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Bharat Sanchar Nigam Ltd. Versus DCIT, New Delhi And Vica-Versa

Allowable for deduction u/s 80IA - whether the restriction of “derived from” contained in sub-section (1) cannot be read into the provision of sub-section (2A) of section 80-IA? - Held that:- The provisions cannot be taken in an isolated or detached manner dissociated from the context where the “referents” i.e. the business undertakings or enterprises to whom it is said provisions are to be applied are clearly specified and distinguishable from one another. Yet, it is necessary to determine firs .....

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construed. Deduction under section 80- IA in terms of sub-section (1) is available to “gross total income” of an assessee where “gross total income” is restricted to “profits and gains derived by OR from any business referred to in sub-section (4)”. The deduction is available of an . amount equal to hundred percent of the profits and gains derived from such business for ten consecutive assessment years” subject to the provisions of the section. The meaning and intention of the legislature has be .....

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ction (1) of section 80-IA envisages only first degree nexus for the purposes of claiming deduction. The fact that deduction is available to hundred percent of the profits for a period of ten consecutive years is also not an issue under debate and even otherwise we find that the above provision in the said extent is clear and unambiguous.

What we may take note of is that on reading of only this sub-section in isolation what emanates clearly is that the deduction is applicable to any u .....

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aid sub-section also sets out the period and extent of deduction available as hundred percent for ten years.

The fact that the restrictions placed on the eligible business by sub-section (1) of section 80-IA shall continue to be read into sub-section (2) of section 80-IA is made clear in the opening words of sub-section (2) itself and as observed in the earlier part of this order is not in doubt and the restrictions of “derived from” have not been diluted either in sub-section (2) or .....

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and has taken care to qualify the word with the all encompassing, all inclusive, well understood word “anything” contained in sub-section (1) or (2). The meaning, use and import of the said word does not lead to any confusion or ambiguity. Thus prima-facie to our understanding when considering the para phrasing used by the legislature in its plain and literal meaning there cannot be any doubt about what the intention of the legislature is as it is loud and clear in stating that while considerin .....

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ace of the non-obstante clause coupled with the specific omission to use the well understood term “derived from”. This argument is notwithstanding the argument that considering the assessee’s nature of business the direct nexus presumed by sub-section (1) of section 80-IA is also fulfilled. On a careful reading of the above provisions, we find that the legislature has left no ambiguity in the wording of the sub-section (2A). Having started with the non-obstante clause in sub-section (2A) which o .....

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undertaking falling in sub-section (2) and the proviso thereto only keeping in mind the nature of the enterprises/undertakings contemplated under sub-section (2) the option of claiming deduction in any ten consecutive years is given to be claimed from the first fifteen years of beginning operation is given. - I.T.A. No. 3304/Del/2010, I.T.A. No. 3386/Del/2010 - Dated:- 23-12-2015 - Smt Diva Singh, Judicial Member And Sh. J. S. Reddy, Accountant Member For the Appellant : Sh. P. Pardiwala, Sr. Ad .....

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rsement of License fee etc. as ancillary income and not allowable for deduction u/s 80IA of the I.T. Act, 1961. 2. That on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in holding that the refund received by the appellant from Universal Service Fund of ₹ 310.25 crores, is not eligible for deduction u/s 80IA of the I.T. Act, for the same reasons as have been applied, while denying deduction u/s 80IA to reimbursement of License fee. 3. That on the facts and the .....

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90,000/- on account of liquidated damages are entitled for deduction u/s 80IA of the I.T. Act ignoring the fact that it is necessary to prove that the receipt generated should be of first degree source of special activity, but not of ancillary and incidental activity of the undertaking. 2. The ld. CIT(A) has erred in law and on facts in holding that receipts amounting to ₹ 16,86,63,72,000/- on account of excess provision written back are entitled for deduction u/s 80IA of the I.T. Act igno .....

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ome connected with the business and cannot be termed to be explicitly derived from the principal business of the undertaking. 4. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal. 2. The relevant facts of the case are that the assessee in the year under consideration [as per the assessment order dated 25.09.2009 u/s 263/143(3)] filed its return of income on 31.10.2004. The said r .....

