(iii)
Scrap sales
(iv)
Freight recovery
(v)
Interest income fr
(vi) Other income (Ma

Total
5.3
We shall deal wit
From the facts availab automotive manufactur
Pantnagar. It was brou
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f the Act. The AO, accordingly, re
Pantnagar Unit (after excluding out the eligible deduction u/s 80-
52,600/-. Hence, the AO disallowed o the extent of Rs.23,89,06,451/-.
order of the AO. Now the assesse both the parties and perused the m rder of the lower authorities, it is me were excluded by the AO while eligible unit and accordingly, the eli s correspondingly reduced.
e of spare parts

Rs.126.49 c

Rs.35 crores

Rs.18.5 cror

Rs.49.8 cror rom investments
Rs.8.13 cror arketing)

Rs.12.47 cro

Rs.229.85 c h each of the above items of reven le before us, it is noted that the er. It had set up a chassis manufa ght to our notice that all the sales

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
e-calculated the the aforesaid
-IC at 9.5% of d the deduction
On appeal, the ee is in appeal material placed noted that the computing the igible deduction crores s res res res ores crores nue separately.
assessee is an acturing unit at of the vehicles manufactured in variou which contains an ident being a manufacturer provide parts and spare their maintenance and checked and approved bought out compone components. The Ld. A these spare parts to th with the sales as the as that their products rem also to facilitate the r genuine spare parts to vehicle. It was submitte would result in damage quality, which would res warranty as well as c before us that the manufactured as well a to the manufacture and same was rightly appo credited in the stand-alo
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us units are identifiable by their ch tification of the manufacturing unit of commercial vehicles, is therefo es for smooth functioning of the ve upkeep. These spare parts suppl for usage in the vehicles, which nts and also certain manufact
AR for the assessee pointed out th eir customers is necessary and intr ssessee being a manufacturer is req ain defect free during their period o replacement or removal of the d o be made available during the ed that any inappropriate or spurio e of the vehicle parts or comprom sultantly cause consumer dissatisfac consumer litigation. It was theref supply and sale of these spar s bought out components, were int d sale of its commercial vehicles and ortioned in the ratio of the total one accounts of the eligible unit. Th

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
assis numbers, t. The assessee ore required to ehicles sold, for ied are quality h comprises of tured in-house hat the sale of rinsically linked uired to ensure of warranty and defects through lifetime of the ous spare parts mise the vehicle ction, breach of fore contended re parts, both rinsically linked d therefore, the l turnover and he assessee has therefore urged that considering the aforesai unit. The Ld. CIT, DR o authorities.
5.4
Having considered fact that the assessee supply of commercial manufactured and sol
Pantnagar Unit, which regard to the nature o assessee to supply spa maintenance of these made during the period by the assessee that t customers even post c unless and until the cu spare parts are availabl commercial vehicles, th hampered. We are there required to manufactur bought out componen manufactured by the ITA N
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the lower authorities were unju id revenues as a part of the turnove n the other hand supported the ord d the facts relating to this issue, it is is engaged in the business of ma vehicles. During the year, the d 46181 number of vehicles fro yielded revenue of Rs.7410.36
of the product supplied, it is neces are parts to the customers for th vehicles. This supply is not only d of warranty but it is also required these spare parts are readily ava ompletion of the warranty period.
ustomers are ensured that the nec le, which are inextricably linked to t he sale of these vehicles would inde efore in agreement with the assesse re these parts and also obtain and nts from genuine suppliers (whi m) in relation to these comm

