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TMI Blog2015 (4) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... g. There must be, for the application of the words derived from, direct nexus between the profits and gains and the business of an industrial undertaking. In the instant case, the profit derived from sale of the license could be, at the most treated as incidental and not direct. In the present case, it is not the case of the assessee that sale of the license is their business. If the assessee has derived any profits/gains from the sale of license, it at the most could be treated as income from sources other than the actual conduct of the business and the same, in any case, cannot be treated as a part of gross total income from their business of manufacturing rubber moulded goods such as rubber rings and sale of the same. The submission that the sale of license has direct nexus/connection with the business of the undertaking must be rejected. Merely because the license was obtained for procuring the raw material for manufacturing finished products for its exports, does not mean that the sale of advance license has nexus with the business of manufacturing and sale of finished product. - Decided against the appellant. - ITTA Nos. 50, 51, 52 & 71 of 2005 - - - Dated:- 21-1-2015 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-Company filed a revised Return of income showing the same income as disclosed in the original Return. 5. The Assessing Officer as well as the CIT (A) and the Tribunal rejected the claim of assessee-Company holding that for the purpose of calculation of deduction under Section 80-IA and for the purpose of calculating relief under Section 80HHC; a) premium on sale of advance licences; b) export incentive; and c) interest income, cannot be treated as income derived from their business. In the present appeals we are concerned only with the premium on sale of the licenses. In short, all the three authorities viz., Assessing Officer, CIT (A) and the Income-Tax Appellate Tribunal answered the question, as formulated in these appeals, against the assessee-Company holding that the income earned by them from the sale of the license cannot be considered as income derived from business of their industrial undertaking. From perusal of the order of the Tribunal it is clear that the Tribunal based on the judgment of the Supreme Court in Commissioner of Income Tax v. Sterling Foods (1999) 237 ITR 579 (SC) rejected the claim of the appellants and held that the receipts from sale of license can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under Section 80-IA of the Act. He further submitted that the purchase of raw materials is a part of the business of undertaking and so also the sale of license, and therefore, it would fall within the first degree of proximity. 8. On the other hand, learned counsel for the Revenue in support of the judgment of the Tribunal, in addition to Sterling Foods (supra), placed reliance upon the judgment of the Supreme Court in Liberty India v. Commissioner of Income-Tax (2009) 317 ITR 218 (SC) to contend that the sale of license has absolutely no connection with the business of the assessee-Company. He submitted that for application of the words derived from there must be a direct nexus between the profit and the business of undertaking. He submitted merely because under the scheme to encourage export, the income derived from sale of license cannot be regarded as profit derived from the business of undertaking. In other words, he submitted that sale of the license by the assessee-Company did not have either direct or indirect connection with their business, and therefore, the authorities below have rightly rejected their claim. 9. In Sterling Foods (supra) assessee was engag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te a profit and gain derived from the assessees industrial undertaking. (emphasis supplied) 10. In Liberty India (supra) the Supreme Court while dealing with similar submissions, as urged in the instant case, based on the provisions contained in Sections 80-IB and 80-IA held thus: 13. Before analysing section 80-IB, as a prefatory note, it needs to be mentioned that the 1961 Act broadly provides for two types of tax incentives, namely, investment-linked incentives and profit-linked incentives. Chapter VI-A which provides for incentives in the form of tax deductions essentially belong to the category of profit linked incentives. Therefore, when section 80-IA/80-IB refers to profits derived from eligible business, it is not the ownership of that business which attracts the incentives. What attracts the incentives under section 80-IA/80-IB is the generation of profits (operational profits). ......... 14. Analysing Chapter VI-A, we find that section 80-IB/80-IA are a code by themselves as they contain both substantive as well as procedural provisions. Therefore, we need to examine what these provisions prescribe for computation of profits of the eligible business. It is evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from an industrial undertaking, or the business of hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. 12. Analyzing Chapter VI-A of the Act, we find that Section 80-IA is a Code by itself as it contained both substantive as well as procedural provisions. To analyze the provision of Section 80-IA, so far as it is relevant here, if the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking, the assessee is entitled to be allowed, in the computation of his total income, a deduction from the profits and gains derived from any business of an industrial undertaking of an amount equal to 25% thereof. Insofar as Section 80-HH, as it is relevant here, is concerned, if the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, the assessee is entitled to be allowed, in the computation of his total income, a deduction from the profits and gains derived from the ind ..... X X X X Extracts X X X X X X X X Extracts X X X X
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