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es of deduction claimed u/s 80 IA. As a result of this the assessment was concluded by computing the income of the assessee under the normal provisions of the Act at ₹ 4817,50,71,000/- by the order dated 25.09.2009 u/s 263/143(3). Since it was more than the book profit as per order u/s 154/143(3) dated 12.02.2008 at ₹ 13136,33,09,623/-, the net payable tax was determined under the normal provisions of the Act. 3. Aggrieved the assessee carried the issue before the CIT(A) in appeal wh .....

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cific grounds raised in assessee s appeal and of course defending the relief granted in appeal by the CIT(A), he would first want the issue to be considered whether in terms of sub-section (2A) of section 80-IA the income of the assessee has correctly been computed or not. The Ld.AR stated that consideration of the relevant statutory provisions since these flow from the assessment itself thus the issue raised by way of a legal argument encompassing the entire issue addressing both the appeals sh .....

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f the specific sub-section has been lost sight of by the authorities. The issue, it was submitted, has been considered in the light of the context of subsection (1) of section 80 IA. Decisions rendered considering the wordings derived from and attributable to have wrongly been relied upon in the facts of the present case namely:-Cambay Electric Supply Ltd. vs CIT 113 ITR 84 [1978] [SC]; CIT vs Sterling Foods Ltd. 237 ITR 579 [1999] [SC]; and Pandian Chemicals Ltd. vs CIT 262 ITR 278 [SC] and oth .....

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of the statute which anyway the Revenue is duly bound to consider. In the course of the hearing before us the Revenue did not dispute the position and offered no objection to the raising the issue and maintained that subsection (2A) is only addressing the apportionment of profits for the purposes of deduction and does not carve out any exception as canvassed by the assessee. However, these arguments would be addressed in detail after first having addressed the background of the case as brought o .....

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witching Data Network) and other telecom services through out India (except Delhi and Mumbai) including rural, backward and tribal areas. Prior to the Incorporation of the assessee, the telecommunication services were being provided by the Government of India, Ministry of Communication through its department namely Department of Telecom Services (DTS) and Department of Telecom Operation (DTO). The assessee was incorporated pursuant to the policy of the Government of India (National Telecom Polic .....

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ommenced its business activities from 01.10.2000. The first assessment year of the company was 2001-02 assessment year. No deductions were claimed by the assessee u/s 80IA on account of the returned loss in the first three years upto 2003-04 assessment year and the assessee had begun exercising its claim for deduction u/s 80IA for the first time in the year under consideration and onwards. The relevant extract of section 80-IA is reproduced hereunder :- 80-IA. (1) Where the gross total income of .....

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tion specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or develops a special economic zone referred to in clause (iii) of sub-section (4) or generates power or commences transmission or distribution of .....

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tituted. (2A) Notwithstanding anything contained in sub-section (1) or sub-section (2), the deduction in computing the total income of an undertaking providing telecommunication services, specified in clause (ii) of sub-section (4), shall be hundred per cent of the profits and gains of the eligible business for the first five assessment years commencing at any time during the periods as specified in sub-section (2) and thereafter, thirty per cent of such profits and gains for further five assess .....

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show-caused the assessee to explain why the following items should not be excluded from the profits derived from the eligible business for the purposes of deduction u/s 80IA as although the receipts are attributable to the primary/preferred business, they could not be said to have been derived from the business of the industrial undertaking:- 1. Extra Ordinary Items 2300,00,00,000 2. Refund from Universal Service Fund 310,24,68,000 3. Interest from others 11,79,09,000 4. Liquidated Damages 76,71 .....

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e P&L Account as extraordinary items, as reported by auditors as per Companies Act, and ICAI Act (AS-5). The dispute before me is whether these items of income are business income or income from other sources or other than business income, as per the I.T. Act. Another issue is whether these incomes (profits and gains) are derived by the PSU from the business of providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite services, network of tru .....

