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DATE: July 18, 2018 (Date of pronouncement)
DATE: August 3, 2018 (Date of publication)
AY: -
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S. 80-IA: There is a difference between "derived from the undertaking" and "derived from the business of the undertaking". The latter expression is wider than the former. Interest on fixed deposits from Bank and other interest are "derived from the business of the undertaking" and are eligible for deduction u/s 80-IA

Mr. Subramaniam, learned Counsel appearing in support of the appeal points out that Pandian Chemicals Ltd. (supra) was rendered in the context of Section 80HH of the Act and we are concerned with Section 80IA of the Act. It is particularly pointed out that there is a difference in the wording of the two sections as existing during the previous year relevant to the subject assessment year. Section 80HH of the Act grants deduction in respect of the profits and gains derived from industrial undertaking while Section 80IA of the Act as in force at the relevant time grants deduction of profits and gains derived from any business of an industrial undertaking. It is submitted that the above issue is no longer res integra as the issue stand concluded in its favour by the decision of this Court in Commissioner of Income Tax Vs. Jagdishprasad M. Joshi, 318 ITR 420

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DATE: October 30, 2017 (Date of pronouncement)
DATE: November 1, 2017 (Date of publication)
AY: -
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S. 10A/ 10B: Entire law on the concept of "derived from" the undertaking and "purposive interpretation" of statutes explained. The incidental activity of parking surplus funds with banks or advancing of staff loans by assessees covered u/s 10-A or 10-B is an integral part of their export business activity and a business decision taken in view of the commercial expediency. Such incidental income cannot be delinked from the profits and gains derived by the undertaking engaged from the export of specified goods and cannot be taxed separately u/s 56 of the Act

Sections 10-A and 10-B of the Act are special provisions and complete code in themselves and deal with profits and gains derived by the assessee of a special nature and character like 100% Export Oriented Units (EOUs.) situated in Special Economic Zones (SEZs), STPI, etc., where the entire profits and gains of the entire Undertaking making 100% exports of articles including software as is the fact in the present case, the assessee is given 100% deduction of profit and gains of such export business and therefore incidental income of such undertaking by way of interest on the temporarily parked funds in Banks or even interest on staff loans would constitute part of profits and gains of such special Undertakings and these cases cannot be compared with deductions under Sections 80-HH or 80-IB in Chapter VI-A of the Act where an assessee dealing with several activities or commodities may inter alia earn profits and gains from the specified activity and therefore in those cases, the Hon’ble Supreme Court has held that the interest income would not be the income “derived from” such Undertakings doing such special business activity

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DATE: August 1, 2016 (Date of pronouncement)
DATE: August 5, 2016 (Date of publication)
AY: 2005-06
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S. 80IA(2A): As the words "derived from" are absent, there is no requirement to prove "first degree nexus" of the receipts with the eligible business. All receipts of the undertaking are eligible for 100% deduction

The legislature having ousted applicability of sub-section (1) and (2) in the opening sentence brought in for the purposes of time line sub-section (2) into play but made no efforts whatsoever to put the assessee under sub-section (2A) to meet the stringent requirements that the profits so contemplated were to be “derived from”. The requirements of the first degree nexus of the profits from the eligible business has not been brought into play

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DATE: April 19, 2016 (Date of pronouncement)
DATE: July 7, 2016 (Date of publication)
AY: -
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Subsidy by way of refund of excise duty and interest for setting up a new industrial undertaking is a capital receipt & not taxable as income. Alternatively, such receipts are "derived" from the industrial undertaking and are deductible u/s 80-IB

The issue raised in these appeals is covered against the Revenue by the decision of this Court in “Commissioner of Income Tax, Madras Vs. Ponni Sugars and Chemicals Ltd.”, reported in (2008) 9 SCC 337, or in the alternate, in “Commissioner of Income Tax Vs. M/s Meghalaya Steels Ltd.“, reported in (2016) 3 SCALE 192 (383 ITR 217 (SC)). The appeals are, therefore, dismissed

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DATE: March 1, 2016 (Date of pronouncement)
DATE: April 18, 2016 (Date of publication)
AY: 2007-08
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S. 80-IB(7): Amounts by way of rent and other misc items, though shown as "other income" in the books, constitutes "key revenue category" as per ICAI Guidelines and are "derived" from the business of the hotel