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
ustified in not er of the eligible der of the lower s an undisputed anufacture and assessee had om its eligible crores. Having ssitated for the he upkeep and required to be d to be ensured ailable for their
Reason being, essary genuine their use of the eed be severely ee that they are supply certain ich cannot be ercial vehicles manufactured and sold revenue derived from th in relation to the comm intrinsically linked to th and was therefore eligib
5.5
We find that som rendered by the Mumb
Engineers Limited vs derived from sale of bo products manufactured deduction u/s 80-IC of which are found to be re
“27. The issue of and spare parts and erection into Bench of Tribuna and after deliber
CIT v. N.C. Budh judicial pronounc was covered with ….
It was further hel
"In the instant ca different equipme were assembling thereby they wer known as ETP. Th of assembling of ITA N
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by them. In our considered view he sale of spare parts and bought o ercial vehicles sold by the eligible u he operations of the eligible industr ble for deduction u/s 80-IC of the Ac mewhat similar issue was involved bai Bench of this Tribunal in the s JCIT (112 TTJ 940), wherein ought out components, which were d by the assessee, was held to f the Act. The findings rendered in elevant to the present case is as foll purchasing different components, differen from various concerns and their assembly plant known as ETP was considered at len l in Degremont India Ltd. v. Dy. CIT [1996
ation at length on the facts, decision of A haraja & Co. [1993] 204 ITR 4121 and v ements of various courts, it was held that in the definition of manufacturing of an art ld as under :
ase, the assessee was purchasing different ents and spare parts from various other those components, equipments and acc re preparing fabricating and erecting a pla he ultimate end product which was prepare f various components with the constant a No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
therefore, the out components nit, indeed was rial undertaking ct.
in the decision case of Mihir n the revenues integral to the be eligible for n this decision, lows:
t equipments y, fabrication ngth by Delhi
6] 59 ITD 423
Apex Court in various other the assessee ticle or thing.
components, r parties and cessories and nt which was ed as a result application of technical know-h different plant tha got manufactured different supplier therefore, clearly article or thing.
…
31.…….The situs o not disentitle the IA of the Act in erection of the sa the learned DR th levy of Excise Du denial of exempt items as the sa prepares two diff other for bought erection of cool transportation, e manufactured ite deduction under s
32. Thus, after co the various High assessee is entit the Act both o components, use flow (CM series) c
5.6
Likewise, we find
Tribunal at Chandigarh
No.
1273/Chd/201
Engineering Devices dated 11.06.2013, w revenues derived from eligible for deduction u
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ow was the ETP. The ETP was obvi-ously an the various components, equip- ments, d according to the tailor made requireme rs. The activities carried out by the ass y covered within the definition of manuf of assembly of end-product being client’s p assessee from its claim of deduction unde n respect of bought out components uti aid cooling towers. There is no merit in the hat excise duty is paid only on manufacture uty is governed by Excise Laws. There is tion under section 80-IA of the IT Act on me are not subjected to Excise Duty. T ferent bills, one for excisable manufacture t out components, both of which are uti ling tower. The assessee raises separa rection and service charges. The profits o ems and bought out components are section 80-IA of the Act.
onsidering the entire relevant material and h Courts and Tribunal, we are of the v led to the benefit of deduction under sect on the manufactured items and the d for the erection of cross flow (XE series) cooling towers.”
wherein on similar facts, it was sale of spares and bought out co u/s 80-IC of the Act. For the fore

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
y distinct and purchased or ent from the sessee were, facture of an premises does er section 80- lized for the contention of ed items. The s no merit in n bought out
The assessee es items and ilized for the ate bills for on sale of the eligible for d decisions of iew that the tion 80-IA of bought out
) and counter pressed by this ddln. CIT (ITA
M/s
Spray
30/Chd/2012) held that the omponents was egoing reasons therefore, we hold that, parts of Rs.126.49 cr manufactured vehicles
80-IC of the Act.
5.7
The next item of charges amounting to such AMC charges are d assessee of manufactu the vehicles supplied r committed warranty b
Revenue however has c to be derived from the issue, we find that this Bench of this Tribuna
Limited (supra) wher
Hon’ble Himachal Prade allowed the deduction assessee. The relevant o
“52. The assesse customers to who and Annual Maint carried out by th claim of the asses and condensing s
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, in the present case also, the reven rores was inextricably linked wit and hence is held to be eligible for revenue is the revenue derived fro
Rs.35 crores. It is the case of the directly relatable to the business ca ring commercial vehicles in order remain defect free and function no ut also during the lifetime of the contended that such service charges eligible business. Having considered identical claim had come up before l in the case of Spray Enginee rein, this Tribunal, following the d esh High Court, in the assessee’s u/s 80-IC on AMC charges re observations of the Tribunal reads a ee has furnished on record communication om it had supplied the cooling and conden tenance Contract (AMC) of the said system he assessee at negotiated terms and con ssee was that it was providing AMC to only systems, which were manufactured by it an No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
nue from spares h the sale of r deduction u/s om service/AMC e assessee that rried on by the to ensure that ot only for the e product. The s cannot be said d the impugned the Chandigarh ering Devices decision of the own case has ceived by the as under:- n with certain nsing systems ms were to be nditions. The y such cooling nd supplied to the customers a based, depending sugar mill. The t year were Rs.37,
High Court in ass dated 7.11.2009
of the Act were m
'attributable to'. I would be entitle shows that the p
Undertaking. The of the business a Hon'ble High Cou the assessee was Act on MODVAT being directly re being business its assessee is eng
'manufacture' can to the price of th customer to erec by it on this co therefore eligible
53. Following th factual aspect br charges received carried on by t erection of coolin the claim of dedu the assessee is al
5.8
The relevant observatio is as follows:-
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s the systems provided by the assessee g on the size of the sugar mill and type of otal AMC charges received by the assesse
,75,423/-. We find that the Hon'ble Hima sessee's own case in ITA No.39 of 2006
had held that the words 'derived from' in much narrower in connotation as compared
It was further laid down that The Industria d to claim deductions under Section 80- profit is derived from the business of su e income should be derived from the opera and the source of income should be busine urt after laying down the above said princip s entitled to claim deduction under section credit and also erection and commission latable to the business and the source o self. The Hon'ble High Court further held th gaged in the business of manufacture nnot be read so narrowly so as to limit the he goods sold. If the manufacturer is req ct and commission the machinery the amo ount is income derived from the busine for deduction under Section 80-IB.
e above said parity of reasoning and in rought on record by the assessee, we ho by the assessee are directly relatable to the assessee of manufacturing, commis ng system and consequently the assessee uction u/s 80IB/80IC of the Act. Ground N llowed."
hat, the Hon’ble Bombay High Cour
Data Management Limited (261
he assessee derives income from re ies to its clients in relation to the pr ges are entitled to deduction u/s 8
ons of the Hon’ble High Court, taken