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n Sl.No.1 to 3 the additions were sustained. 7.2. Aggrieved by this, both the parties are in appeal before the Tribunal on the afore-mentioned grounds. 8. Mr. P.Pardiwala, Sr. Advocate vigorously argued that per se the very section has been wrongly invoked and without prejudice to this main argument canvassed that considering the very nature of assessee s business the first degree nexus contemplated by the various Courts is also fully met. 8.1. Inviting attention to section 80-IA alongwith sub-s .....

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R 383, it was submitted that the assessee cannot be barred from raising these arguments as the arguments flow from the provisions of the Act. 8.3. It was argued that section 80IA of the Act can be divided into two broad categories:- Category (a) can be said to be applicable to infrastructure undertakings; and category (b) can be said to be applicable to the assessee engaged in provision of tele-communication services. The argument is duly reiterated in the synopsis dated 22.05.2015 also. The sub .....

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ection (1) of section 80 IA provides that the deduction under the said section shall be available to an enterprise where its gross total income includes profits derived from any business (being eligible business) by an undertaking from an eligible business. On the other hand, the tele-communication services, it was submitted is governed by sub-section (2A) wherein the Legislature has consciously used the words profits and gains of eligible business . Sub-section (2A) it was emphasized, starts wi .....

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would be available to such undertakings providing telecommunication service. Thus it was his submission that in respect of the undertakings providing tele-communication services the legislature has specifically excluded the requirements of the source of profit and gains to be obtained directly from tele-communication services and hence excluded the use of words derived from in sub-section (2A), and further including the nonobstante clause in the provision itself so as to over-ride the restricti .....

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ing upon the Principles of Statutory Interpretation as brought out by Justice Sh. G.P.Singh (8th Edition) it was submitted that the non-obstante clause is appended to a section at the beginning of the section in order to give the enacting part of the section an over-riding effect over the other provisions or the Act mentioned in the non-obstante clause. Relying upon the said text it was submitted that the non-obstante clause was used as a legislative device to modify the ambit of the provisions .....

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y the Hon ble Supreme Court and the Hon ble Andhra Pradesh High Court in the case of Ashwini Kumar Ghosh vs Arabinda Bose [1953] SCR 1; and Parsuramaiya vs Lakshman AIR 1965 AP 220. In the said background it was submitted that the Legislature has provided for a specific over-ride in subsection (2A) of section 80IA of the Act over the provisions of sub-section (1) & (2) of section 80IA of the Act. It was submitted that it is not a mere general override and therefore, the provisions of sub-sec .....

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8.7. It was further submitted that had the legislature only meant to distinguish the rates of exemption allowed and the period of deduction to the companies providing tele-communication services as provided in sub-section (2A) of section 80IA of the Act, it could have been done by way of Proviso and not by means of an insertion of a new sub-section altogether. 8.8. Reliance was also placed upon the commentary of Kanga Palkivala & Vyas The Law and practice of Income Tax , 12th Edition (page 3 .....

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ge of the main enactment and its effect is confined to that case. 8.9. In support of the said proposition reliance was placed on the following decisions of the Apex Court :- 1. A.N.Sehgal & Others vs Raje Ram Sheoran 1991 AIR 1406 (SC); 2. Allied Motors vs CIT 224 ITR 667 (SC); and 3. CIT vs Pyari Lal Kasam Manji & Company 198 ITR 110 (Orissa High Court). 8.10. Even otherwise it was submitted that by applying the various Rules of Interpretation the scope and ambit of section 80IA (2A) of .....

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literally and strictly interpreted. Relying on the same it was submitted that following the Rules of construction the Court is bound to interpret the provisions of the Act as they stand without going behind the wisdom of the legislature. 8.12. It was further submitted that it is well accepted and is a settled legal position that every word of a statute has to be assumed to have been deliberately and consciously incorporated therein by the legislature and where the language of the statute is cle .....

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IR [1973] SC 1034; 2. Union of India & Others vs Deoki Nandan Aggarwal 922 Suppl. (1) SCC 323; 3. State of Kerala vs Mathai Verghese & Others [1986] 4 SCC 786. 8.14. Reliance was further placed upon Rishabh Agro Industries Services vs PNB Capital Services [2000] 5 SCC 515; and Padman Sundra Rao vs State of Tamil Nadu [2002] 255 ITR 147 (SC), for the proposition that it is one of the fundamental principles of interpretation of statute that omissions in statute as a general Rule cannot be .....

