1980 (3) TMI 45 - HC - Income Tax

High Court grants relief under section 80E for import entitlement profits.

Shardlow India Limited Versus Commissioner Of Income-Tax, Madras

The High Court of Madras ruled in favor of the assessee, allowing them to claim relief under section 80E of the Income-tax Act, 1961 for profits derived ... Priority Industry Issues involved: Interpretation of relief under section 80E of the Income-tax Act, 1961 for profits derived from sales of import entitlements.Summary:The High Court of Madras addressed the issue of whether profits from sales of import entitlements would be entitled to relief under section 80E of the Income-tax Act, 1961. The assessee, a priority industry manufacturing automobile parts, was entitled to a rebate under section 80E. The Income Tax Officer (ITO) excluded the profit on sales of import entitlements from the income eligible for rebate, stating it was not related to the manufacturing operations. This decision was upheld by the Appellate Assistant Commissioner (AAC) and the Tribunal. The Tribunal emphasized the necessity of a direct nexus between profits earned and the manufacturing activity to qualify for relief under section 80E. Referring to the Supreme Court's decision in Cambay Electric Supply Industrial Co. Ltd. v. CIT, the Court highlighted the broader interpretation of the term 'attributable to' as opposed to 'derived from.' The import entitlements were directly linked to the export of manufactured goods and the business of sale of forgings and stampings. Drawing from a similar case, the Court ruled in favor of the assessee, stating that the profits from import entitlements were eligible for relief under section 80E due to their connection with manufacturing, sale, and export activities.Therefore, the Court answered the reference in the negative and in favor of the assessee, allowing them to claim the relief under section 80E. The assessee was also awarded costs, including counsel's fee of Rs. 500.