TaxTMI 
TaxTMI 
2011 (11) TMI 466
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....f Section 80IB under the following heads: 1. Service Income : Rs.10,79,000-00 2. Interest on Deposits with Banks and Finance Institutions : Rs.14,19,000-00 3. Interest received from loans given to employees : Rs.25,51,000-00 4. Cash discount arising from prepayment of dues : Rs.19,84,000-00 5. Commission received : Rs. 3,02,000-00 6. Compensation received from sundry debtors for delayed payments : Rs.15,35,000-00 7. Imported materials : Rs.59,50,000-00 Rs.97,71,000-00 4. The Assessing Officer did not agree with the contentions of the assessee that these incomes are directly derived from the activity of industrial undertaking. With regard to the claim of the assessee under heads (1) to (6) above, the Assessing Officer, on verification of the records and the receipts produced by the assessee, has observed that the 'receives have not been derived from the direct activity of the Industrial Undertaking and there is no direct nexus between the Industrial Undertaking and the service income received. It is clear that training activities are carried out by the assessee at its Headquarters and has n....
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....o.(7), 'imported materials', of Rs.59,50,00,000/=, the CIT(A) has allowed the claim of the assessee in part, to the extent of Rs.27,01,00,000/=, directing the Assessing Officer to adopt Rs.27.01 lakhs (instead of Rs.59.50 lakhs) as the profit relating to sale of imported materials. 9. Aggrieved over the decision of the CIT(A) - in partly allowing the claim of the assessee - while the Revenue has preferred ITA.No.208/Mds/2005 before the Income-tax Appellate Tribunal, Bench 'A', Chennai (hereinafter referred to as the ITAT), the assessee company has preferred ITA.No.193/Mds/2005. 10. The ITAT, dismissed both the appeals of assessee and Revenue, by its common order dated 31.10.2006. Aggrieved, while the assessee has come forward to file this appeal, no appeal has been preferred on the part of the Revenue. 11. Though the assessee has preferred this appeal, questioning dis-allowance of his claim under six heads viz. (i) service income; (ii) interest on deposits with banks and financial institutions; (iii) interest received from loans given to employees; (iv) commission received; (v) compensation received from sundry debtors for delayed payments and (vi) imported materials, this Court....
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....rial undertaking and hence, the authorities below have committed a legal error in not allowing the claims made by the assessee. In support of such arguments, the learned counsel for the assessee would rely on a judgment of a Division Bench of this Court in CIT v. Indo Matsushita Carbon Co. Ltd. [2006] 286 ITR 201. 14. On the other hand, the learned standing counsel appearing for the Revenue would take strong exception to the arguments advanced on the part of the learned counsel for the assessee, even with regard to the aspects, which are not part and parcel of the substantial question of law framed. The learned standing counsel would argue that when the Court has framed substantial question of law only with regard to 'service income' and 'commission received', it is not open for the assessee to rake up such other pleas, which are not covered under the substantial question of law. He would argue that the power of this Court under Section 260A of the Act is to be exercised only within the bounds of law and not otherwise. 15. For this, the learned counsel appearing for the assessee would argue that the powers of this Court under Section 260A of the Act are not that much narrow, as i....
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....shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which-- (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1). (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section. 17. Though under sub-section (4) of this Section 260A, it has been mandated that the appeal shall be heard only on the question formulated, the proviso to this sub-section makes it clear that 'nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.' Therefore, if the Court satisfies that the case involves not only the ....
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....of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) It is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) It manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India : Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in sub-section (4) shall apply as if the words "not being any article or thing specified in the list in the Eleventh Schedule" had been omitted. Explanation 1 : For the purposes of clause (ii), any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely :- (a) Such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) Such machinery or plant is impo....
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....ate specified in the Eighth Schedule shall be hundred per cent of the profits and gains derived from such industrial undertaking for five assessment years beginning with the initial assessment year and thereafter twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains derived from such industrial undertaking : Provided that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment years where the assessee is a co-operative society) subject to fulfilment of the condition that it begins to manufacture or produce articles or things or to operate its cold storage plant or plants during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2000 : Provided further that in the case of such industries in the North-Eastern Region, as may be notified by the Central Government, the amount of deduction shall be hundred per cent of profits and gains for a period of ten assessment years, and the total period of deduction shall in such a case not exceed ten assessment years. (5) The amount of deduction in the case of an industrial undertaking located in such indus....
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....resident in India; and (iii) Is brought into use by the Indian company at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995. (7) The amount of deduction in the case of any hotel shall be- (a) Fifty per cent of the profits and gains derived from the business of such hotel for a period of ten consecutive years beginning from the initial assessment year as is located in a hilly area or a rural area or a place of pilgrimage or such other place as the Central Government may, having regard to the need for development of infrastructure for tourism in any place and other relevant considerations, specify by notification in the Official Gazette and such hotel starts functioning at any time during the period beginning on the 1st day of April, 1990 and ending on the 31st day of March, 1994 or beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001 : Provided that nothing contained in this clause shall apply to a hotel located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee or a cantonment board or by any other name) o....
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....ofits and gains of such business for a period of five assessment years beginning from the initial assessment year if such company - (a) Is registered in India; (b) Has the main object of scientific and industrial research and development; (c) Is for the time being approved by the prescribed authority at any time before the 1st day of April, 1999. (9) The amount of deduction to an undertaking which begins commercial production or refining of mineral oil shall be hundred per cent of the profits for a period of seven consecutive assessment years including the initial assessment year : Provided that where the undertaking is located in North-Eastern Region, it has begun or begins commercial production of mineral oil before the 1st day of April, 1997 and where it is located in any part of India, it begins commercial production of mineral oil on or after the 1st day of April, 1997 : Provided further that where the undertaking is engaged in refining of mineral oil, it begins refining on or after the 1st day of October, 1998. (10) The amount of profits in case of an undertaking developing and building housing projects approved by a local authority, shall be hundred ....
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....d sub-sections (7) to (12) of section 80-IA shall, so far as may be, apply to the eligible business under this section. (14) For the purposes of this section, - (a) "Cold chain facility" means a chain of facilities for storage or transportation of agricultural produce under scientifically controlled conditions including refrigeration and other facilities necessary for the preservation of such produce; (b) "Hilly area" means any area located at a height of one thousand metres or more above the sea level; (c) "Initial assessment year" - (i) In the case of an industrial undertaking or cold storage plant or ship or hotel, means the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the cold chain facility or the ship is first brought into use or the business of the hotel starts functioning; (ii) In the case of a company carrying on scientific and industrial research and development, means the assessment year relevant to the previous year in which the company is approved by the prescribed authority for the purposes of sub-sec....
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....en held in this judgment by the Honourable Apex Court that "It is evident that Section 80-IB provides for allowing of deduction in respect of profits and gains derived from the eligible business. The words 'derived from' are narrower in connotation as compared to the words 'attributable to'. In other words, by using the expression 'derived from', Parliament intended to cover sources not beyond the first degree." 23. Therefore, to substantiate their claim, the assessee is required to satisfy the condition that the deductions, claimed by them, are entitled to be allowed, since 'derived from' their business. 24. In CIT v. Sterling Foods [1999] 237 ITR 579/104 Taxman 204, the Honourable Apex Court has held that 'the assessee has to establish that the profits and gains were derived from industrial undertaking and it was just not sufficient that commercial connection was established between the profits and industrial undertaking. The industrial undertaking has to be the source of the profit. The business of the industrial undertaking has directly to yield the profit. The industrial undertaking should be the direct source of that profit and not a means to earn the profit.' 25. In this....