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TMI Blog2011 (9) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeal are concerned, it pertains to not allowing deduction of Rs.21,07,643/- u/s 80-IB of the Act. The crux of arguments on behalf of the assessee is that the assessee is engaged in ginning and pressing of cotton, therefore, the impugned income is derived from industrial undertaking. Our attention was drawn to pages 26 and 29 of the paper book by further placing reliance upon the decisions in CIT vs. Eltek SGS P. Ltd. (300 ITR 6) (Del), CIT vs. Jagdish Prasad M. Joshi (318 ITR 420) (Bom), Liberty India vs. CIT (317 ITR 218) (SC), CIT vs. Advance Detergents Ltd. (228 CTR 356) (Del), National Legguare Works vs. CIT (288 ITR 18) (P & H) and CIT vs. Paras Oil Extraction Ltd. (230 ITR 266) (MP). On the other hand, the crux of arguments on behalf of the revenue is that the excess cash, interest credited and income from beverage are not the income derived from industrial undertaking, therefore, the impugned order was supported. A plea was also raised that no evidence was furnished by the assessee evidencing that the impugned amount was generated from the manufacturing activities of the assessee. In reply, the Ld. Counsel for assessee contended that the assessee is having only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in sub-section (4) shall apply as if the words "not being any article or thing specified in the list in the Eleventh Schedule" had been omitted. Explanation 1.- For the purposes of clause (ii), any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely:- (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.-Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is a co-operative society) subject to fulfilment of the condition that it begins to manufacture or produce articles or things or to operate its cold storage plant or plants during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 85[2004]: Provided further that in the case of such industries in the North- Eastern Region, as may be notified86 by the Central Government, the amount of deduction shall be hundred per cent of profits and gains for a period of ten assessment years, and the total period of deduction shall in such a case not exceed ten assessment years: 87[Provided also that no deduction under this sub-section shall be allowed for the assessment year beginning on the 1st day of April, 2004 or any subsequent year to any undertaking or enterprise referred to in sub-section (2) of section 80-IC:] 88[Provided also that in the case of an industrial undertaking in the State of Jammu and Kashmir, the provisions of the first proviso shall have effect as if for the figures, letters and words "31st day of March, 2004", the figures, letters and words "31st day of March, 89[2012]" had been substituted: Provided also that no deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the initial assessment year provided that the ship- (i) is owned by an Indian company and is wholly used for the purposes of the business carried on by it; (ii) was not, previous to the date of its acquisition by the Indian company, owned or used in Indian territorial waters by a person resident in India; and (iii) is brought into use by the Indian company at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995. (7) The amount of deduction in the case of any hotel shall be- (a) fifty per cent of the profits and gains derived from the business of such hotel for a period of ten consecutive years beginning from the initial assessment year as is located in a hilly area or a rural area or a place of pilgrimage or such other place as the Central Government may, having regard to the need for development of infrastructure for tourism in any place and other relevant considerations, specify by notification in the Official Gazette and such hotel starts functioning at any time during the period beginning on the 1st day of April, 1990 and ending on the 31st day of March, 1994 or beginning on the 1st day of April, 1997 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided that any hotel approved by the prescribed authority95 before the 1st day of April, 1999 shall be deemed to have been approved under this sub-section. 96[(7A)The amount of deduction in the case of any multiplex theatre shall be- (a) fifty per cent of the profits and gains derived, from the business of building, owning and operating a multiplex theatre, for a period of five consecutive years beginning from the initial assessment year in any place : Provided that nothing contained in this clause shall apply to a multiplex theatre located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee or a cantonment board or by any other name) of Chennai, Delhi, Mumbai or Kolkata; (b) the deduction under clause (a) shall be allowable only if- (i) such multiplex theatre is constructed at any time during the period beginning on the 1st day of April, 2002 and ending on the 31st day of March, 2005; (ii) the business of the multiplex theatre is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of any building or of any machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd development; (iii) is for the time being approved by the prescribed authority2 at any time after the 31st day of March, 2000 but before the 1st day of April, 3[2007]; (iv) fulfils such other conditions as may be prescribed4. 5[(9)The amount of deduction to an undertaking shall be hundred per cent of the profits for a period of seven consecutive assessment years, including the initial assessment year, if such undertaking fulfils any of the following, namely:- (i) is located in North-Eastern Region and has begun or begins commercial production of mineral oil before the 1st day of April, 1997; (ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after the 1st day of April, 1997; (iii) is engaged in refining of mineral oil and begins such refining on or after the 1st day of October, 1998 5a[but not later than the 31st day of March, 2012]. The following clauses (iv) and (v) shall be inserted after clause (iii) of sub-section (9) of section 80-IB by the Finance (No. 2) Act, 2009, w.e.f. 1-4-2010: (iv) is engaged in commercial production of natural gas in blocks licensed under the VIII Round ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the completion certificate in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; 6b[and] (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less.] The following clauses (e) and (f) shall be inserted after clause (d) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains derived from the operation of such business in a manner that the total period of deduction does not exceed ten consecutive assessment years and subject to fulfilment of the condition that it begins to operate such business on or after the 1st day of April, 2001.] The following proviso shall be inserted after sub-section (11A) of section 80-IB by the Finance (No. 2) Act, 2009, w.e.f. 1-4-2010 : Provided that the provisions of this section shall not apply to an undertaking engaged in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products if it begins to operate such business before the 1st day of April, 2009. 