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ning is uncertain that the Court can ascertain what the legislature meant. 8.15. In the facts of the present case it was submitted there is no ambiguity or uncertainty in the wording used in the statute. Referring to the relevant provisions of the Act it was submitted that non-inclusion of the phrase derived from is not a case of casus omisus since the difference between the phrases profits of the business and attributable from and derived from has not only been recognized by the legislature in .....

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ngeably but has used the phrases attributable from and derived from whenever they wanted to restrict the benefit. It was further submitted that before the re-structuring of section 80 IA by the Finance Act, 2001, the phrase derived from was used even for telecom undertaking. However, it was only during the Finance Act, 2001 that the legislature thought it appropriate to categorize infrastructure undertakings into different segment and provide benefit accordingly. For the said purpose it was subm .....

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different meanings then they necessarily have to be given different meanings. Accordingly, it was his submission that where different expressions have been used in different sections of the Statute they should be given a different meaning. Thus it was submitted that when the legislature has taken care of using different phrases in different section then normally different meaning is required to be assigned to the language used. Relying upon DLF Qutab Enclave Complex Educational Charitable Trust .....

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aware of its implication is an undisputed fact. It was submitted that whenever intended the legislature has used the phrase derived from in the provision starting with non-obstante clause to carve out of different specified assessees. For the said purpose, attention was invited to section 80IB(II) which being a non-obstante clause provides an exception to the general time limits as provided in section 80IB but uses the words deriving profits from business of…………&helli .....

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ion of Grey vs Pearson [1857] 6 HL Cas 61 it was submitted that it is wellsettled that the Golden Rule of Interpretation can be applied only in cases where resorting to grammatical and ordinary sense of the words in the statute would lead to some obscurity or inconsistency with the rest of the statute. Only in such cases, the words are modified so as to avoid obscurity and inconsistency but no further. However, in the case of a taxing statute it was submitted it is well-settled that literal rule .....

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h non-obstante clause otiose and redundant. 8.19. Reliance was placed upon on Union of India vs Popular Construction Company [2001] 8 SCC 470 for the proposition that Parliament cannot be presumed to make superfluous legislation. Thus any interpretation which renders a word or phrase in a statutory provisions redundant or otiose, can never be justified. 8.20. When considered from the premises of the Heydon s Rule i.e. the mischief sought to be addressed, it was submitted that since the intention .....

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e benefit and has not to sought to rectify any mischief. Hyden s Rule it was submitted prescribed that where there is a ambiguity in the language used the real meaning can be arrived at by finding out the aim, scope and object of the whole Act by considering the position of law before the Act was passed; the mischief or defect which the law had not prevented; what remedy the Parliament has provided and the reason for remedy. 8.21. Considering from the perspective of the Rule of beneficial constr .....

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ieved by way of a proviso to sub-section (1) of section 80IA. However, the legislature instead has introduced by the Finance Act, 2001, a separate sub-section (2A) which clearly depicts that the intention of the legislature was not only to differentiate between the rates of deduction allowable to telecommunication service provider but also to distinguish the method of computation of profits for the telecom industry. 8.23. It was submitted even the Notes to the clauses of the Finance Bill 2001 sp .....

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defeat it. Reliance was placed upon Bajaj Tempo vs CIT 196 ITR 188; Mysore Minerals vs CIT 239 ITR 775; CIT, Madras vs South Arcot District Cooperative Marketing Society Ltd. 176 ITR 117. 8.26. Inviting attention to sub-section (2A) it was submitted that the legislature has used the words shall in the sub-section (2A) and accordingly it makes the said sub-section mandatory for the Revenue Authorities. Inviting attention to CIT vs Anjum Ms Ghaswala & Others 252 ITR 1 (2001) it was submitted t .....

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nts supplemented by letter dated 15.06.2015 and the submissions dated 12.10.2015 also addressed each of the items of the additions made by the Assessing Officer. It was his submission that considering what constitutes the business of the assessee each of these items of additions made by the AO where as a result of partial relief granted by the CIT(A) both the parties were in appeal before the ITAT the requirements of the tests judicially settled by Courts even for derived from would make the add .....

