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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 ..... 12.5.2010 of the learned CIT(A)-I, Indore on the following grounds: 1. That, on the facts and in the circumstances of the case, the ld. first appellate authority erred in not allowing deduction u/s 80-IB of Rs.21,07,643/- as claimed by the assessee firm. 2. That, on the facts and in the circumstances of the case, the ld. first appellate authority has further erred in not allowing deduction u/s 80-IB of Rs.21,07,643/- as the assessee firm derives income from industrial undertaking only, hence eligible for deduction. 3. That without prejudice to above, the ld. CIT(A) below erred in not granting deduction u/s 80IB: a) Excess Cash Rs.8,98,524/- b) Interest Credited Rs.7,33,623/- c) Income from Weighbridge Rs.3,70,710/- 2. During the hearing, we have heard Shri S.C. Goyal, Ld. Counsel for assessee and Shri Arun Dewan, Sr. DR. So far as ground nos.1 2 in the 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars as specified in this section. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) it is not formed82 by splitting up82, or the reconstruction82, of a business already in existence: Provided that this condition shall not apply in respect of an industrial undertaking which is formed as a result of the reestablishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India : Provided that 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 omitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustrial undertaking being a small scale industrial undertaking, it begins to manufacture or produce articles or things or to operate its cold storage plant [not specified in sub-section (4) or sub-section (5)] at any time during the period beginning on the 1st day of April, 1995 and ending on the 31st day of March, 83 [2002]. 84(4) The amount of deduction in the case of an industrial undertaking in an industrially backward State specified in the Eighth Schedule shall be hundred per cent of the profits and gains derived from such industrial undertaking for five assessment years beginning 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 such industrial undertaking: Provided that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment years where the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n industrial undertaking located in a backward district of category B for three assessment years beginning 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 of an industrial undertaking: Provided that the total period of deduction does not exceed eight consecutive assessment years (or where the assessee is a cooperative society, twelve consecutive assessment years): Provided further that the industrial undertaking begins to manufacture or produce articles or things or to operate its cold storage plant or plants at any time during the period beginning on the 1st day of October, 1994 and ending on the 31st day of March, 92-94[2004]. (6) The amount of deduction in the case of the business of a ship shall be thirty per cent of the profits and gains derived from such ship for a period of ten consecutive assessment years including 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 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee, town area committee or a cantonment board or by any other name) of Calcutta, Chennai, Delhi or Mumbai, which has started or starts functioning on or after the 1st day of April, 1997 and before the 31st day of March, 2001; (c) the deduction under clause (a) or clause (b) shall be available only if- (i) the business of the hotel 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 a building previously used as a hotel or of any machinery or plant previously used for any purpose; (ii) the business of the hotel is owned and carried on by a company registered in India with a paid-up capital of not less than five hundred thousand rupees; (iii) the hotel is for the time being approved by the prescribed authority 95: 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 profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y claimed.] (8) The amount of deduction in the case of any company carrying on scientific research and development shall be hundred per cent of the profits and gains of such business for a period of five assessment years beginning from the initial assessment year if such company- (a) is registered in India; (b) has the main object of scientific and industrial research and development; (c) is for the time being approved by the prescribed authority99 at any time before the 1st day of April, 1999. 1[(8A) The amount of deduction in the case of any company carrying on scientific research and development shall be hundred per cent of the profits and gains of such business for a period of ten consecutive assessment years, beginning from the initial assessment year, if such company- (i) is registered in India; (ii) has its main object the scientific and industrial research and 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letes such construction,- (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority. Explanation.-For the purposes of this clause,- (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date on 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 Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains derived from the operation of such facility in a manner that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment years where the assessee is a co-operative society) and subject to fulfilment of the condition that it begins to operate such facility on or after the 1st day of April, 1999 but before the 7[1st day of April, 2004]. 8[(11A) The amount of deduction in a case of 9[an undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or 9a[meat and meat products or poultry or marine or dairy products or] from] the integrated business of handling, storage and transportation of foodgrains, shall be hundred per cent of the profits and gains derived from such undertaking for five assessment years beginning 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 busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bye-laws of the local authority; and (iv) the assessee furnishes along with the return of income, a report of audit in such form and containing such particulars, as may be prescribed12a, and duly signed and verified by an accountant, as defined in the Explanation to sub-section (2) of section 288, certifying that the deduction has been correctly claimed. Explanation.-For the purposes of this sub-section- (a) a hospital shall be deemed to have been constructed on the date on which a completion certificate in respect of such construction is issued by the local authority concerned; (b) initial assessment year means the assessment year relevant to the previous year in which the business of the hospital starts functioning; (c) excluded area shall mean an area comprising- (i) Greater Mumbai 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) in the case of a company carrying on scientific and industrial research and development, means the assessment year relevant to the previous year in which the company is approved by the prescribed authority for the purposes of sub-section (8); (iii)in the case of an undertaking engaged in the business of commercial production or refining of mineral oil referred to in subsection (9), means the assessment year relevant to the previous year in which the undertaking commences the commercial production or refining of mineral oil; 9[(iv) in the case of an undertaking engaged 20[in the business of processing, preservation and packaging of fruits or vegetables or] in the integrated business of handling, storage and transportation of foodgrains, means 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the conditions enumerated therein to such industrial undertaking. Sub-Section (iii) speaks about the percentage of deduction of such industrial undertaking and the profit and gains derived from such industrial undertaking for the specified period. If the language used in Section 80-IB is kept in juxtaposition with the facts of the present appeal and the source of income then it can be said that so far as recovery of excess cash is concerned, it was explained by the assessee that this cash was generated out of industrial undertaking of the assessee. So far as interest income is concerned, it was also not explained as to be generated from industrial undertaking. Even otherwise, interest income cannot be claimed to be from industrial undertaking. 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 char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was engaged in infrastructure development clearly held that for computing profit from the receipts from DEPB/duty drawback, these profits do not form part of net profit as such receipts do not form part of eligible industrial undertaking for the purpose of deduction u/s 80-I, 80- IA, and 80- IB of the Act. This judicial pronouncement from Hon ble Apex Court rather supports the Revenue. So far as the decision from Hon ble Bombay High Court in the case of Jagdish Prasad M. Joshi (supra) is concerned, we find that Hon ble High Court affirmed the finding of the Tribunal in respect of Section 80-IA. In the case of Eltek SGS P. Ltd. (supra), the Hon ble Court was considering for special deduction u/s 80- IB and difference of language used 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 fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Lever Ltd. vs. CIT (1980) 121 ITR 951 (Bom); 3. North East Gases P. Ltd. vs. CIT (1996) 220 ITR 372 (Gauhati); 4. Orissa Tyres Ltd. vs. CIT (1991) 188 ITR 342 (Ori); 5. CIT vs. Bihar Alloy Steels Ltd. (1994) 206 ITR 350 (Pat); 6. Godavari Sugar Mills Ltd. (No.2) vs. CIT (1991) 191 ITR 359 (Bom); and7. Cochin Refineries Ltd. (1985) 154 ITR 345 (Ker). The Hon ble Apex Court in the case of Liberty India (supra) deliberated upon the meaning of derived from . Sub-Section (v) of Section 80-IB clearly speaks about notwithstanding anything contained in any other provisions of this Act, the profit and gains of an eligible business to which the provisions of Sub-Section (i) applies, for the purposes of determining 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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