10[(11B) The amount of deduction in the case of an undertaking deriving profits from the business of operating and maintaining a hospital in a rural area shall be hundred per cent of the profits and gains of such business for a period of five consecutive assessment years, beginning with the initial assessment year, if- (i) such hospital is constructed at any time du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urban agglomeration; (ii) Delhi urban agglomeration; (iii)Kolkata urban agglomeration; (iv) Chennai urban agglomeration; (v) Hyderabad urban agglomeration; (vi) Bangalore urban agglomeration; (vii) Ahmedabad urban agglomeration; (viii) District of Faridabad; (ix) District of Gurgaon; (x) District of Gautam Budh Nagar; (xi) District of Ghaziabad; (xii) District of Gandhinagar; and (xiii) City of Secunderabad; (d) the area comprising an urban agglomeration shall be the area included in such urban agglomeration on the basis of the 2001 census.] (12) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger- (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans the assessment year relevant to the previous year in which the undertaking begins such business;] 2'[(v) in the case of a multiplex theatre, means the assessment year relevant to the previous year in which a cinema hall, being a part of the said multiplex theatre, starts operating on a commercial basis; (vi) in the case of a convention centre, means the assessment year relevant to the previous year in which the convention centre starts operating on a commercial basis;] 22[(vii) in the case of an undertaking engaged in operating and maintaining a hospital in a rural area, means the assessment year relevant to the previous year in which the undertaking begins to provide medical services;] (d) "North-Eastern Region" means the region comprising the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura; 23[(da)"multiplex theatre" means a building of a prescribed area, comprising of two or more cinema theatres and commercial shops of such size and number and having such other facilities and amenities as may be prescribed24;] (e) "place of pilgrimage" means a place where any temple, mosque, gurdwara, church or other place of public w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . So far as income from weighbridge is concerned, the claim of the assessee is that the weighbridge is part and partial of such industrial undertaking. We are not agreeing with this submission of the assessee because the assessee has shown separate receipts from weighing business and the same cannot be part of industrial undertaking. If for argument sake, the plea of the assessee is considered to be correct then there was no necessity to charge from weighment if it is for the business of the assessee. However, the assessee has charged separately from weigh ment (from weighbridge), therefore, it cannot be treated to be income generated from ginning business of the assessee because the income should be "derived from" the ginning business of assessee/industrial undertaking. Even otherwise, it can be said that the income which has been "derived from" the business of ginning and pressing of cotton can only be considered for deduction u/s 80- IB of the Act and the income which has been either acquired out of income from undisclosed sources are from different business cannot be allowed to be claimed as deduction u/s 80-IB of the Act. The onus is clearly on the assessee to explain that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d between Sections 80-HH & 80-IB. 5. We are aware that in the taxing statute, granting incentives for promoting and development, should be construed liberally but at the same time, no violence is permitted to the language used by the Legislature unless and until it results into absurdity and goes against the intention of the Legislature. The word "derived from" cannot have a wide import so as to include any income which is not generated from the eligible business and is not directly connected with such eligible business of the assessee. Our view is supported by the decisions from CIT vs. Cochin Refineries Ltd. (135 ITR 278) (Ker), CIT vs. Cement Distributors Ltd. (208 ITR 355) (Del). Admittedly, ginning of cotton is a process of manufacturing, therefore, the income "derived from" such eligible business has to be allowed as deduction u/s 80-IB of the Act but the nexus of income has to be explained by the assessee. For example, Section 80-IB should not be stretched to the limit where the income "derived from" industrial undertaking, if reinvested by the assessee in a non-industrial undertaking purpose, therefore, such income from non-industrial undertaking cannot be treated as incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the quantum of deduction then the source of the eligible business has to be considered. The Hon'ble Apex Court in Liberty India (supra) while coming to a particular conclusion affirmed the following decisions: 1. Liberty India vs. CIT (2007) 293 ITR 520 (P & H); 2. CIT vs. Lakhwinder Singh (2009) 317 ITR 209 (P & H); 3. CIT vs. Ritesh Industries Ltd. (2005) 274 ITR 324 (Del); and 4. Shakti Footwear vs. CIT (No.2) (2009) 317 ITR 199 (Mad).The Hon'ble Apex Court while arriving at to a particular conclusion also considered following judicial pronouncements: 1. CIT vs. Kirloskar Oil Engines Ltd. (1986) 157 ITR 762 (Bom); 2. CIT vs. India Gelatine & Chemicals Ltd. (2005) 275 ITR 284 (Guj); 3. CIT vs. Lakhwinder Singh (2009) 317 ITR 209 (P & H); 4. CIT vs. Ritesh Industries Ltd. (2005) 274 ITR 324 (Del); 5. CIT vs. Sterling Foods (1999) 237 ITR 579 (SC); 6. Liberty India vs. CIT (2007) 293 ITR 520 (P & H); 7. Pandian Chemicals Ltd. vs. CIT (2003) 262 ITR 278 (SC); and 8. Shakti Footwear vs. CIT (No.2) (2009) 317 ITR 199 (Mad). In view of the above, it can be said that majority of the decisions, relied upon by the Ld. Counsel for assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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