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TMI Blog1985 (9) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... inery manufactured by it, the assessee became entitled to and obtained import entitlements which were sold during the relevant assessment year. The assessee contended that the profit arising from the sale of the import entitlements was also part of the profit derived from the priority industry, namely, manufacture of tea garden machinery carried on by it, and deduction provided under section 80E should be allowed on such profit. The contention of the assessee was not accepted by the Income-tax Officer who included the entire amount arising from the sale of the import entitlements in the income of the assessee. On an appeal by the assessee, the Appellate Assistant Commissioner held that the profit on sale of the import entitlements had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled to relief under section 80E of the Income-tax Act, 1961, as it then stood for the assessment year 1967-68 ? " Section 80E of the Income-tax Act, 1961, as it stood at the relevant time, read as follows: " Section 80E. Deduction in respect of Profits and gains from specified industries in the case of certain companies.-(1) In the case of a company to which this section applies, where the total income (as computed in accordance with the other provisions of this Act) includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was carrying on business as a manufacturer of aluminium which was a priority industry within the meaning of section 80-I of the Income-tax Act, 1961. In the said business, the assessee procured funds, a part of which became a surplus. The said surplus was invested for a short period and earned interest. The assessee claimed deduction in respect of this interest under section 80-I. It was held by a Division Bench of this court to which I was a party on the facts that the interest had arisen not because that the surplus fund had been employed in the priority industry but because the said fund was not so employed and was utilised for temporary investment. The interest accruing on such fund had no connection direct or indirect with the prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see company and hence the same was attributable to the earning of the business, a priority industry. It was held that the assessee was entitled to relief under section 80-I. Learned advocate appearing for the assessee contended on the other hand that the controversy sought to be raised was covered by the decisions of this court as also those of the other High Courts and the Supreme Court. He submitted that the cases relied on by the Revenue were all on section 80-I and not on section 80-E. He cited the following decisions. (a) Cambay Electric Supply Industrial Co. Ltd. v. CIT reported in [1978] 113 ITR 84. In this case, the question arose before the Supreme Court whether the balancing charge arising as a result of sale of old machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration and distribution of electricity. " (b) Shardlow India Ltd. v. CIT [1981] 128 ITR 571 (Mad). In this case, the assessee was engaged in a priority industry, being manufacturing of forgings and Stampings for automobile parts and claimed relief under section 80E of the Income-tax Act, 1961, on profit arising on sale of import entitlements obtained on export of its manufacture. It was held by Division Bench of the Madras High Court following the principles laid down by the Supreme Court in Cambay Electric Supply Industrial Co. Ltd. [1978] 113 ITR 84, that the import entitlement was directly attributable to the export of the goods manufactured in the priority industry and the assessee was entitled to relief under section 80E of the Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8] 113 ITR 84, the Supreme Court has held that the expression " attributable to " is wider in import than the expression " derived from ". The import entitlements having accrued to the assessee for export of manufactured products of priority industry, it must be held that the profits and gains from the sale of import entitlement are attributable to the business of the assessee in the manufacture of products in the priority industry. The same view has been taken by this court and also the Madras High Court in the decisions referred to hereinabove. For the above reasons, we answer the question referred in the affirmative and in favour of the assessee. There will be no order as to costs. G. N. RAY J.-I agree. - - TaxTMI - TM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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