TaxTMI 
TaxTMI 
2004 (10) TMI 588
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....nland gas based fertilizer project. The applicant has a corporate office and Marketing division at Noida. The role of the corporate office is to manage all activities relating to corporate affairs which includes statutory compliance with the Companies Law, Income-tax Law and coordination between Ministry and Government agencies. The role of Marketing division is to promote the products of the company and to handle trading of the products which are not manufactured by the company. The expenses incurred by each of the division are accounted for initially in the respective divisions and they are debited to each of the unit including Vijaipur. In the same manner expenses incurred in the corporate office and marketing office are also accounted for in the respective divisions. As a policy the company prepares consolidated accounts at the year end and all the expenses incurred in the corporate office as well as marketing divisions are transferred to four units including Vijaipur unit in the ratio of installed capacity of each of these plant. It is worth noticing that the expenditure incurred by the corporate office as well as the marketing office is not directly relatable to any of the un....
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....r section 80-I is to be allowed on a further sum of Rs. 51,51,289 on account of other miscellaneous income ? Questions (1), (2) and (4) in AAR/533/2001 are similar to the aforementioned question except, the fact that amounts in them are different. Insofar as question No. 3 is concerned while there are 6 items in AAR/532/2001, there are only 2 items in AAR/533/2001. We shall advert to those facets presently. 2. The Commissioner of Income-tax forwarded his comments to the applications, stating that the applicant raised two types of questions. In the first category fall questions (1), (3) and (4) which relate to claim of deductions on various types of income which may be attributable to but are not derived from the eligible industrial undertaking; question (2) which involves exclusion of certain expenditure for the purpose of arriving at permissible deductions under section 80-I, falls in the second category. The assessee failed to show that the income from various sources could be said to be derived from the industrial undertaking. The legislature had earlier used the expression "attributable to" but later that was changed to "derived from". These expressions were interpreted by th....
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....hich is first brought into use; or (iii )the business of a hotel which starts functioning, on or after the 1st day of April, 1990 but before the 1st day of April, 1991 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 twenty-five per cent thereof : Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel as if for the words 'twenty five per cent', the words 'thirty per cent' had been substituted . (2) to (5)****** (6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft to which the provisions of sub-section (1) apply shall, for the purposes of deter mining the quantum of deduction under sub-section (1) for the assessment year immediately succeeding the initial assessment....
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....from', a direct nexus between the profits and gains and the industrial undertaking. In the instant case, the nexus was not direct but only incidental. The industrial undertaking exported processed sea foods. By reason of such export, the Export Promotion Scheme applied. There under, the assessee was entitled to import entitlements, which it could sell. The sale consideration there from could not be held to constitute a profit and gain derived from the assessee's industrial undertaking". (p. 580) 5. Question No. (1), referred to above, relates to interest on deposit with the MP Electricity Board. 6. Mr. Ved Kumar Jain who appeared for the applicant fairly conceded that in view of the judgments, the point is covered against the applicant by the judgments in the following cases : 1.Sterling Foods' case (supra). 2.Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 2782 (SC). 7. Ms. Shumana Sen, DCIT, for the Commissioner had taken the same plea. 8. In view of the above position we conclude on question No. 1 in AAR/532/2001 that interest of Rs. 7,22,506 and on question No. 1 in AAR/533/ 2001 that interest of Rs. 7,05,191 earned on deposit with MP Electricity Board, do not qualify for ....
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....hat the said interest income did not qualify for deduction under section 80-I, it, therefore, follows that the allocation of interest expenditure from corporate office is untenable. Question No. 3 in AAR/532/2001 Whether the following incomes credited to P&L account of the industrial undertaking and held by the Assessing Officer as not derived from the Industrial Undertaking, for the purpose of working out deduction under section 80-I, should not be excluded from its profits to the extent of expenses incurred for earning these incomes and debited to Profit and Loss account. S. No. Name of the item Income included under the head 'other income' (Rs.) 1. Interest on bank deposit 13,30,480 2. Interest on others 57,86,115 3. Hire charges of construction equipment 3,97,746 4. Hire charges of heavy vehicles 24,713 5. Medical charges 2,77,011 6. Sale of scrap 8,39,021 Question No. 3 in AAR/533/2001 S. No. Name of the item Income included under the head 'other income' (Rs.) 1. Hire charges of machinery 3,80,367 2. Income from Railway siding 7,18,245 In so far item Nos. 1 and 2 in AAR/532/2001 are concerned, ....
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....st of Rs. 7,22,506 and in AAR/533/2001 of Rs. 7,05,191, earned on deposits with MP Electricity Board do not qualify for deduction under section 80-I of the Income-tax Act, 1961. (2)question No. 2 in AAR/532/2001 that the expenses of Rs. 2,76,03,364 and Rs. 12,12,74,426 (it is stated that the correct figure is Rs. 11,02,56,561) allocated by marketing office and corporate office and interest expenditure of Rs. 1,65,99, 045 allocated by the corporate office and on question No. 2 in AAR/533/2001 that expenses of Rs. 2,56,44,186 and of Rs. 12,94,59,292 allocated by corporate office and marketing office and interest expenditure of Rs. 8,49,30,952 allocated by corporate office should be excluded from the debit side of the profit and loss account of the industrial undertaking for the purpose of deduction under section 80-I of the Income-tax Act, 1961; the fact that the allocated interest income from corporate office Rs. 5,22,94,939 and Rs. 3,97,44,811 credited to profit and loss account of Vijaipur unit in the assessment years 1995-96 and 1996-97 is of no consequence as both interest income and interest expenditure are liable to be excluded for the purpose of deduction under section....