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2006 (2) TMI 265 - AT - Income TaxDeduction u/s 80-IA - Export incentives and miscellaneous income derived from' the eligible industrial undertaking ? - disallowance out of staff welfare expenses, telephone. expenses, and miscellaneous expenses. HELD THAT:- The Government has been giving incentives to the exporters in different forms namely 'import entitlement', 'cash assistance', 'duty drawback', 'DEPB Scheme', etc. and the incentive received in each of these forms results in some extra profit in the hands of the assessee. The question is as to what can be said to be the 'source' of that extra profit that arises from the incentive/benefit given by the Government to the exporter-assessee under its various schemes. The extra profit, resulting from the various export incentives benefits of the Government, cannot be said to flow directly from the business of the industrial undertaking itself. The 'source' of such extra profit is surely the particular scheme of the Government, under which the export incentive/benefit flows to the assessee in one form or the other. In one case, the assessee received 'cash' straightaway and in another case, the assessee received 'import entitlement' which could be converted into cash and in yet another case, the customs duty paid by the assessee was reimbursed. But in all such cases, in whatever form the export incentive/benefit flowed to the assessee resulting in some extra profit, the 'source' was surely that particular scheme of the Government. This humble opinion of ours is based on the principles laid down by the Supreme Court in the cases of Sterling Foods [1999 (4) TMI 1 - SUPREME COURT], and Pandian Chemicals Ltd. [2003 (4) TMI 3 - SUPREME COURT] and by the Madras High Court in the cases of Jameel Leathers and Uppers[1998 (10) TMI 12 - MADRAS HIGH COURT] and Viswanathan & Co. [2002 (10) TMI 43 - MADRAS HIGH COURT]. The ground No.1 is accordingly rejected. Disallowance out of staff welfare expenses, telephone. expenses, and miscellaneous expenses - We find that the AO and also the CIT(A) did not give cogent reasons for making the above disallowances. In our opinion, the above disallowances are based on conjectures and surmises and cannot be sustained. Further, the decision of the Gujarat High Court in the case of Sayaji Iron & Engg. Co.[2001 (7) TMI 70 - GUJARAT HIGH COURT] supports the case of the assessee. Thus, the above disallowances are deleted and the ground No.3 is allowed. In the result, the appeal filed by the assessee is partly allowed.
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