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2004 (10) TMI 588 - AUTHORITY FOR ADVANCE RULINGS, NEW DELHIDeduction u/s 80-I for interest earned on deposits - incomes from profits - Exclusion of expenses allocated by Marketing and Corporate offices - miscellaneous income - Profit and Loss account -Central Government Public Sector Undertaking - manufacturing and marketing of nitrogenous fertilizer - HELD THAT:- It may be noted that section 80-I of the Act is a beneficial provision and the special deduction allowed there under is in addition to the deductions permissible under other provisions of the Act. Since the special deduction is linked to the ‘profits and gains’ of the industrial undertaking, the expression ‘derived from an industrial undertaking’ was sought to be interpreted as anything connected with the undertaking to boost up income/profits and gains of such undertaking by increasing items/quantum of elementary/reducing deductions to avail maximum benefit under the section. It will be useful to notice here that the expression ‘derived from’ was interpreted by the Hon’ble Supreme Court in CIT v. Sterling Foods [1999 (4) TMI 1 - SUPREME COURT]. Thus, interest on deposit with the MP Electricity Board does not qualify for deduction u/s 80-I Marketing and Corporate offices - It is admitted that while preparing the profit and loss accounts for the purpose of claiming exemption u/s 80-I of Act, all income and expenditure as allocated by the corporate office and marketing division though not directly relatable to the Vijaipur unit, were taken into consideration. The transfer of expenditure to Vijaipur unit is said to be on the basis of the installed capacity as per the practice which was being followed. Therefore, the income and expenditure transferred by the corporate office and the marketing office to Vijaipur unit ignoring the fact that for the purpose of claiming the exemption u/s 80-I, it is only income derived from the industrial undertaking that has to be reckoned in computation as such the income and expenditure which are not directly relatable to Vijaipur unit cannot but be ignored. Thus, the expenditure allocated by the corporate office and the marketing division ought to have been excluded from the debit side of the profit and loss accounts for working out the profits of industrial undertaking for the purpose of computing special deduction u/s 80-I. In regard to question No. 1, it was conceded that the said interest income did not qualify for deduction u/s 80-I, it, therefore, follows that the allocation of interest expenditure from corporate office is untenable. Whether the following incomes credited to P&L account of the industrial undertaking and held by the Assessing Officer as not derived from the Industrial Undertaking, for the purpose of working out deduction u/s 80-I, should not be excluded from its profits to the extent of expenses incurred for earning these incomes and debited to Profit and Loss account - We conclude that these items of income cannot be said to be ‘derived from’ Vijaipur unit, therefore, they ought to be excluded. Item No. 5 is income to recovered from the employees as medical charges spent on them over and above their eligibility. Mr. Jain argued that the amount recovered from the employees would go to reduce the amount al ready spent by the industrial undertaking on its employees. Similar argument was put forth in regard to income received by the sale of scrap, which is item (6). Ms. Shumana fairly submitted that if the applicant could satisfy the concerned Assessing Officer (AO) by showing corresponding entries in the books of account of medical charges spent on the employees and the amounts spent on goods of which the scrap under consideration was sold, such items would not be excluded. Miscellaneous income detailed in column 8 of the applications will abide the result of reconsideration by the Assessing Officer of each item. It should be excluded.
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