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TMI Blog1998 (10) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... y aggregating Rs. 26,98,066 as also import licence nomination of Rs. 37,146. The Income-tax Officer excluded the amount of the cash assistance and duty drawback as also the value of the import licence nomination for the purpose of determining the amount in respect of which the exemption under section 80HH could be allowed. For the assessment year 1984-85, the cash assistance and drawback aggregated to Rs. 36,72,757 and the value of the import licence nomination premium was Rs. 97,897. The assessee claimed exemption under section 80HH to the tune of Rs. 2,14,002. That claim was negatived by the Income-tax Officer. The assessee had also claimed exemption under section. 80J for Rs. 43,178 and Rs. 1,18,645 respectively, for the assessment years 1983-84 and 1984-85. The Income-tax Officer limited the exemption to 2/3rds of the claim. In appeal, at the instance of the assessee, the assessee's claim for the entire amount claimed by it under section 80HH as also under section 80J of the Act was allowed. That order of the Commissioner had been upheld by the Tribunal. Learned counsel for the Revenue submitted that section 801 and also section 80HH can be invoked only in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business that was carried on by the assessee. All such income should, therefore, be, according to counsel, regarded as income from the business carried on by the assessee. Counsel in this context referred to the amendment to section 28 of the Income-tax Act by the Finance Act, 1990, with retrospective effect from April 1, 1962, and April 1, 1967 and April 1, 1972. Clause (iiia) and clauses (iiib) and (iiic) were introduced in section 28 of the Income-tax Act with retrospective effect from April 1, 1962, April 1, 1967, and April 1, 1972, respectively. As a consequence of the amendment so effected, profits and sale of the import licence, as also the amount of cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India is treated as forming part of the profits and gains of the business or profession. It was the submission of counsel that in view of the treatment accorded to such receipts by the Act in treating those receipts as forming part of the profits and gains in business, there can be no doubt whatever that those receipts qualified for the benefits available to an assessee under section 80HH, as al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was only a part of the marketing efforts of the assessee. All receipts by the assessee which are connected with or as a consequence of the export, therefore in the submission of counsel, constitute part of the total income of the assessee, as also the profits and gains derived by it from the business of manufacture and export. It was further submitted by counsel that though section 80J as also section 80HH of the Act used the expression "derived from", it does not necessarily follow that the meaning of that expression should be narrowed down artificially to only that income which was derived by the assessee directly by the sale of the products manufactured by it, namely, the amounts paid to the assessee by the buyer of its products. So long as the receipt was a consequence of the sales effected and such receipts would not have been available to the assessee in the absence of such sale including export, those receipts are required to be regarded as amounts which are derived from the business of the assessee. The fact that the cash assistance, duty drawback and the import entitlements were made available to the assessee by the Government of India, instead of the buyer paying a high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of an industrial undertaking and the court has concluded that they are not. It is no doubt true that arguments so elaborately advanced before us do not appear to have been advanced before the court, when those decisions were rendered. Nevertheless, the relevant statutory provisions, as also the relevant decisions of the Supreme Court, and of the Privy Council and the decisions of other courts, as also the earlier decisions of this court were considered and it was after such consideration that it was held that the benefit of section 80HH could be claimed only when there was a direct nexus between the profit or gain and the industrial undertaking. Such a direct nexus, it was held, was not there as between the amounts paid to the assessee by the Government as part of the scheme to encourage export of the goods, and the industrial undertaking. It was not the industrial undertaking which yielded the income by way of cash compensatory support, duty drawback and import entitlements, but it was the scheme of the Government which made it possible for the assessee to receive those amounts and the existence of such a scheme was not essential part of the industrial undertaking. The cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extent of profit and gain that should be properly considered as being relevant for the purpose of those provisions. Though there is some substance on what learned senior counsel for the assessee submitted, we cannot in the light of the statutory language found in these two provisions, and the decisions of the Privy Council as also the Supreme Court holding that the words "derived from" are narrower than "attributable to" and that there must be a direct nexus as between the income and the industrial undertaking, we must necessarily hold as has been held by this court in the earlier cases, that the amounts received by the assessee from the Government consequent to the exports effected by it are not amounts which form part of the profits and gains "derived" from the industrial undertaking. It may perhaps be that it would have been more logical to allow the benefits under sections 80J and 80HH of the Act for the profits and gains which are taxable as business income of the assessee, as the tax levied, is on the business income, and it would be logical to permit the benefits extended to be availed of by the assessee, by adopting the income regarded as business income as the basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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