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TMI Blog2017 (12) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ting a Statute, but it is always subject to the context being otherwise. We may notice in this regard Section 28 of the Act, which provides for the income coming under the heading ‘Profits and gains of business or profession’. We may notice Section 28(i) of the Act, which provides as follows: “28. Profits and gains of business of profession.-The following income shall be chargeable to income-tax under the head “profits and gains of business or profession”,- (i) the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year;” Contrast the words used in Section 28 (i), it does not use the word “derive”; it also does not specify any particular business as such. The entire income from trade and business would be reckoned under the heading ‘business income’. In other words, under Section 80-IC, a person, an enterprise or an undertaking is entitled to take the benefit of Section 80-IC only insofar as it carries on business, which is mentioned in sub-section (2) of Section 80-IC and derives profits and gains therefrom. - Decided against the assessee - Income Tax Appeal No. 24 of 2015, Income Tax Appeal No. 21 of 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer was incorrect in including the same for the purpose of computing deduction under Section 80-IC of the Act. Hence, the assessment was cancelled under Section 263 of the Act and it was to be done afresh after taking all aspects discussed into the consideration. Against the same, the appellant preferred an Appeal before the Tribunal, which, by the order, which is impugned in ITA No. 24 of 2015, dismissed the Appeal of the assessee. 4. ITA No. 21 of 2017 arises as a sequel to the earlier proceeding. As just noted the matter had been remitted back by the Commissioner under Section 263 of the Act. Following the said order, a fresh assessment order was passed, in which the interest portion was not deducted. It was added to the income and no doubt, shown as an income from business. The Appeal filed against the same was unsuccessful. Equally unsuccessful was the Appeal filed before the Tribunal as the Tribunal found that the Assessing Authorities were only following the direction given in the earlier round. It is this order, which is the subject matter of ITA No. 21 of 2017. 5. We heard Mr. (Dr.) Kartikey Hari Gupta, learned counsel for the appellant and Mr. H.M. Bhatia, lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise from any business referred to in sub-section (2), 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, as specified in sub-section (3). 8. He would submit that in Section 80-IC, though no doubt the word used is derived , there is also reference to the income derived by the enterprise. He would further submit that there is reference to income derived from any of the businesses mentioned in sub-section (2). Next, he drew our attention to the definition of the word business in Section 2(13) of the Act, which reads as under: (13) business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture; 9. He also sought to draw support from the following judgments: (1) Commissioner of Income Tax vs. Karnal Co-operative Sugar Mills Ltd. reported in (2000) 243 ITR 2 (SC). (2) Commissioner of Income Tax vs. Jaypee DSC Ventures Ltd. reported in (2011) 335 ITR 132. (3) Commissioner of Income Tax vs ELTEK SGS (P) Ltd. reported in (2008) 300 ITR 6 (Del). (4) Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he money deposited to open a letter of credit for purchase of plants and machinery would be liable to be treated as capital receipt or whether it would be income. It was found that the deposit of money was directly linked with purchase of plants and, therefore, it was found that the income earned was incidental to acquisition of assets for setting up of the plant and machinery. Therefore, the question, which is deliberated at by the Hon ble Apex Court, has absolutely nothing to do with the issue that arises in this case. In fact, in this case, the amount in question was credited to the Profit and Loss Accounts and it is actually treated as income by the appellant, and the Account of the appellant was accepted and the Assessing Officer gave deduction treating it as an income from his total income, and the issue, which arose from the order passed by the Commissioner was, whether the interest income could be deducted under Section 80-IC, as it was not derived from the business. Therefore, we would think that the appellant cannot rely on the said judgment. 13. As far as the judgment in the case of Commissioner of Income Tax vs. Jaypee DSC Ventures Ltd. reported in (2011) 335 ITR 132 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract for construction of the project; that it is not a case where surplus funds have been utilized to earn the interest income; and that it was not the unutilized and surplus money which was deposited by the assessee to earn interest but on the contrary, the activity of depositing money was incidental to the business of the assessee as FDRs were required to be kept to enter into the agreement for commencement of the project and, hence, FDRs with the bank were made with the definite purpose and the interest earned by the assessee on the FDRs must go to reduce the pre-production expenses. The tribunal also opined that the interest earned by the assessee on the FDRs has intrinsic and inseggregable nexus with the work undertaken and, therefore, the interest earned by the assessee is capital in nature and shall go towards adjustment against the project expenditure and the same cannot be assessed as income from other sources. Being of this view, the tribunal allowed the appeal preferred by the assessee. 