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TMI Blog2007 (4) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... terpreting the provisions of section 80-IB and allowed deduction more than statutorily mandated. 2. Assessing Officer allowed deduction on profits and gains "derived" from business and not on incidental activities attributable to the said business. 3. For the reasons given above it is prayed that order of the CIT (Appeals) should be set aside and the order of the Assessing Officer on the point of section 80-IB be restored." 2. Rival contentions have been heard and record perused. Brief facts in this case are that the assessee-company is in the business of manufacturing and trading of specialized governors and controls to be used in diesel engine power generating sets and allied industrial equipments. It was also engaged in repair wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from manufacturers abroad. Nevertheless, profits on trade of controls and governors purchased from manufacturers abroad cannot be said to be profits derived from industrial undertaking. 4. Accordingly, the Assessing Officer concluded that assessee is not eligible for deduction under section 80-IB in respect of profits derived from such services and repair as well as trading of items imported. 5. By the impugned order, CIT (Appeals) held that assessee was entitled to deduction under section 80-IB not only on the goods manufactured by it but also on the profits from import and sale of products as well as services rendered by the assessee-company. 6. Aggrieved by the above order of the CIT (Appeals), the revenue is in further appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire range of controls/governors, the manufacturing whereof, the assessee is implementing in a phase manner. In the meantime, when such a situation arises the assessee takes specifications from its customers and gets these controls/governors manufactured from overseas for supplying to the customers. The manufacture and sale of such high-tech equipment necessitates a good service and repair facility also. In the course of providing such services, the assessee also replaces certain components/parts of such governors to make them conducive to local requirements. The Governors/Controls supplied by the assessee are proprietary items, which only assessee-company, is best equipped to install and alter in terms of the customer s requirements. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the use of the products sold to them and also providing after sales services and repairing of the products sold to its customers. The activities which are related to activity of manufacture and sale of products are that of provision of training of the customers employees for being able to use the products and after sale service and repairs. The profit from these activities are indeed "derived" from industrial undertaking and formed part of manufacturing products. As the assessee is engaged in the business of manufacture and sale of high precision governors and other control devices. Given the high technical precision it is incumbent upon the assessee to not only adequately train the customers employees to be able to use such products bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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