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required to be re-imbursed where the costs incurred were for ensuring last mile connectivity to the sparsely populated out lying areas of the country at times in difficult terrain etc. providing telephone services at affordable prices right upto the village panchayat levels. In order to achieve the socially desired aims and objects of the policy where no private player in the sector would want to invest as the costs vis-à-vis the profits are detrimental and not commercially viable. Thus t .....

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aking the business of provision of telecommunication services in India. Thus it was submitted it was required to be considered that it flows from the very same business activity and thus is derived from the telecommunication business. Accordingly even on this touchstone the claim was allowable. 9.1. It was submitted that for the subsequent years i.e 2007-08 to 2009-10 assessment year, the deduction u/s 80IA in respect of such income on record stands allowed by the AO himself and the CIT(A) in hi .....

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statutory status by the Indian Telegraph (Amendment) Act 2003. The fund it was submitted is to be utilized by the Government of India exclusively for providing access to telegraph services (including telecommunication services) to rural and remote areas at affordable and reasonable price and is collected from all telecom operators including the assessee (except those providing pure value added services). Referring to the scheme of USO Fund it was submitted that any telecom services provider whi .....

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ovide telecom services thus the compensation in the form of a refund from USO Fund is evidently income derived from the business of telecom undertaking of the assessee. 9.4. Addressing the issues of liquidity damages, excess provision written back agitated by the Revenue in their appeal and other miscellaneous income the submissions made before the CIT(A) and the decisions relied upon by the CIT(A) and before the CIT(A) as summarized in the written submissions dated 15.06.2015 was relied upon. T .....

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9.5. However, consideration of these issues it was submitted would arise only if the assessee failed in the preliminary argument that the wordings and phrase of sub-section (1) of section 80-IA cannot be imported in sub-section (2A) as it would be running foul of the intention of the legislature which was clear, explicit and unambiguous. 10. The Ld. CIT DR in reply relying upon the impugned order submitted that the language employed in section 80IA is very clear and self-sufficient and the said .....

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ly it was submitted that the source of income which has no direct nexus with the profits of the business undertaking does not help the assessee in any manner. The position it was submitted has been addressed at length and settled by the Apex Court way back in the case of Cambay Electric Supply Ltd.; CIT vs Sterling Foods Ltd.; and Pandian Chemicals Ltd. (cited supra). Thus it was her submission that the arguments and submissions advanced in the face of the clear language used by the statute is o .....

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tion, by giving effect to the requirements and exception carried out in section (I) of section 80IA. Any interpretation which does away with the legislative intent coming from sub-section (1) of section 80IA, it was her submission, would be contrary to the legislative intent. It was her argument that the Court cannot interpret the statute negating sub-section (1) of section 80IA for telecom industries. 10.1. Apart from relying upon the clear intent of the legislature, reliance was also placed up .....

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as compensated - assessee claimed that insurance money was paid to it for loss of production due to accident and, therefore, same would be considered for grant of relief u/s 80IA - Whether given fact that fire accident had taken place as early as 11.3.1996 and there being no nexus between claim before insurance company and subsequent loss arising out of industrial activity, compensation could be considered for purpose of granting relief u/s 80IA - Held, no [para 4] [In favour of revenue]. 10.2. .....

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yee s loan and advances, interest on margin money and interest income on dues towards income tax refund - Held, yes [para 9] [In favour of revenue]. 10.3. Carrying us through the departmental ground, it was her stand that the CIT(A) has not kept in mind the settled legal position addressed by the Apex Court in the case of Liberty Shoes Ltd. on the requirements of a direct nexus. Thus on each of the counts on which relief was granted by the CIT(A), reliance was placed upon the provision of the Ac .....

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not actually been derived from the main line of business undertaken by the enterprise. These incomes are from ancillary sources like reversal of provisions on account of excess provision written back and liquidated damage etc. All these sources have no direct nexus with line of business, which is directly linked to the provisions of Sec.80lA. Reversal of past provisions is not actual business profits. Law is clear in providing the incentives of business enterprise in allowing the benefits, incom .....

