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Issues involved: Interpretation of eligibility for deduction u/s 80HH of the Income Tax Act, 1961 in respect of transport subsidy received by the assessee.
Summary: The case involved a dispute regarding the eligibility of an assessee for deduction u/s 80HH of the Income Tax Act, 1961, in relation to a transport subsidy received. The Assessing Officer and the Commissioner of Income-tax (Appeals) had ruled against the assessee, but the Tribunal allowed the appeal, citing conflicting views by different High Courts. The main contention was whether the transport subsidy amount could be considered as profit derived from the industrial undertaking or merely incidental income. The Revenue argued that the subsidy amount is not part of the profit derived from the industrial undertaking, relying on various court decisions. On the other hand, the assessee contended that the transport subsidy directly impacted the profit earned and should be considered as derived from the industrial undertaking. The High Court analyzed previous judgments, including those by the Supreme Court, to determine the interpretation of "derived from" in section 80HH. It was emphasized that for a deduction under this section, the profit must directly originate from the industrial undertaking itself, not from incidental sources like subsidies. The Court concluded that the transport subsidy, being an aid from the Government and not directly linked to the industrial activities, could not be considered as part of the profits derived from the industrial undertaking. In light of the above discussion, the Court ruled in favor of the Revenue, holding that the transport subsidy did not qualify as part of the profits and gains derived from the industrial undertaking. The reference application was thus disposed of accordingly.
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