9911796707
TMI Blog2015 (5) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... short), against the order dated January 18, 2008, passed by the Income-tax Appellate Tribunal, Bangalore "B" Bench (hereinafter referred to as "the Tribunal" for short). 3. The facts of the case in brief are : The assessee is a 100 per cent export oriented undertaking ("EOU" for short) engaged in the manufacturing of X-ray tubes, high voltage tanks, CT detectors used in CT scanners and X-ray equipment. By virtue of being 100 per cent. export oriented undertaking, the assessee is entitled to deduction under section 10B of the Act in respect of the profits earned from this unit. The assessee is a part of the GE group of companies having operations all over the world. The assessee filed its return of income declaring a total income of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is manufacture and sale of X-ray tubes and high voltage tanks for diagnostic imaging equipment. It is incidental that spare parts are imported for this purpose by the associate companies. Only on the income derived from such manufacturing activity, deduction under section 10B can be allowed. There has to be a direct nexus between the manufacturing activity and the receipts in question. Therefore, it held that the income on sale of spare parts is not eligible profit for the purpose of computing deduction under section 10B of the Act. 5. In so far as the sale of scrap is concerned, relying on the order of the Tribunal in the assessee's own case in I. T. A. No. 3624(B) of 2004 for the assessment year 2001-02, the Tribunal has g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act ? (iii) Whether the Tribunal was correct in holding that incidental income derived by the assessee from the sale of scrap would be entitled to exemption under section 10B of the Act despite the same having been not derived from the export of articles or things ?" 7. Questions Nos. 1 and 2 Learned counsel for the assessee assailing the impugned order con tended that having regard to the total turnover of the export business, the turnover in respect of the import and export of spare parts is negligible. However, it forms part of export business of the assessee. It is incidental to the export business and, therefore, the profit derived from the export of spare parts is also eligible for deduction under section 10B of the Act. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the production of articles for export. Those spare parts which are used for producing articles are extended the benefit of section 10B. There is no dispute on that count. The dispute is that, when the spare parts are imported and without any change or they being used in any production/manufacturing activity, if they are exported, the profits and gains derived from such export is eligible for the benefit under section 10B of the Act having regard to the conditions prescribed under sub-section (2) which is a condition precedent for availing of the benefit under section 10B. Until those conditions are fulfilled, the assessee is not entitled to the benefit of section 10B. When the assessee imports spare parts and exports them in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee submitted that the profit earned by sale of scrap constitutes profits and gains of the assessee and, therefore, section 10B is attracted and the Tribunal was justified in extending the benefit of section 10B to the assessee. 10. The apex court in the case of the CIT v. Sterling Foods reported in [1999] 237 ITR 579 (SC), while dealing with the deductions under section 80HH explained the meaning of the word "derived from" held as under : "The use of the word 'derived from' suggests that the original source of the product has to be found. As a matter of plain English, when it is said that one word is derived from another, often in anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
