Transport subsidy is not income derived from industrial operations, so it does not qualify for Section 80-IA deduction.

Transport subsidy received under a Government scheme is not profit derived from an industrial undertaking for deduction under Section 80-IA, because the phrase "derived from" requires a direct and immediate nexus with the eligible business operations. The subsidy is intended to reimburse transport-related costs and support viability in remote areas, but its source remains the scheme itself rather than manufacture or operational activity. As an incidental receipt, it falls outside the profit-linked incentive provision, so the deduction claim on that subsidy fails and the Revenue's position is upheld.

---

---

Issues: Whether transport subsidy received by an industrial undertaking is profit derived from the industrial undertaking so as to qualify for deduction under Section 80-IA of the Income-tax Act, 1961.

Analysis: The expression "derived from" in Section 80-IA is narrower than "attributable to" and requires a direct nexus between the profits and the industrial undertaking. Transport subsidy is granted under a Government scheme to reimburse transport-related costs and to make industries viable in remote areas; its source is the scheme itself and not the business operations of the undertaking. Applying the principles governing profit-linked incentives, only operational profits generated by the eligible business fall within the deduction provision. Since the subsidy is an incidental and not an operational receipt arising from manufacture or business activity, it does not satisfy the statutory test.

Conclusion: Transport subsidy is not income derived from the industrial undertaking and is not eligible for deduction under Section 80-IA.

Final Conclusion: The deduction claim on the transport subsidy fails, and the appeals were rightly dismissed in favour of the Revenue.

Ratio Decidendi: For deduction under a profit-linked incentive provision using the words "derived from", the receipt must arise from the direct and immediate business operations of the eligible undertaking; a subsidy sourced from a Government scheme is outside that ambit.

---