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TMI Blog2005 (8) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... he short allowability of deduction under s. 80-IA." The facts of the case are that assessee filed the return declaring therein income of Rs. 50,98,360. As per information received from ADIT (Inv.), the AO came to know that during the course of search in the case of Shri Harbhajan Singh Chawla, one agreement for sale of one plot measuring 3,744 sq. yards of land executed by Shri Jaspal Singh in favour of assessee for consideration of Rs. 18,72,000 was found. On further inquiry initiated by the ADIT (Inv.) with the seller and buyer that assessee purchased the said land by means of 3 transfer deeds of Rs. 1,40,000 each aggregating to Rs. 4,20,000. As regards the balance amount, the assessee stated that the same had been debited to the books of account of the assessee for the financial year 1993-94 relating to assessment year under reference. In order to cover the amount, assessee surrendered income of Rs. 14,80,000 under the head "Other income" shown as business income. In the return of income filed, the assessee claimed deduction under ss. 80-IA and 80HHC of the IT Act, 1961 (in short "the Act"), by including income surrendered of Rs. 14,80,000. The AO was of the view that amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 23 of the paper book which is a copy of P L a/c for the assessment year under reference. He submitted that a sum of Rs. 19,44,135 was credited under the head "Other income". He then referred to p. 25 of the paper book which is a copy of the details of "Other income". He submitted that a sum of Rs. 14,80,000 was shown as business income. He submitted that since the only source of income was from business of rice shelling, such income was nothing but business profit because of such circumstantial evidence. Relying on the decision of Tribunal, Amritsar Bench, in the case of Kashmir Steels Rolling Mills vs. Dy. CIT (1991) 39 TTJ (Asr) 126 and the fact that Department has not brought on record any material to show that the assessee was having income from other sources, the learned Authorised Representative submitted that such income was a business income entitled to deductions under ss. 80HHC and 80-IA. He also relied on the decision of Tribunal, Amritsar Bench, in the case of Dy. CIT vs. Chaman Lal Sons (2005) 93 TTJ (Asr) 132. 5. The learned Departmental Representative, on the other hand, heavily relied on the orders of authorities below. He submitted that the 'onus' was on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment. Income was credited under the head "Other income." Apart from this, there was no document, bill, invoice, entries in the books of account to indicate undisclosed turnover, inflation of expenses, and suppression of sales/receipts to link such income with the business activities of the assessee. The assessee had neither produced any such evidence before the authorities below or before us to link such income with the business activities of the assessee. Now the question that requires to be considered by this Bench is whether, the assessee would be entitled to claim deductions under ss. 80-IA and 80HHC of the Act in respect of such income. Before recording our findings on this issue, we consider it appropriate to reproduce herein the relevant provisions of the Act which relate to deductions under the s. 80-IA of the Act inserted by the Finance (No. 2) Act, 1991, w.e.f. 1st April, 1991, and relevant for the assessment year under reference read as under: "Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship or developing, maintaining and operating any infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed deduction under s. 80HH in respect of profit earned on sale of import entitlements granted by the Central Government under an export promotion scheme. Sec. 80HH provided deduction in respect of profits "derived from" an industrial undertaking set up in backward area. The apex Court observed that the expression "derived" is usually followed by the word "from" and it means "get to trace from a source, arise from, originate in, show the origin and formation of". The Court further observed that there must be, for the application of the words "derived from", a direct nexus between the profits and gains and the industrial undertaking. The source of import entitlements could not be said to be the industrial undertaking of the assessee. The nexus in this case was not direct but only incidental and, therefore, it was held that profit earned on sale of import entitlements could not be held to constitute a profit and gain "derived from" the industrial undertaking. Hence, assessee was not entitled to deduction under s. 80HH. The wording of s. 80HH is similar to the wording used in s. 80-IA of the Act. 7. In the case of Pandian Chemicals Ltd. vs. CIT (2003) 183 CTR (SC) 99 : (2003) 262 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon by the learned