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the incentives. What attracts the incentives under Section 80-IA/80-IB is the generation of profits (operational profits). For example, an assessee company located in Mumbai may have a business of building housing projects or a ship in Nava Sheva. Ownership of a ship per se will not attract Section 80-1B (6). It is the profits arising from the business of a ship which attracts sub-section (6). In other words, deduction under subsection (6) at the specified rate has linkage to the profits derive .....

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contain same phrase. The issue revolves around the contention whether deduction is applicable for all receipts/income of the ,assessee or is it restricted to profits and gains "derived from". The phrase derived from used in the Sections 80IA(1) and 80IB(1) of the Act IS highlighted for reference below:- 80-IA(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise ......................... a deduction of an amount equal .....

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ex Court, the expression 'attributable to' has a much wider import than the expression 'derived from' thereby intendinq to cover receipts from sources other than the actual conduct of the business of the industrial undertaking. In other words, it can be understood to mean that there can be receipts which are incidental to the actual conduct of the business of industrial undertaking yet the same may not fall within the expression of 'derived from' so as to be eligible for .....

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ordships, in the aforesaid case, were dealing with the question as to whether the interest derived from the deposit made with the Electricity Board could be construed as a profit derived from the industrial undertaking of the assessee for the purposes of deduction under Section 80HH. According to the Hon'ble Apex Court, the said income was not eligible for the purposes of the claim under Section 80HH. Therefore, certain income falling within the parameters of being incidental to business, ca .....

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h the profit of the business of the undertaking, therefore the income shown as ancillary is not eligible for the deduction u/s 80IA of the Act. 10.5. The detailed arguments advanced by the assessee in support of its case that the additions sustained by the CIT(A) claimed to be derived from the eligible business was disputed by the Ld.CIT DR again relying upon Liberty Shoes and it was her argument that the relief granted is contrary to the said decision and the clear mandate of law. Reliance was .....

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or hearing. Accordingly the raising of the said argument stands unopposed on record. 11. Reverting to the counter arguments of the Ld. Sr. Advocate addressing the departmental request that the issue may be sent back it was submitted that it is a legal argument and can be taken at any stage. It was further submitted that no handicap can be stated to have been caused to the department by arguing this law point and no jurisprudence needs to be cited in order to canvass that the relevant provision o .....

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nnot be said that the Mumbai Bench of the Tribunal has laid down a legal proposition which the Delhi Bench is required to follow as the issue was infact given up by the assessee itself in view of the peculiar facts of the case. The relevant extract brining out this fact relied upon and found to be correct is reproduced hereunder for ready-reference:- 7. At the time of hearing the ld. Sr. counsel for the assessee, at the outset, submits that the Tribunal in assessee s own case in Dy. CIT vs. Essa .....

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ting attention to the decisions rendered by the Hon ble Madras High Court relied upon by the Ld. CIT DR namely Gangotri Textile Ltd. (cited supra) was also relied upon by the Ld. CIT DR, it was submitted that a bare reading of para 6 of the said order would show that no facts were placed either before the ITAT or before the Hon ble High Court and it is on this count that the finding of the ITAT was reversed. The issue therein it was submitted was the compensation received, stated to be from the .....

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cision of the Delhi Bench of the Tribunal rendered in the case of Rollatainers Ltd. (supra) is totally misplaced, since, as is evident from the order of the Tribunal, the case dealt with by the Delhi Bench related to the compensation received on the goods damaged while in transit. As far as the present case is concerned, even though we directed the assessee to produce the details regarding the fire accident and the policy, the assessee could not produce the same before this Court to substantiate .....

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decision would have no relevance to the facts of the present case. The relevant extract of the synopsis filed on behalf of the assessee is extracted hereunder for ready-reference:- The appellant reiterated that the primary contention of the appellant is that the appellant is solely engaged in the business of providing telecommunication services. It s claim of deduction u/s 80IA of the Act has to be governed by the provisions of section 80IA(2) of the Act. The appellant further submitted that pro .....