21. Keeping in view the aforesaid pronouncements in the field, the present controversy is to be adjudged. As is noticeable from the stipulations in the agreement, the performanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the assessee on the customs duty drawback under Section 80-IB. There, the Bench took the view that the amount, which is received by way of duty drawback is to be treated as reimbursement. Under the duty drawback scheme, the exporters were entitled to duty drawback on the duty paid on the raw materials used for the purpose of manufacture of goods, which were exported. They had the right to either use it themselves or sell it. The proceeds of the sale were sought to be deducted under Section 80-IB. It was there that the Court essentially took the view that there is a crucial difference between language of Sections 80HH, Section 80I and Section 80IB of the Act. We notice the following findings: 21. We are of the opinion that it is not necessary for us to go as far as the Gujarat High Court has done in coming to the conclusion that duty drawback is profit or gain derived from an industrial undertaking. It is sufficient if we stick to the language used in Section 80IB of the Act and come to the conclusion that duty drawback is profit or gain derived from the business of an industrial undertaking. The language used in Section 80IB of the Act is not as broad as the expression &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied on the judgment of the Delhi High Court in the case of CIT vs. Eltek Sgs (P) Ltd. (2008) 215 CTR (Del) 279 : (2008) 3 DTR (Del) 241: (2008) 300 ITR 6 (Del) wherein the Delhi High Court has in fact considered the very same issue, and also the judgment relied upon by the Revenue and has clearly distinguished the language employed under ss. 80-IB and 80HH and has observed as under (pp. 9 and 10): That apart, s. 80-IB of the Act does not use the expression profits and gains derived from an industrial undertaking as used in s. 80HH of the Act but uses the expression profits and gains derived from any business referred to in sub-section A perusal of the above would show that there is a material difference between the language used in s. 80HH of the Act and s. 80-IB of the Act. While s. 80HH requires that the profits and gains should be derived from the industrial undertaking, s. 80-IB of the Act requires that the profits and gains should be derived from any business of the industrial undertaking. In other words, there need not necessarily be a direct nexus between the activity of an industrial undertaking and the profits and gains. Learned counsel for the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit should be treated as income derived from the industrial undertaking within the meaning of Section 80HH. 6. The word derived has been construed as far back in 1948 by the Privy Council in CIT v. Raja Bahadur Kamakhaya Narayan Singh [1948] 16 ITR 325 when it said (page 328) : The word 'derived' is not a term of art. Its use in the definition indeed demands an enquiry into the genealogy of the product. But the enquiry should stop 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. This definition was approved and reiterated in 1955 by a Constitution Bench of this court in the decision of Mrs. Bacha F. Guzdar v. CIT . It is clear, therefore, that the word 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. Although electricity may be required for the purposes of the industrial undertaking, the deposit r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to the fact that interest, which is earned by the appellant, has nothing to do with carrying on of the business per se, namely, manufacture and sale of the articles in question, the appellant would not be entitled to the benefit of deduction. 21. The attempts made by Mr. (Dr.) Kartikey Hari Gupta, learned counsel for the appellant to make distinction between Section 80HH and Section 80-IC would, in our opinion, be without any basis. In Section 80HH and in Section 80-IC, what is contemplated is deduction of the income derived from profits of business. In Section 80-IC, no doubt, it is provided that it may be an income derived by an undertaking or an enterprise. There is no significance to be attached to the employment of words undertaking or enterprise in Section 80-IC. As far as resolving the controversy before this Court is concerned, the appellant claims itself to be an undertaking. The employment of the word enterprise is essentially to deal with a different form of business organization. Insofar as the appellant is an undertaking, there is no distinction otherwise between the words used in Section 80HH. Further attempt made to draw support from the use of wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btedly, in Section 2 (13) of the Act, business is defined. A definition clause is, undoubtedly, to be considered when interpreting a Statute, but it is always subject to the context being otherwise. We may notice in this regard Section 28 of the Act, which provides for the income coming under the heading Profits and gains of business or profession . We may notice Section 28(i) of the Act, which provides as follows: 28. Profits and gains of business of profession.-The following income shall be chargeable to income-tax under the head profits and gains of business or profession ,- (i) the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year; 26. Contrast the words used in Section 28 (i), it does not use the word derive ; it also does not specify any particular business as such. The entire income from trade and business would be reckoned under the heading business income . In other words, under Section 80-IC, a person, an enterprise or an undertaking is entitled to take the benefit of Section 80-IC only insofar as it carries on business, which is mentioned in sub-section (2) of Section 80-IC and d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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