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TMI Blog2014 (2) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... e Industrial Undertaking – Held that:- The Commissioner has clearly directed for including the income from the Scrap generated by specified units as - The Scrap generated from the above units has to be treated as Scrap derived from the industrial undertaking and any income from the sale of the said Scrap has to be included for the purpose of benefit of Section 80-HH –Relying upon Pandian Chemicals Ltd. Vs. Commissioner of Income Tax2003 (4) TMI 3 - SUPREME Court] - the word derived from under Section 80-HH has to be understood as something which has immediate nexus with the industrial undertaking - the scrap generated from the units has direct and immediate nexus with the industrial undertaking since the said scrap has been generated from the manufacturing process itself - the Commissioner as well as the Tribunal has committed no error in allowing the benefit of Section 80-HH to the assessee – Decided against Revenue. - Income Tax Appeal No. - 3 of 2011, Income Tax Appeal No. - 356 of 2012 - - - Dated:- 12-2-2014 - Hon'ble Ashok Bhushan And Hon'ble Mahesh Chandra Tripathi,JJ. For the Appellant : S. C.,B. J. Agarwal,R. K. Upadhaya For the Respondent : R. R. Agrawal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned at Sl. No. 22 of Eleventh Schedule of the I.T. Act read with explanation pertaining thereto ? 6. Whether on the facts and in the circumstances of the case, the Ld. ITAT was legally justified in holding the assessee can claim deduction under section 80-I on two profit making units M/s Xerographic undertaking and M/s Toner, Developer, and Photo Receptor Unit and ignoring third unit M/s Service Trading other which had suffered losses without considering the business of M/s Modi Xerox Ltd. as a whole, in totality whereas the deduction under section 80-I was not allowable to the assessee in view of the question of law mentioned at para 6 above ? 7. Whether on the facts and in the circumstances of the case, the Ld. ITAT was legally justified in the CIT (A)'s order allowing the claim of the company that it could claim deduction under section 80 HH on two profit making units M/s Xerographic undertaking and M/s Toner, Developer, and Photo Receptor Unit and ignoring third unit M/s Service Trading other which had suffered loses yet constituted a unit for the business of the assessee as a whole, in totality and without appreciating the provisions of section 80 AB and 80 B (5) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Income Tax Appeal No. 30 of 2001. The question No. 2, is thus answered in favour of the revenue and against the assessee. Question No. 3:- Learned counsel for the assessee has submitted that similar issue was restored to the file of the Assessing Officer by the High Court for the assessment in 1996-97 for verification. Following the judgment of this Court in the case of Commissioner of Income Tax another Vs. Modi Xerox Ltd. in Income Tax Appeal No. 42 of 2002, the issue is restored to the file of Assessing Officer for verification. Question No. 4:- The issue is covered in favour of the assessee by judgment in its own case in Income Tax Appeal No. 31 of 2001. We have perused the judgment of this Court in Income Tax Appeal No. 31 of 2001 (The Commissioner of Income Tax, Meerut another Vs. Modi Xerox Ltd., New Delhi) decided on 15.04.2010. Following the said judgment, the question is answered in favour of the assessee and against the Revenue. Question No. 5, 6 7:- The above three issues are covered in favour of the assessee in its own case i.e. Income Tax Appeal No. 30 of 2001 reported in 344 ITR 411. We have gone through the judgment of the Division Bench of this Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding i.e. Silver Stone and no other expenditure was incurred by the assessee towards guest house/training centre. He submits that Assessing Officer has not referred to any material and the addition was purely based on surmises and conjectures. He submits that the Commissioner Appeal has rightly deleted the said addition. He submits that the Assessing Officer has already referred to expenditure towards entertainment which has already been included in the assessment order and entertainment expenses of Rs. 56,28,733/- has already been included. We have considered the submissions and perused the record. The Assessing Officer while making addition of Rs. 15 lakhs as estimated expenses for guest house has not referred to any expenditure or any material for estimating expenditure of Rs. 15 lakhs. The assessee's case throughout was that he had not incurred any expenditure apart from paying rent of Rs. 9 lakhs. The Commissioner Appeal has allowed the appeal of the assessee and noted the submission of the assessee and recorded its finding in Paragraph No. 13.1 and 13.2 which are quoted as below:- "13.1 The learned counsel for the appellant submitted as under:- "In response to the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 80-HH before the Assessing Officer. Under Section 80-HH, the assessee was entitled to the deduction equal to 20% of the gross total income of the assessee, which includes any profit and gains derived from the industrial undertaking. The assessee's case is that income of Rs. 63,66,932/- was deducted treating to be income from other sources and deduction under Section 80-HH was not given on the aforesaid amount of Rs. 63,66,932/-. The assessee filed appeal against the said order and the Appellate Authority in Paragraph No. 6.2 directed the Assessing Officer to take the income from the sale of Scrap by xerographic equipment unit and Toner, Developer, Photocopier unit as profit of the said unit. The said order has been confirmed by the Tribunal. Learned counsel for the appellant submitted that the Assessing Officer has rightly not deducted the said income from the profits and gain from the industrial unit, since the said income from the Scrap could not be said to be income derived from the industrial undertaking. He submits that the word 'derived from' in Section 80-HH has to be understood as something which has direct and immediate nexus with the assessee's industrial undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priority Industry and, hence, relief u/s 80-I was available in respect of these units. After considering the submissions of the appellant, I direct the A.O. to take the income from sale of Scrap by xerographic equipment Unit and Toner, Developer, Photocopier Unit as profit of the said Units (and not income from other sources) for purpose of deduction u/s 80HH. However, as I have held in the case of the appellant in previous asst. year that the income/profit derived by the appellant by service and trading Unit does not constitute income from Industrial Undertaking, other income of Rs. 29,28,427 (out of claim of Rs. 83,66,932) concerning this unit has to be reduced from the above said net assessable income taken by the A.O." The Commissioner has clearly directed for including the income from the Scrap generated by specified units as noted above. The Scrap generated from the above units has to be treated as Scrap derived from the industrial undertaking and any income from the sale of the said Scrap has to be included for the purpose of benefit of Section 80-HH. The Hon'ble Apex Court in Pandian Chemicals Ltd. Vs. Commissioner of Income Tax reported in 262 ITR 278 (SC) have occasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... top as soon as the effective source is discovered. In the genealogical tree of the interest land indeed appears in the second degree, but the immediate and effective source is rent, which has suffered the accident of non-payment. And rent is not land within the meaning of the definition." The proposition laid down by the Hon'ble Apex Court that the said case was to the effect that the word derived from under Section 80-HH has to be understood as something which has immediate nexus with the industrial undertaking. In the present case, the scrap generated from the aforesaid three units has direct and immediate nexus with the industrial undertaking since the said scrap has been generated from the manufacturing process itself. Thus, we are of the view that the Commissioner as well as the Tribunal has committed no error in allowing the benefit of Section 80-HH to the assessee on the aforesaid income of Rs. 63 lakhs and odd. However, as directed by the CIT Appeal in Paragraph No. 6.1, the Assessing Officer has to pass a consequential order to carry out the directions of the Appellate Authority. In view of above, the question No. 11 is answered in favour of the assessee and against th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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