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ellant also wishes to highlight the following judgements of jurisdictional Delhi High Court in the case of CIT vs Hirtnik Exports ITA 219/2014 and 239/2014 decided on November 13, 2014 and judgement by Karnataka High Court in case of CIT v Motorola India Electronics (P) Ltd. and Special bench order in the case of Maral Overseas Ltd. v ACIT 136 ITD 177, wherein in context of provisions of section 10b of the Act, it has been held that though section 10B(1) of the Act refers to profits derived , th .....

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ns of the Act. 12. We have heard the rival submissions and perused the material available on record. It is seen that the Ld. AR in the course of his arguments, apart from addressing the specific grounds raised by the assessee and addressing the specific grounds raised by the Revenue has raised a preliminary objection to the maintainability of the additions based on the restrictions placed by sub-section (1) if section 80-IA. The objection has been raised on the ground that the restriction of der .....

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needs to be decided at the threshold as a preliminary issue. The issue if decided in assessee s favour it was submitted would make the other grounds in the assessee s appeal and the grounds in the Revenue s appeal academic in nature. In support of raising this issue, reliance has been placed on the decisions of the Apex Court in the case of Hukumchand vs CIT 63 ITR 362 and NHPC 292 ITR 383 (SC). We find that since the Revenue has not objected to the raising of this preliminary objection taken as .....

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ion by the Ld.AR in the above-mentioned legal and factual position on record where the argument has not been opposed by the Revenue and has infact been addressed at length during the course of the arguments by both the parties, it would be appropriate to first consider the relevant provisions of section 80-IA of the Act. 13. Having so held, we now propose to examine the relevant provisions of Section 80-IA of the Income Tax Act in order to decide whether the legislature intended that the words d .....

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d plain, the Court is bound to accept the expressed intention of the legislature. Hence we need to examine the scheme of the relevant Section in order to determine the true meaning of the words used in any one or more of the sub-sections. The provisions cannot be taken in an isolated or detached manner dissociated from the context where the referents i.e. the business undertakings or enterprises to whom it is said provisions are to be applied are clearly specified and distinguishable from one an .....

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ding of the Section, though both the parties have taken a contrary view on the manner in which the words used in the provision are to be construed in the context for imposition of tax or allow deduction. 13.2. On a reading of sub-section (1) of section 80-IA, we find that the legislature specifically uses the words meaning and import of which is plain and unambiguous in the context it is to be construed. Deduction under section 80- IA in terms of sub-section (1) is available to gross total incom .....

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said to be derived from such business. The intention of the legislature on a plain reading of the said sub-section is loud and clear. Reference to the decisions which establish a nexus of the first degree at this stage is refrained from as the position is well-settled legally and at this stage is not an issue for consideration in the present proceedings as both the parties agree that sub-section (1) of section 80-IA envisages only first degree nexus for the purposes of claiming deduction. The f .....

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ture describes as eligible business . The said sub-section sets out in unequivocal terms that the deduction is available to the gross total income of such undertaking/enterprise which includes profits and gains derived from such business. The meaning and limits of first degree nexus of the said phrase is well-understood by the tax payer, the tax collector and the Legislature. The said sub-section also sets out the period and extent of deduction available as hundred percent for ten years. 13.4. P .....

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ambit of first degree nexus continues to remain in play as is evident from the opening line itself. The said sub-section retains hundred percent deduction for a period of ten years but provides an option to claim the deduction for ten consecutive years from the expanded period of 15 years beginning from the year in the case of enterprises and undertaking develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or deve .....

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both the parties have no objection to the literal meaning of the said subI. section to be construed in the above manner. 13.5. It is seen that the Legislature by the Finance Act, 2001 w.e.f 01.04.2005 substituted the original proviso to sub-section (2) by inserting the following proviso, the same is again extracted hereunder for ready-reference:- 80-IA. (1) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (2) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Provided that where the assessee develops or operates and maintains o .....

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ps or operates and maintains any infrastructural facility referred to in clause (a); (b) or (c) of Explanation to clause (i) of sub-section (4) of section 80-IA. For these undertakings the legislature has extended the period during which deduction can be claimed from fifteen years to twenty years. The fact that the restrictions placed on the eligible business by sub-section (1) of section 80-IA shall continue to be read into sub-section (2) of section 80-IA is made clear in the opening words of .....