Thus it can be seen from the above that, rent received by the assessee of Rs.180,000/- from Heritage Shop which represents rental income from Curio Shop and of Rs.120,000/- for the space and amenities given to Kumarakom Water Transport Pvt. Ltd. will fall within the key revenue generation category of ‘Space Rentals’ and ‘Arcade revenue’ and ‘Housekeeping bill’ for a hotel industry. Revenue from staff mess of Rs.7,139/- will also fall within the key revenue generation category of ‘Food and Beverages’ for a hotel industry. Revenue from staff telephone of R.90,048/- will fall within the key revenue category of ‘Communication revenue (both telephone & internet)’ as per ICAI guidelines

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DATE: November 19, 2015 (Date of pronouncement)
DATE: November 29, 2015 (Date of publication)
AY: 2008-09
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S. 10B: Deemed Export Drawback, Customer claims, Freight subsidy & Interest on fixed deposit receipts (under lien for LC & bank guarantee) are all derived from the undertaking & are eligible for deduction

The Court fails to appreciate as to how the ITAT could have held that this transaction did not arise from the business of the export of goods. Even as regards freight subsidy, the Assessee’s contention was that it had received the subsidy in respect of the business carried on and the said subsidy was part of the profit of the business of the undertaking. If the ITAT was prepared to consider the deemed export draw back as eligible for deduction then there was no justification for excluding the freight subsidy

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DATE: October 28, 2015 (Date of pronouncement)
DATE: November 5, 2015 (Date of publication)
AY: 2009-10
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S. 80-IA: Interest on TDS refund, interest from lessees, interest on FDRs and Tender fees are all “derived” from the undertaking and are eligible for deduction. If items of income are not eligible, it should be netted off against expenditure and only balance can be disallowed

The TDS deduction from lease rental income was beyond the control of the assessee and also due to the delay in getting no-deduction certificate from the AO. In view of the same, the assessee was deprived of funds to the extent of TDS amount, which would have otherwise used for the purpose of business purposes including repayment of loan taken for construction of IT parks and SEZ. The Income tax department was required to pay interest only due to the delay in granting refund of TDS. In the case of Liberty India Ltd, relied upon by the AO, the assessee therein received DEPB credits as per the scheme framed by the Government of India. Hence the Hon’ble Supreme Court held that the primary source of the DEPB receipt is the scheme framed by the Government. However, in the instant case, TDS deduction is integral part connected with the receipt of lease income and the same cannot be separted from the activity carried on by the assessee

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DATE: November 13, 2014 (Date of pronouncement)
DATE: March 3, 2015 (Date of publication)
AY: 2008-09, 2009-10
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S. 10B(4): All business profits of the undertaking are eligible for deduction and it is not necessary to show that they have a "direct nexus" with the undertaking

Sub-section (4) of s. 10B does not require an assessee to establish a direct nexus with the business of the undertaking and once an income forms part of the business of the undertaking, the same would be included in the profits of the business of the undertaking. Thus, once an income forms part of the business of the eligible undertaking, there is no further mandate in the provisions of section 10B to exclude the same from the eligible profits

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DATE: November 21, 2014 (Date of pronouncement)
DATE: December 3, 2014 (Date of publication)
AY: 2008-09 & 2009-10
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S. 80-IB: Excise duty refund is "derived" from the undertaking. Liberty India 316 ITR 218 (SC) is distinguishable

The AO has denied 80IB deduction on excise duty refund for the sole reason that it cannot be treated as income derived from eligible business of the undertaking. However, as can be seen from the facts brought on record, there …

DCIT vs. Coromandel International Ltd (ITAT Hyderabad) Read More »

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DATE: October 14, 2014 (Date of pronouncement)
DATE: November 18, 2014 (Date of publication)
AY: 1991-92
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S. 80HHA/ 80-IA: Interest earned on fixed deposits placed out of business compulsion is "derived" from the undertaking

Income earned from fixed deposit placed for business purpose cannot be treated as income from other source but must be seen as part of the assessee’s business income. In the present case also the assessee was compelled to park a …

Empire Pumps Pvt. Ltd vs. ACIT (Gujarat High Court) Read More »