9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (6) TMI 378 - HC - Income TaxDistinction between the words derived from and attributable to - Section 80 IA - Freight Subsidy - Decision of Supreme Court in the matter of CIT vs. Cambay Electric supply Industrial Co. Ltd. (1978 -TMI - 5174 - SUPREME Court) - Held that - It is apparent that the Apex court held that it is only the profits generated i.e. operational profits which are entitled to the benefit under Section 80-1A. In Sterling Food the Apex Court (1999 -TMI - 5740 - SUPREME Court) has also laid down a test as to what is the source of income. In the present case the source of income transport subsidy is not the business of the assessee but the scheme framed by the Central Government. Applying the tests laid down in Liberty India s case (2009 -TMI - 34471 - SUPREME COURT) and Sterling Food s case (1999 -TMI - 5740 - SUPREME Court) it is apparent that the transport subsidy received by the assessee is not a profit derived from business since it is not an operational profit. The source of the subsidy is not the business of the assessee but scheme of the Central Government. In view of the above discussion we are clearly of the view that the questions have to be answered in favour of the revenue and against the assessee.
Issues Involved:
1. Whether the ITAT was right in law in holding that 'Freight Subsidy' received from the Government by the assessee is allowed to be included as profits derived from the industrial undertaking and eligible for deduction under Section 80-1A of the Income Tax Act, 1961. Issue-Wise Detailed Analysis: 1. Eligibility of 'Freight Subsidy' for Deduction under Section 80-1A: The central question in this case is whether the 'Freight Subsidy' received by the assessee from the Government can be considered as profits derived from the industrial undertaking, thus making it eligible for deduction under Section 80-1A of the Income Tax Act, 1961. Legal Framework and Precedents: - Cambay Electric Supply Industrial Co. Ltd. vs. CIT (1978) 113 ITR 84: The Supreme Court emphasized the distinction between the terms "derived from" and "attributable to". The term "derived from" has a narrower meaning and requires a direct nexus between the profits and the industrial undertaking. - Merinoply and Chemicals Ltd. vs. CIT (1994) 209 ITR 508: The Calcutta High Court held that transport subsidies are inseparably connected with the business carried on by the assessee and are meant to augment the profit and make the industry viable economically. - Ashok Leyland Ltd. vs. CIT (1997) 224 ITR 122: The Supreme Court held that the term 'attributable' has a wider meaning and includes profits from activities that are not directly part of the main business. - CIT vs. Pandian Chemicals Ltd. (1998) 233 ITR 497: The Madras High Court held that income derived from deposits made with the Electricity Board cannot be considered as income derived from the industrial undertaking. - CIT vs. Sterling Foods (1999) 237 ITR 579: The Supreme Court held that the sale of import entitlements does not constitute profits derived from the industrial undertaking, as the source of such income is the Export Promotion Scheme, not the business itself. - CIT vs. Andaman Timber Industries Ltd. (2000) 242 ITR 204: The Calcutta High Court held that transport subsidy is not derived from the activity of the industrial undertaking and thus not eligible for deduction under Section 80HH. - Liberty India vs. CIT (2009) JT 2009 (11) SC 571: The Supreme Court upheld the view that duty drawbacks and DEPB credits do not constitute profits derived from the industrial undertaking, as they flow from government schemes and not from the business operations directly. Court's Analysis and Conclusion: The court analyzed the above precedents and noted the consistent interpretation that the term "derived from" requires a direct and immediate nexus with the business operations of the industrial undertaking. The court emphasized that the source of the freight subsidy is the scheme framed by the Central Government, not the business operations of the assessee. The court concluded that the freight subsidy received by the assessee does not constitute operational profits derived from the industrial undertaking. Instead, it is an aid provided by the government scheme, which is incidental to the business activities but not directly derived from them. Final Judgment: The court held that the freight subsidy received by the assessee cannot be included as profits derived from the industrial undertaking for the purpose of deduction under Section 80-1A of the Income Tax Act, 1961. Consequently, the appeals were dismissed, and the questions were answered in favor of the revenue and against the assessee.
|
