2004 (7) TMI 278

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....f the Act in respect of the profits and gains which are attributable to the trading activities of the concern. The learned CIT(A) has misinterpreted the meaning of the words in the said section i.e. "the profits and gains derived from any business of any industrial undertaking". The business of an industrial undertaking essentially, intrinsically and exclusively envisages profit and gains derived from manufacturing and not trading." 3. The facts which are essential to be stated for the adjudication of this appeal are that the assessee was carrying on its business of manufacturing of rice having head office at Amritsar and branch office at Karnal. Return was filed declaring an income of Rs. 27,45,980 after claiming deductions under ss. 80HH....

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....re relevant in view of the fact that the Hon'ble apex Court has reversed it in Chillies Exports House Ltd. vs. CIT (1997) 140 CTR (SC) 1 : (1997) 225 ITR 814 (SC). It was stated on behalf of the assessee that the similar deduction was claimed in the subsequent years also and the same AO has allowed it on identical lines. 6. We have heard the rival submissions in the light of material placed before us and precedents relied upon. The assessment year under consideration is 1994-95. The relevant portion of s. 80-IA provides that where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking, there shall be allowed a deduction from such profits in accordance with and subject....

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....or deduction under this section. 7. We would now, therefore, proceed to determine as to whether or not the conditions of industrial undertaking are satisfied in the instant case. The CBDT in its Circular No. 103, dt. 17th Feb., 1973 has defined an industrial company as under: "2. The question as to the exact meaning of the Explanation to sub-s. 7(b) of s. 2 of the Finance Act, 1996, came up for consideration and the Board are advised that an "industrial company" would mean- (i) a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining, even if its income from such activities is less t....

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....Revenue that the assessee is not an industrial undertaking and hence, ineligible for deduction under s. 80-IA. Rather, by treating it as such, the deduction was granted, though on a lower scale. When s. 80-IA(1) is perused, it becomes explicitly clear that deduction is eligible in respect of profits and gains which are derived from any business of an industrial undertaking. As the conditions of the industrial undertaking are satisfied and the transactions of sale and purchase of rice are part and parcel of the 'business of industrial undertaking', we, therefore, hold that the profits in respect of such trading operations would also qualify for deduction. 9. Another important aspect which cannot be lost sight of is that the assessee....