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2015 (12) TMI 1531 - AT - Income TaxAllowable for deduction u/s 80IA - whether the restriction of derived from contained in sub-section (1) cannot be read into the provision of sub-section (2A) of section 80-IA? - Held that - The provisions cannot be taken in an isolated or detached manner dissociated from the context where the referents i.e. the business undertakings or enterprises to whom it is said provisions are to be applied are clearly specified and distinguishable from one another. Yet, it is necessary to determine first whether the language used is plain or ambiguous for which purpose the provisions of section 80-IA would be required to be read as a whole. Ambiguity could be said to arise only where a provision contains a word or phrase which, in the particulars context, is capable of having more than one meaning. On a reading of sub-section (1) of section 80-IA, we find that the legislature specifically uses the words meaning and import of which is plain and unambiguous in the context it is to be construed. Deduction under section 80- IA in terms of sub-section (1) is available to gross total income of an assessee where gross total income is restricted to profits and gains derived by OR from any business referred to in sub-section (4) . The deduction is available of an . amount equal to hundred percent of the profits and gains derived from such business for ten consecutive assessment years subject to the provisions of the section. The meaning and intention of the legislature has been legally settled and well understood to mean that only those profits come under the ambit which can be said to be derived from such business. The intention of the legislature on a plain reading of the said sub-section is loud and clear. Reference to the decisions which establish a nexus of the first degree at this stage is refrained from as the position is well-settled legally and at this stage is not an issue for consideration in the present proceedings as both the parties agree that sub-section (1) of section 80-IA envisages only first degree nexus for the purposes of claiming deduction. The fact that deduction is available to hundred percent of the profits for a period of ten consecutive years is also not an issue under debate and even otherwise we find that the above provision in the said extent is clear and unambiguous. What we may take note of is that on reading of only this sub-section in isolation what emanates clearly is that the deduction is applicable to any undertaking or an enterprise from any business referred to in sub-section (4) of section 80-IA which the legislature describes as eligible business . The said sub-section sets out in unequivocal terms that the deduction is available to the gross total income of such undertaking/enterprise which includes profits and gains derived from such business. The meaning and limits of first degree nexus of the said phrase is well-understood by the tax payer, the tax collector and the Legislature. The said sub-section also sets out the period and extent of deduction available as hundred percent for ten years. The fact that the restrictions placed on the eligible business by sub-section (1) of section 80-IA shall continue to be read into sub-section (2) of section 80-IA is made clear in the opening words of sub-section (2) itself and as observed in the earlier part of this order is not in doubt and the restrictions of derived from have not been diluted either in sub-section (2) or in the proviso to sub-section (2) of section 80-IA. Accordingly it is seen that the referent business i.e. the undertakings or enterprises covered under the proviso, have been enabled to exercise their option for claiming deductions for ten consecutive years from a period of twenty years. The said term by itself would have been sufficient and complete to convey the legislative intent that whatever may have been said in sub-section (1) and (2) but the legislature has not rested there and has taken care to qualify the word with the all encompassing, all inclusive, well understood word anything contained in sub-section (1) or (2). The meaning, use and import of the said word does not lead to any confusion or ambiguity. Thus prima-facie to our understanding when considering the para phrasing used by the legislature in its plain and literal meaning there cannot be any doubt about what the intention of the legislature is as it is loud and clear in stating that while considering and deciding the intent of sub-section (2A) the mandate of sub-sections (1) and Sub-section (2) are not required to be imported in respect of the referent undertaking or enterprises providing telecommunication services. The dispute of bringing sub-section (1) into play for a tax payer falling in sub-section (2A) of section 80-IA to our minds cannot arise. According to the assessee sub-section (2A) does not put the restriction contemplated in sub-section (1) of section 80-IA in the face of the non-obstante clause coupled with the specific omission to use the well understood term derived from . This argument is notwithstanding the argument that considering the assessee s nature of business the direct nexus presumed by sub-section (1) of section 80-IA is also fulfilled. On a careful reading of the above provisions, we find that the legislature has left no ambiguity in the wording of the sub-section (2A). Having started with the non-obstante clause in sub-section (2A) which over-rides the mandate of sub-section (1) and (2), the legislature is well aware that the phrase derived from has been used only in sub-section (1). The meaning of the said terms is judicially well-accepted and understood and it is not the case of that Revenue that the legislature was not conscious of the said term. It is seen that the import of this term continues to exist for an assessee covered under subsection (2) of section 80-IA. The legislature has consciously retained it for enterprise/undertaking falling in sub-section (2) and the proviso thereto only keeping in mind the nature of the enterprises/undertakings contemplated under sub-section (2) the option of claiming deduction in any ten consecutive years is given to be claimed from the first fifteen years of beginning operation is given.
