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TMI Blog2008 (1) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... such under The Companies Act. It has a solvent extraction plant where soyabean oil is manufactured from soyabean seeds. It is then sold in market. So the main business of assessee is to manufacture and sell soyabean oil . 4. For the assessment year 1993-94, the respondent (assessee) claimed special deduction under sections 80HH and 80-I on a sum of ₹ 8,73,622 being an amount realized by them (assessee) by sale proceeds of old gunny bags (packing material). It was made part of the total turnover of assessee (respondent herein) during the assessment year in question. So, the question that arose before the Assessing Officer was, whether assessee (respondent) is entitled to claim deduction under section 80HH/80-I on the amount of ₹ 8,73,622 realized by assessee by sale of old gunny bags ? 5. The Assessing Officer by order dated 25-3-1996 rejected the claim of assessee and in consequence declined to grant deduction as claimed under section 80HH/80-I ibid. In the opinion of Assessing Officer, it being not an income derived by an assessee from an industrial undertaking, the same cannot be allowed to be deducted as provided in section 80HH/ 80-I of the Act while calcula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel urged that sale of gunny bags by the assessee is not the business of assessee and hence, any income earned by sale of gunny bags cannot be regarded as an income derived from industrial undertak-ing within the meaning of sections 80HH and 80-I ibid. Learned counsel urged that Tribunal erred in placing reliance on the decision rendered by Madras High Court in Fenner (India) Ltd. v. CIT [2000] 241 ITR 803 which does not lay down correct principle of law. No one appeared for the respondent (assessee) to support the impugned order of Tribunal despite issuance of notice of appeal and SPC to them. 9. Having heard the learned counsel for the appellant (revenue) and having perused the record of the case, we are inclined to allow the appeal and while setting aside the order passed by Tribunal answer the questions framed in favour of revenue. 10. The basic question that arises for consideration in this appeal is what is the meaning of the expression derived from industrial undertaking used by Legislature in sections 80HH and 80-I of the Income-tax Act ? 11. The word derived was first construed as far back in 1948 by the Privy Council in CIT v. Raja Bahadur Kamakhay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whenever the Legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General, it has used the expression derived from , as, for instance, in section 80J. In our view, since the expression of wide import, namely, attributable to , has been used, the Legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity. 14. Again this issue came up for consideration before the Supreme Court in the year 2003 in the case of Pandian Chemicals Ltd. (supra). Referring to aforesaid decisions their Lordships affirmed the earlier view and held as under : It is clear, therefore, that the words derived from in section 80HH of the Income-tax Act, 1961, must be understood as something which has direct or immediate nexus with the appellant s industrial undertaking. 15. It is thus clear as being a law laid down by the Supreme Court that expression derived from has to be given restricted meaning while interpreting the section in which this expression is used. 16. Coming now to the facts of this case, the question is, whether income earned out of sale of gunny bags ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s industrial undertaking established in the backward area. The view that we are taking is in accord with the interpretation made by the Supreme Court in relation to expression derived from in aforementioned cases, wherein the expression, has been given restricted meaning. This necessarily follows that only that income which has a direct or immediate nexus with the industrial undertaking that alone will be taken into consideration for calculating the deduction under section 80HH/80-I ibid. Such is not the case here, because the income earned from sale of gunny bags is not the result of direct or immediate nexus with the business of assessee carried on in the industrial undertaking. 18. We are further fortified with our reasoning by yet one more decision of the Supreme Court in CIT v. Sterling Foods [1999] 237 ITR 5791. The question involved in this case was whether assessee is entitled to claim deduction of sale amount realized by sale of import entitlement under the export promotion scheme for calculating profit and gains derived from the assessee s industrial undertaking, which was engaged in the business of processing prawns and other seafoods under section 80HH of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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