TMI Blog2007 (4) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... ed proceedings under section 263 of the Income-tax Act. After hearing the appellant, the Commissioner set aside the assessments and directed computation of benefits under section 80HHD for the business of the assessee as a whole vide annexures B and B-1 to the appeal. The Income- Appellate Tribunal confirmed the orders of the Commissioner. It is against the said order that this appeal is filed. The only issue that arises for consideration is whether in the facts and circumstances of the case, the profits for the purpose of section 80HHD are to be computed in respect of each of the hotel units which had separately obtained approval of the Department of Tourism on two different dates or whether the eligible deduction under section 80HHD has to be computed with reference to the profits of the entire business of the assessee as held by the Tribunal. Section 80HHD in so far as it relevant is extracted here under: "Section 8OHHD. Deduction in respect of earnings in convertible foreign exchange. ( 1) Where an assessee, being an Indian company or a person (other than a company) resident in India is engaged in the business of a hotel or of a tour operator, approved by the prescribed auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness. It is to be arrived at taking the business as a whole and not unit-wise. It is this finding which was accepted by the Tribunal. 3 We heard Shri S. Sarangan, learned senior counsel appearing on behalf of the appellant and Shri P. K. R. Menon, learned standing counsel appearing for the respondent. Learned counsel appearing for the appellant would contend that the stand taken in annexures B and C orders is unsustainable. He would submit that the view taken is not in keeping with the principles enunciated by the apex court. Reference is made to the following decisions by counsel. (1) CIT v. Buildwell Assam P. Ltd. [1996] 220 ITR 577 (Gauhati) (2) CIT v. Siddaganga Oil Extractions P. Ltd. [1993] 201 ITR 968 (Karn) (3) Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC); (4) CIT v. Kamani Engineering Corporation Ltd. [1986] 161 ITR 473 (Bom); (5) CIT v. Canara Workshops P. Ltd. [1986] 161 ITR 320 (SC) ; and (6) State Level Committee v. Morgardshammar India Ltd. [1996] 101 STC 1 (SC). 4 In Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC), the question which fell for consideration was whether the assessee was entitled to claim partial exemption from pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically speaking, it is transfer of material used in the previous business. 7 In CIT v. Canara Workshops P. Ltd. [1986] 161 ITR 320 (SC), the question arose as to whether in computing the profits for the purpose of deduction under section 80E of the income-tax Act, 1961, the loss incurred by the assessee in the manufacture of alloy steels should not be set off against the profits of the manufacture of automobile ancillaries. The assessee was manufacturing automobile spares. The products manufactured by the company were covered by the list of the Fifth Schedule to the Income-tax Act. During the previous year in question, the assessee commenced manufacture of alloy steels which was also included in the Fifth Schedule and sustained the loss. There were profits disclosed from the automobile ancillary unit. The assessee claimed relief at eight per cent. under section 80E on the profits from the automobile unit. The question which arose was whether the stand of the Department that the relief under section 80E was to be given on the profits from the automobile unit, after setting off the loss in the alloy steel unit. Section 80E provided for deduction from the profits and gains in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of transmission towers in excess of its actual capacity in its Bombay factory. It applied to the Government of India to shift a part of its capacity to the State of Rajasthan. Sanction was accorded and it located the plant in Rajasthan in a new building and acquired new plant and machinery. The assessee claimed the, benefit of section 80J. In computing the capital of the new unit, a question arose whether the loans and current liabilities should be deducted and whether the deduction of borrowed moneys and debts due should be made only in respect of the liabilities of the unit at Jaipur. The court proceeded to hold, inter alia, that the shifting of a part of the capacity would not make any difference where new plant and machinery was set up in a new building constructed for the purpose. It was also found that there is not a word to show that there was, in fact, unity of control. The finding of the Tribunal was that there was no shifting of machinery or plant already in existence or splitting up or reconstruction of the business already in existence. The court held as follows (page 476) "There is not a word to show that there was, in fact, unity of control. The shifti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption.' . . . The principle is well-settled that when two views of a notification are possible, it should be construed in favour of the subject as notification is part of a fiscal enactment. But in this connection, it is well to remember the observations of the Judicial Committee in Carolin M. Armytage v. Frederick Wilkinson [1878] 3 AC 355 (PC) at page 370 that it is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises. The Judicial Committee reiterated in the said decision at page 369 of the report that in a taxing Act provisions establishing an exception to the general rule of taxation are to be construed strictly against those who invoke its benefit. While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It must, however, be borne in mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits and gains of the said industrial undertaking in any sense, much less in a commercial sense; it will be an unnatural and artificial 'profits and gains' of that industrial undertaking. In Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC), while considering the scope of section 80E of the Act, the Supreme Court pointed out that the difference between the 'income attributable to the business' and 'income derived from the business', the term 'attributable to' is of wider import than the expression 'derived from'. In Sterling Foods v. CIT [1984] 150 ITR 292, a Bench of this court, in the context of section 80HH, held that the expression 'derived from' has a definite but narrow meaning and it cannot receive a flexible or wider concept." 12 In UT v. Buildwell Assam P. Ltd. [1996] 220 ITR 577, a Division Bench of the Gauhati High Court held as follows (page 578) "On hearing counsel for the parties and on a perusal of section 80HH of the Income-tax Act we are of the opinion that the assessee is entitled to get rebate to the extent of any profits or gains derived from the industrial undertaking only. If the assessee carries on some other busine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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