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
e were client f the existing ee during the achal Pradesh vide decision section 80IB to the words l Undertaking
-IB only if it uch Industrial ational profits ess itself. The ples held that n 80IB of the ning charges, f the income hat When the e, the work amount only quired by the ount received ss itself and view of the old that AMC the business ssioning and is eligible to o.3 raised by rt in the case of ITR 177) has ndering service roduct supplied,
80-I of the Act.
n note of by us,

“According to th maintenance cha manufacturing o profits derived f
Officer excluded from the eligible business of manu mini micro-based computer hardwa orders for the ea service and maint and maintenance the impugned re
This is a finding o reason to interfer question in the a the Department.”
5.9
Likewise, we find case of Torsa Machine revenue from service ch of the eligible unit and Act. Respectfully follow assessee is entitled to d
5.10 In relation to the scrap, it was brought generated from the o
Understandably, in an vehicles in the present have saleable value. Ac such scrap has no direc
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he Assessing Officer, receipts by way of arges have been included in profits d perations. That these receipts cannot f from industrial undertaking. Therefore, th receipt of service charges and maintena profits. In this case, the assessee is en ufacture and sale of data processing cards, d systems. It is also a dealer in computer are. This finding is also recorded by the T arlier years. The assessee derives income tenance facility to its clients for which it ch e charges. Therefore, there is a direct ne ceipts and the main business activity of t of fact also recorded by the Tribunal. We do re with this finding of fact. Accordingly, w affirmative, i.e., in favour of the assessee
”
that the Hon’ble Gauhati High Co es Ltd. vs CIT (389 ITR 377), ha harges is derived from the manufact thus was entitled for deduction u/
wing the decisions cited (supra), we deduction u/s 80-IC on the AMC cha revenue of Rs.18.50 crores derive to our notice that the foregoing perations of the eligible industria y manufacturing operation, partic case, certain scrap materials are ge ccording to us, it would be improp ct link or nexus with the manufactu

