1994 (3) TMI 69 - HC - Income Tax

Backward Area Industrial Undertaking Literal Interpretation Taxing Statutes Words And Phrases

Summary

Issues Involved:
1. Deduction u/s 80HH for leased industrial unit.
2. Deduction u/s 80J in consequence of relief under section 80HH.

Summary:

Issue 1: Deduction u/s 80HH for leased industrial unit
The Tribunal allowed the assessee's claim for deduction u/s 80HH for its unit, Messrs. Rockfort Asbestos, despite the unit being leased out and the assessee not deriving any profit from manufacturing operations. The High Court held that the deduction u/s 80HH requires profits and gains to be "derived from" the industrial undertaking. The term "derived from" has a restricted meaning, implying that the industrial undertaking must be the direct source of profits. Since the lease income was not directly derived from manufacturing activities but from leasing the unit, it did not qualify for deduction u/s 80HH. Thus, the Tribunal's decision was erroneous.

Issue 2: Deduction u/s 80J in consequence of relief under section 80HH
The Tribunal granted relief u/s 80J based on the allowance of deduction u/s 80HH. As the High Court denied the deduction u/s 80HH, it logically followed that the assessee could not claim relief u/s 80J either. The Tribunal's direction to allow deduction u/s 80J was also incorrect.

Conclusion:
Both questions were answered in the negative, in favor of the Revenue and against the assessee. The Revenue was awarded costs of Rs. 2,000.