Transport subsidy is not income derived from an industrial undertaking and cannot be deducted as business profits.

Freight or transport subsidy received under a Government scheme does not qualify as profits derived from an industrial undertaking for deduction under Section 80-IA of the Income-tax Act, 1961. The expression "derived from" was treated as narrower than "attributable to" and requiring a direct, immediate source of income. Because the subsidy originated in the scheme itself, and not in the undertaking's manufacturing activity, it was characterised as an incentive or reimbursement rather than operational profit. The subsidy was therefore excluded from deductible business profits, and the assessee was not entitled to the claimed deduction.

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Issues: Whether freight or transport subsidy received under a Government scheme formed part of profits derived from the industrial undertaking and qualified for deduction under Section 80-IA of the Income-tax Act, 1961.

Analysis: The expression "derived from" was held to have a narrower meaning than "attributable to" and requires a direct and immediate source of income. Transport subsidy was found to originate from the Government scheme and not from the industrial undertaking's manufacturing activity. The subsidy was treated as an incentive or reimbursement linked to the scheme, not as operational profit generated by the business itself.

Conclusion: Freight or transport subsidy is not profits derived from the industrial undertaking and is not eligible for deduction under Section 80-IA of the Income-tax Act, 1961.

Final Conclusion: The appeals failed and the assessee was held not entitled to include the transport subsidy in deductible business profits.

Ratio Decidendi: For profit-linked deductions, income must arise from the first-degree source of the industrial undertaking itself; amounts received under an independent Government subsidy scheme do not satisfy the requirement of being derived from the business.

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