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
service and derived from form part of he Assessing ance charges gaged in the , ribbons and software and Tribunal in its as it renders arges service exus between the assessee.
o not see any e answer the e and against ourt also in the as held that the turing activities
/s 80-IC of the e hold that the rges.
ed from sale of receipts were al undertaking.
cularly that of enerated, which per to say that ring operations of the eligible business sale of scrap materials eligible unit. Our view
Calcutta High Court in t
(231 Taxman 585) an Sadhu Forgings Ltd ( also be made to the juri ictional Madras H
ACIT (125 Taxman 38
"13. As already s of V-Belts, oil sea materials resulted materials has no cannot be at all b facts and in the c may say that the of the industrial u as V-Belts, oil se
In this view of the the sale of scrap twenty per cent derived from the income of the as sale of scrap is th
5.11 In view of the ab revenues derived from the deduction of the elig
5.12 The next item of r the customers which wa
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. According to us therefore, revenu is includible while working out the finds support from the decision he case of Reckitt Benckiser Indi nd Hon'ble Delhi High Court in the (11 taxmann.com 322). Gainful e following findings rendered by igh Court in the case of Fenner
86), which are as follows:- stated, in the industrial undertaking in the als, O-Rings and rubber moulded products, d in, which has a saleable value. To say th o direct link or nexus with the industrial be expected or commend acceptance, espe circumstances of the case. For the sake of e scrap materials come within the manufact undertaking in the manufacture of certain p als, O-Rings and certain rubber moulded p e matter, we are of the view that profits an materials is eligible to deduction in an amo under S. 80HH, inasmuch as such gains o industrial undertaking and includible in th ssessee and the question relatable to the hus answered in favour of the assessee."
bove therefore, the AO is directed sale of scrap of Rs.18.50 crores wh gible Pantnagar Unit u/s 80-IC of the revenue is the recovery of the freigh as incurred on their behalf amount

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
ue derived from e profits of the of the Hon'ble ia Ltd Vs ACIT case of CIT Vs reference may y the Hon'ble
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to our notice that, the assessee inc acture and sale of its commercial ve stomers. The Ld. AR showed us t the standalone accounts of the e ore, the recovery of such freight hown by way of separate credit in ent on to reduce the overall freig to the Ld. AR, only because the fre e credit side of the standalone accou was not intrinsically linked to the el
Ld. CIT, DR argued that the recov the manufacturing operations of t e said to be ‘derived’ from the eligibl d the rival submissions, we are in a eight recovered by the assessee w in the course of manufacture a which had already been debited to unit. Accordingly, the freight recov burden of freight cost. Hence, in t prudent to hold that the freight cost eligible business and is therefore ing the eligible profits, but at the s

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
urs freight cost ehicles, which is that the freight eligible unit at cost from the the standalone ght cost of the eight recoveries unts, cannot be igible business.
veries of freight the eligible unit le business.
agreement with as towards the and supply of the standalone veries in a way hat view of the t is relatable to required to be same time, the freight recoveries canno
In this regard, we find the case of ACIT vs N
93/Chd/2013) dated of the present case wh relatable to the eligib purposes of computing findings of this Tribunal
“7. After conside been adjudicated
3.2 I have co charges show reimburseme profit and los raw material charges are reimburseme loss account, effect of freig the Act shou deduction u/s 8. The above cle carriage of finis received form reimbursement if already been deb considered, then truck expenses a profits, therefore
Accordingly in ou issue.”
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ot be treated as part of the same el that the decision of this Tribunal at Nalagarh Steel Rolling Mill Pvt.
02.08.2013 to be squarely applica erein, the recovery of freight cost ble business and therefore consi g deduction u/s 80-IC of the Act read as under:- ring the rival submissions, we find that t by Ld. CIT(A) in para 3.2, which is as unde onsidered the submission of the Ld. Counse wn by the appellant as income are, in ent against which expenses have been de ss account. Freights are in relation to the s and sale of finished goods and it is se e included in the sale bill.
Only b ent have been shown on the credit side of t
, it does not alter the nature of transacti ght charges being expenditure, disallowanc uld not have been made. Hence, the dis s 80IC of the Act on freight charges is delet arly shows that freight has been earned o hed goods and raw material and freig customers.
However, this is in the f the total expenditure on truck is consider bited to profit and loss account. If such e there is no income on account of freigh are debited to profit and loss they lead to e, freight charges would compensate su ur onion, the Ld. CIT(A) has correctly adj