counsel for the assessee. The first decision in the case of Kashmir Steel Rolling Mills vs. Dy. CIT is dt. 16th May, 1990. In this case the assessee had claimed deduction under ss. 80HH and 80-I in respect of income disclosed under the Amnesty Scheme. As per Board's Circular No. 281/50-86 (IT) (Inv. III), dt. 17th June, 1986, the field authorities, were precluded from making any enquiry to find out the source of income disclosed under the Amnesty Scheme. Besides, Tribunal also took note of the fact that the Chief CIT, while answering the question on the stock disclosed, had stated that this would qualify for deduction under ss. 80HH and 80-I. In that case assessee was not bound to disclose the source of such income. In the light of these facts, the Tribunal held that the only source of income was from industrial undertaking, there was strong circumstantial evidence in favour of assessee to come to the conclusion that the income voluntarily disclosed was derived from the industrial undertaking. But these are not the facts of present case. Income has neither been disclosed under the Amnesty Scheme nor the assessee is allowed any immunity from not disclosing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as claimed on identical pattern and was allowed accordingly. The learned Departmental Representative was required to verify the factual position in this regard. On next hearing, it was reported by him that the deduction was allowed in the course of proceeding under s. 143(3), as stated on behalf of the assessee and further no action under s. 263 was taken. Keeping into consideration this fact that the assessee was allowed deduction in the same fashion even after the passing of the instant assessment order, we are at a loss to appreciate any logic in pursuing the matter-in appeal. Albeit the principle of res judicata is not strictly applicable to the proceedings under the Act, yet, the doctrine of consistency does not permit the Department authorities to change its stand when there is no change in the facts or laws in one year vis-a-vis the other, warranting departure. Our view gets support from a recent decision rendered in the case of Director of IT vs. Lovely Bal Shikshan Parishad (2004) 186 CTR (Del) 384 : (2004) 266 ITR 349 (Del). In view of the aforenoted factual and legal position, it becomes apparent that the learned CIT(A) was justified in directing the AO to allow deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the export of such goods or merchandise. The expression used is profit "derived from" export of such goods. This means that there should be direct 'nexus' between the profits and gains with the export of goods. Thus, section is, therefore, similar to s. 80-IA. However, there is a difference in the computation of deduction as provided under s. 80HHC(3) of the Act. As per cl. (a) of sub-s. (3) of s. 80HHC if the assessee has exported goods out of the goods processed by assessee, the profits derived from export shall be computed on proportionate basis as provided in the section. Clause (b) of sub-s. (3) of s. 80HHC refers to export out of trading goods, the profits derived from export again requires to be 'computed on proportionate basis'; cl. (c) deals with computation of profit, if exports out of India is out of goods or merchandise manufactured or processed by the assessee and of trading goods on proportionate basis. But in order to entitle to the claim of deduction under s. 80HHC, it is for the assessee to establish that the case falls under these clauses of sub-s. (3) of s. 80HHC. This has not been done either before the authorities below or even before us. Here also, it's not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by Bombay High Court in the case of CIT vs. K.K. Doshi Co. (2000) 163 CTR (Bom) 472 : (2000) 245 ITR 849 (Bom). In the case of Nanji Topanbhai Co. vs. Asstt. CIT Ors. (1999) 157 CTR (Ker) 225 : (2000) 243 ITR 192 (Ker), Kerala High Court has held that interest earned on fixed deposit offered as collateral security for loan is not profit from business and hence, not entitled to special deduction under s. 80HHC. Same view was taken by Bombay High Court in the case of CIT vs. Ravi Ratna Exports (P) Ltd. (2000) 246 ITR 443 (Bom). Thus, it is clear that it is not every kind of business income which qualifies for computation of deduction under s. 80HHC. The case of the assessee is worst because in this case the assessee has not even disclosed the nature of income which was kept outside the books of account. Therefore, there is no question of allowing deduction under s. 80HHC in respect of such income. 9. In the light of detailed discussion in the preceding paragraphs and legal position discussed above, we are of the considered opinion that assessee is not entitled to deduction under s. 80HHC in respect of income of Rs. 14,80,000 surrendered. We, therefore, do not find any j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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