TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 480
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....the facts and in the circumstances of the case, the sale proceeds of Rs. 27,98,289 obtained on the sale of advance licenses issued under Chapter-VII of the Import Export Policy for asst. year 1993-94, constituted income derived from industrial undertaking for calculating allowance u/s.80IA of the I.T. Act." 3. The above substantial question of law is common in all appeals except the amount of sale proceeds. The amounts of sale proceeds in the remaining three appeals are Rs. 33,91,871/-, Rs. 35,70,645/-; and Rs. 3,42,468/- respectively. 4. Appellant-assessee is a Company registered under the Companies Act, 1956. It is engaged in the business of manufacturing rubber moulded goods, such as rubber rings, and its sale. They filed Return of income for the assessment year 1993-94 declaring 'nil' income after adjustment of deductions under Section 80HHC and 80-IA of the Act. Subsequently, it was noticed that while computing the total income, other income derived from sale of import (advance) license (for short the license), export incentives and interests was not deducted from the profits of the assessee-Company. In view thereof, it was noticed that the income chargeable to tax h....
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....e derived from the business of an undertaking was admissible for deduction whereas under Section 80 HH deduction was allowable to income derived from an industrial undertaking and not the business of the industrial undertaking. Hence, he submitted, the provisions of Section 80-IA were much wider in scope than Section 80 HH. According to learned counsel for the appellants, Section 80-IA was wider than Section 80 HH as the Legislature intended to give the benefit of deduction not only to the profits derived from the undertaking but also to give the benefit of deduction in respect of incomes having direct nexus with the profits of the undertaking. Hence, he submitted all incomes that arose during the course of running the business would be eligible for deduction under Section 80-IA, which, in the present case would include income arising from the sale of license. He, therefore, submitted that the law laid down by the Supreme Court in Sterling Foods (supra) would not apply to the facts of the present case. He submitted, in view of the delay in issuing the license, asseessee-Company had to procure raw material from open market which included the duty paid thereon, and to recover the sam....
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....nces of the case, the Tribunal was justified in law in holding that the receipt from the sale of import entitlements could not be included in the income of the assessee for the purpose of computing the relief under Section 80HH of the Income-Tax Act, 1961?. After noticing the provisions contained in Section 80HH of the Act and while dealing with the submission of learned counsel for the assessee that the profits and gains were derived from the assessees industrial undertakings, and therefore they were entitled to deduction prescribed under the said provision, the Supreme Court in paragraph twelve observed thus: ...... We do not think that the source of the import entitlements can be said to be the industrial undertaking of the assessee. The source of the import entitlements can, in the circumstances, only be said to be the Export Promotion Scheme of the Central Government whereunder the export entitlements become available. There must be, for the application of the words derived from, a direct nexus between the profits and gains and the industrial undertaking. In the instant case, the nexus is not direct but only incidental. The industrial undertaking exports processed sea food. B....
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...., the amendments in 1993, 1994, 1995, 1996 insofar as sub-section (1) of Section 80-IA is concerned, would not have any effect on consideration of the question raised in these appeals. The relevant sub-section (1) of Section 80-IA was inserted by the Finance (No.2) Act, 1991. Similarly, it would be relevant to reproduce the provision of Section 80-HH, as it stood in 1993-94, though we are not directly concerned with, to understand the judgment of the Supreme Court in Sterling Foods (supra), which was strongly relied upon by the Tribunal for answering the question in favour of the Revenue and against the Assessee. Sections 80-IA and 80-HH, so far as they are relevant, read at the relevant times thus:- 80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship (such business being hereinafter referred to as the eligible business), to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the percent....