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
igible business.
t Chandigarh in Ltd. (ITA No.
able to the facts was held to be idered for the t. The relevant his issue has er:- el. The freight fact, freight ebited to the e purchase of en the fright because the the profit and ons. The net e u/s 80IC of sallowance of ted.
on account of ht has been e nature of red which has xpenditure is ht. When the o decrease in ch decrease.
judicated the 5.14 Gainful reference the Hon’ble Supreme C
Limited (238 taxman the Government, whic freight costs incurred at directly linked to the eli
80-IC of the Act. In our this judgment qua the f recovery of freight cos present case. According recoveries of Rs.49.80 c
80-IC of the Act.
5.15 Now on the issue crores is includable or n we find that the action decision of the Hon'ble
Fenner (India) Ltd (s
"14. The other pa the industrial u consideration in t
CTR (Mad) 5: ( relatable to the i runs as under:
Whether, on the was right in hold
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in this regard may also be made to Court in the case of CIT vs Meg n 559)wherein, the freight subsidy h were essentially reimbursement t the industrially backward districts, gible business and hence allowed a r considered view, the ratio deciden freight subsidy would apply with eq sts by the assessee from its cus gly, the AO is directed to consider t crores for the purposes of computing e as to whether the interest inco not for computing deduction u/s 80
of lower authorities is squarely su e juri ictional Madras High Court upra) wherein it was held as under art of the question is relatable to the intere undertaking. This sort of a question the case of CIT v. Pandian Chemicals Ltd
(1996) 10 MTCR 531 : TC S25.2556. T nterest raised therein figured as question facts and in the circumstances of the case, ding that the interest on deposit with the No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
the decision of halaya Steels y received from ts towards the was held to be s deduction u/s ndi laid down in ual force to the tomers, in the the freight cost g deduction u/s ome of Rs.8.13
0-IC of the Act, pported by the in the case of r:
est earned by n arose for . [1998] 147
The question no. 3 and it , the Tribunal e Tamil Nadu

Electricity Board undertaking for th
15. The question by a Division Ben has committed a deposit with the T treated as income relief under s. 80
16. This decision, on us and in this to conclude that t at all be eligible deduction of an computation of t and this part o assessee."
5.16 Following the abo
CIT(A) confirming the Rs.8.13 crores, while co
5.17 With regard to ot assessee submitted tha which was apportioned, alone accounts, on the no specific details in thi intrinsically connected before us or that it had by the eligible unit. In marketing income was a degree nexus betwee
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should be treated as income derived from he purpose of relief under s. 80HH?
so raised had been discussed in paras.7
nch of this Court, which ultimately held that n error of law holding that the interest e
Tamil Nadu Electricity Board by the assess e derived from industrial undertaking for th
HH of IT Act.
, being that of a Division Bench of this Cou view of the matter, there is no other go f the interest earned by the industrial undert to be included in the gross total income amount equal to twenty per cent in th he profits and gains of the said industrial of the question is, therefore, answered ve, we find no infirmity in the order
AO’s action of excluding the inte omputing the deduction u/s 80-IC of her income of Rs.12.47 crores, the t this comprised of income earned f
, similar to marketing costs debited basis of matching concept of accoun s regard demonstrating as to how t with the operations of eligible un d a direct bearing on the marketing n our considered view, this partic an independent source of income be en profits and the industrial un

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
an industrial to 15 therein t the Tribunal arned on the see should be he purpose of urt, is binding for us, except taking cannot e for claiming e process of l undertaking against the r of the learned rest income of f the Act.
e Ld. AR for the from marketing d in the stand- nting. However, his income was it was brought g costs incurred cular stream of eyond the first- ndertaking and therefore, the AO had eligible deduction u/s 80
5.18 In light of the a directed to re-compute the deduction u/s 80-IC spares of Rs.126.49 cro
Rs.18.5 and freight reco viz., interest income o
Rs.12.47 crores shall no With these directions, t the deduction u/s 80-IC opportunity of hearing of deduction u/s 80-IC
Hence, this ground stan
6. In the result, the Order pronounced (अिमताभ शुा)
(AMITABH SHUK
लेखासदय/ACCOUNTANT
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rightly excluded the same while w
0IC of the Act.
above findings therefore, the AO the turnover of the eligible unit f
C after including the revenues deriv ores, AMC charges of Rs.35 crores, overy of Rs.49.8 crores. The other it f Rs.8.13 crores and other marke ot be considered for the purposes of he AO is directed to accordingly re-
C of the Act. Needless to say, the AO to the assessee before finalizing th
C and shall pass a speaking order nds partly allowed.
appeal of the assessee is partly allo d on the 12th day of February, 2025,
KLA)
MEMBER (एबी टी.
(ABY T. VA
याियकसदय/JUDICIA

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.
working out the is accordingly for working out ed from sale of sale of scrap of tems of income eting income of f Section 80-IC.
-work and allow
O shall afford an he computation in this regard.
wed.
in Chennai.
/-
वक
)
ARKEY)
AL MEMBER

चेई/Chennai,
दनांक/Dated: 12th February
TLN, Sr.PS
आदेश क ितिलिप अेिषत/Cop

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y, 2025. py to:
nai / Madurai / Salem / Coimbatore.

No. 2377/Chny/2024
(AY2017-18) s. Ashok Leyland Ltd.