High Court Of Punjab & Haryana
Nahar Exports Ltd. vs. CIT
Sections 80-IA, 260A
Asst. Year 1998-99
Adarsh Kumar Goel & Rajesh Bindal, JJ.
IT Appeal No. 642 of 2005
4th July, 2006
Counsel Appeared
Sanjay Bansal, for the Appellant : S.K. Garg, for the Respondent
JUDGMENT
By the court :
This is an appeal filed by the assessee raising following substantial questions of law, arising out of order passed by the Income-tax Appellate Tribunal, Chandigarh Bench ‘B’, Chandigarh (for short ‘the Tribunal’), in ITA No. 76/Chd/2002 dt. 28th July, 2005, for the asst. yr. 1998-99 :
“(i) Whether, on a correct and proper interpretation of the provisions of s. 80-IA of the Act and application thereof to the facts and circumstances of the case, was the Tribunal legally correct in holding that the claim of deduction under s. 80-IA in respect of interest income and income by sale of import licences derived from its business, made by the appellant was not sustainable ?
(ii) Whether, on the facts and in circumstances of the case, the Tribunal has misdirected itself in law and as well as on facts in holding that the appellant was not entitled to deduction under s. 80IA of the Act claimed by the assessee ?
(iii) Whether the finding returned and recorded by the Tribunal while holding that appellant was not entitled to deduction under s. 80-IA by wrongly applying the earlier decision given in C.O. No. 130/Chd/1993 for asst. yr. 1990-91 which was in respect of s. 80-I of the Act, is perverse and vitiated in law ?”
The facts in brief are that the assessee, who is engaged in the business of manufacture, export and trading in cotton yarn, during the assessment year, declared income from sale of import licence and claimed a deduction under s. 80-IA of the IT Act (for short ‘the Act”) for the same. Claim of the assessee was disallowed by the AO relying upon judgments of Hon’ble the Supreme Court of India in CIT vs. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC) and Madras High Court in Fenner (India) Ltd. vs. CIT (1999) 151 CTR (Mad) 30. The appeal on this issue filed by the assessee against the assessment order was rejected by the CIT(A) vide order dt. 24th Dec., 2001 relying upon the order passed by its predecessor rejecting a similar claim for the earlier year.
Even the second appeal of the assessee before the Tribunal was also rejected with the following findings : “6. The first ground raised by the assessee pertains to deduction under s. 80-IA on interest income derived from the business of industrial undertaking is concerned, the same has been decided by the Hon’ble Supreme Court in the case of CIT vs. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC) wherein the assessee was engaged in processing prawns and other sea food, which was exported. It also earned some income from the import entitlements granted by the Central Government under the Export Promotion Scheme. The assessee was entitled to use the import entitlements itself or sell the same to others. The assessee claimed relief under s. 80HH in respect of sale proceeds of import entitlements. The Tribunal held that relief could not be granted. The Hon’ble apex Court reversing the decision of the High Court thrown light on the word ‘derive from’ and held there must be direct nexus between profit and gains of the industrial undertaking. As the nexus was only incidental and not direct, the receipts from the sale of import entitlements could not be included in the income of the assessee for the purpose of computing relief under s. 80HH of the Act. Similar issue was decided against the assessee in the case of Nahar Spinning Mills. No contrary decision was produced by the assessee before us from a higher forum. In
view of the decision from the Hon’ble apex Court as we have discussed in the case of Sterling Foods (supra) and the decision in the case of Nahar Spinning Mills for the asst. yr. 1998-99 wherein it was held that the interest income is business income and not income derived from industrial undertaking. We have no option but to upheld the order of the learned CIT(A) as far as the income derived from the business of sale of import licenses received from the Government is concerned, the same could not be included in the income of the assessee for the purposes of computing the relief under s. 80HH of the Act as was held in Sterling Foods (supra) as in the present case the nexus was not direct but only incidental. Similar views were expressed by the Hon’ble apex Court in the case of Pandian Chemicals Ltd. vs. CIT (2003) 183 CTR (SC) 99 : (2003) 262 ITR 278 (SC). Therein also the meaning of word ‘derived from’ has been elaborated in s. 80HH of the Act by opining that there must be direct or immediate nexus with the assessee’s industrial undertaking. In view of these facts, ground No. 1 raised by the assessee deserves to be dismissed.”
4. We have perused the order passed by the Tribunal and do not find that any illegality has been committed by the Tribunal in rejecting the claim of the assessee on account of deductions claimed under s. 80-IA of the Act. We concur with the reasons given by the Tribunal while rejecting the claim of the assessee. For arriving at the decision, the authorities below have relied upon the principles of law laid down in judgment of Hon’ble the Supreme Court of India in Sterling Foods’ case (supra), which is directly on the issue, wherein it was held as under : “The word ‘derive’ is usually followed by the word ‘from’ and it means : ‘get, to trace from a source; arise from, originate in, show the origin or formation of’. The source of import entitlements could not be said to be the industrial undertaking of the assessee. The source of the import entitlements could only be said to be the Export Promotion Scheme of the Central Government whereunder the export entitlements became available. There must be, for the application of the words ‘derived from’, a direct nexus between the profits and gains and the industrial undertaking. In the instant case, the nexus was not direct but only incidental. The industrial undertaking exported processed sea foods. By reason of such export, the Export Promotion Scheme applied. Thereunder, the assessee was entitled to import entitlements, which it could sell. The sale consideration therefrom could not be held to constitute a profit and gain derived from the assessee’s industrial undertaking The receipts from the sale of import entitlements could not be included in the income of the assessee for the purpose of computing the relief under s. 80HH of the IT Act, 1961.”
5. No substantial question of law arises in appeal. Accordingly, the same is dismissed.
[Citation : 288 ITR 494]