Issues Involved:
1. Reimbursement of License Fee and Deduction under Section 80IA. 2. Refund from Universal Service Fund and Deduction under Section 80IA. 3. Interest from Others and Deduction under Section 80IA. 4. Liquidated Damages and Deduction under Section 80IA. 5. Excess Provision Written Back and Deduction under Section 80IA. 6. Other Receipts and Deduction under Section 80IA. Detailed Analysis: 1. Reimbursement of License Fee and Deduction under Section 80IA: The assessee argued that the reimbursement of the license fee should be considered as income derived from the business of providing telecommunication services and thus eligible for deduction under Section 80IA. The CIT(A) held that this income was ancillary and not allowable for deduction under Section 80IA. The Tribunal noted that the assessee's business involves providing telecommunication services, which includes the obligation to provide services in rural and backward areas, often at non-commercial rates. The reimbursement was considered a direct consequence of the business activities, and thus, it was held that it should be eligible for deduction under Section 80IA. 2. Refund from Universal Service Fund and Deduction under Section 80IA: The CIT(A) held that the refund from the Universal Service Fund (USF) was not eligible for deduction under Section 80IA. The assessee argued that the USF was a statutory fund to compensate for the losses incurred in providing telecommunication services in rural areas. The Tribunal noted that the USF compensation was directly linked to the business operations of the assessee and should be considered as income derived from the eligible business of providing telecommunication services, thus qualifying for deduction under Section 80IA. 3. Interest from Others and Deduction under Section 80IA: The CIT(A) held that interest income from advances given to employees and suppliers was not eligible for deduction under Section 80IA. The assessee contended that this interest income was part of the business operations. The Tribunal, however, upheld the CIT(A)'s decision, stating that such interest income does not have a direct nexus with the primary business operations of providing telecommunication services and thus is not eligible for deduction under Section 80IA. 4. Liquidated Damages and Deduction under Section 80IA: The CIT(A) allowed the deduction for liquidated damages received by the assessee, considering it as income derived from the business. The Revenue challenged this, arguing that liquidated damages are ancillary and incidental to the business. The Tribunal upheld the CIT(A)'s decision, stating that the liquidated damages were directly related to the business operations and hence eligible for deduction under Section 80IA. 5. Excess Provision Written Back and Deduction under Section 80IA: The CIT(A) allowed the deduction for the excess provision written back, considering it as income derived from the business. The Revenue argued that such write-backs are not directly derived from the business operations. The Tribunal upheld the CIT(A)'s decision, stating that the write-back of provisions is related to the business operations and should be considered as income derived from the business, thus eligible for deduction under Section 80IA. 6. Other Receipts and Deduction under Section 80IA: The CIT(A) allowed the deduction for other receipts such as the sale of directories, publications, forms, and waste paper, considering them as income derived from the business. The Revenue argued that these receipts are ancillary and not directly derived from the business operations. The Tribunal upheld the CIT(A)'s decision, stating that these receipts are connected to the business operations and should be considered as income derived from the business, thus eligible for deduction under Section 80IA. Conclusion: The Tribunal concluded that the phrase "profits and gains of the eligible business" in Section 80IA(2A) does not impose the same restrictions as "profits and gains derived from" in Section 80IA(1). The Tribunal allowed the assessee's appeal on the preliminary issue, making the other grounds academic. The departmental appeal was dismissed, and the assessee's appeal was allowed to the extent mentioned.
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