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ing and intent of sub-section (1); (2) and the proviso to sub-section (2) of section 80-IA is clear and unambiguous. It is seen that the legislature having set out the referent enterprise/undertaking as developing/starting infrastructure, telecommunication or industrial park/ SEZ etc. the duration in sub-section (2) for the purposes of deduction for ten years is retained at hundred percent for those profits of eligible business as could show first degree nexus. The existence of the said requirem .....

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the proviso to sub-section (2) is well understood. The purpose may have been guided by the fact that certain enterprise/undertaking may show profits after a considerably longer time is also plainly clear. 13.8. A plain reading of sub-section (2A), it is seen shows that it starts by giving effect to the legislative intent by inserting the well understood word Notwithstanding . The meaning and the consequent legislative intent can clearly be understood by the subsequent words used anything contain .....

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ding . The meaning and import of the term notwithstanding is well-settled and understood and by itself cannot be said to be leading to any ambiguity. The said term by itself would have been sufficient and complete to convey the legislative intent that whatever may have been said in sub-section (1) and (2) but the legislature has not rested there and has taken care to qualify the word with the all encompassing, all inclusive, well understood word anything contained in sub-section (1) or (2). The .....

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t undertaking or enterprises providing telecommunication services. 13.9. A further reading of the said sub-section makes it clear that the deduction in computing the total income is available only to an undertaking which is providing telecommunication services and that too which have been specified in clause (ii) of sub-section (4). Thus by virtue of this sub-section, a specified class of undertakings have been identified and the fact that the assessee falls under this category is an accepted fa .....

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e remaining five years upto 30 percent of the amount available for deduction. Having over-ridden the requirements of sub-section (1) and (2) by use of the words profits and gains of eligible business in sub-section (2A) and not profit and gains derived by an undertaking or an enterprise from as used in unequivocal terms in subsection (1) and (2) the legislature makes its intention known loud and clear. The fact that after specifying the period and apportionment of the profits available for deduc .....

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erence to it. Thus conscious of the fact that sub-section (1) and (2) had completely been over-ridden for an assessee falling in section (2A) reference to sub-section (2) is made only for the purposes of increasing the timeline from which the assessee could opt for selecting ten consecutive years out of the total 15 years. 13.10. Thus the dispute of bringing sub-section (1) into play for a tax payer falling in sub-section (2A) of section 80-IA to our minds cannot arise. According to the assessee .....

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ording of the sub-section (2A). Having started with the non-obstante clause in sub-section (2A) which over-rides the mandate of sub-section (1) and (2), the legislature is well aware that the phrase derived from has been used only in sub-section (1). The meaning of the said terms is judicially well-accepted and understood and it is not the case of that Revenue that the legislature was not conscious of the said term. It is seen that the import of this term continues to exist for an assessee cover .....

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ess enterprises and undertakings, wherever it wanted to curtail the time line during which deduction can be claimed and also addressing the extent upto which it can be claimed has consciously carved out an exception to specified undertakings/enterprises whose needs and priorities differ has taken care to expand the time line for claiming deductions. It has consciously enabled those undertakings/enterprise who fall under sub-section (2A) to claim 100% deduction of profits and gains of eligible bu .....

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ted were to be derived from . The requirements of the first degree nexus of the profits from the eligible business has not been brought into play. 13.12. The cardinal Rule of Interpretation is that the statute must be construed according to its plain language. Neither should anything be added nor anything be subtracted therefrom unless there are adequate grounds to justify the inference that the Legislature clearly so intended. It is also well settled that in a taxing statute one has to look mer .....

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to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. 13.13. Interpretation postulates the search for the true meaning of the words used in the statutes as a medium of expression to communicate a particular thought. The task is not easy as the language used even in ordinary conversation or correspondence is capable of being mis-understood, however in such cases the person using the language can be approached for a clarification. The languag .....

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cess of law making once again. Accordingly statutory interpretation requires the Courts to seek, ascertain the meaning of the words used by the legislature through the medium of authoritative forms in which it is expressed. Interpretation differs from construction, whereas interpretation is finding out the true sense of any form, construction would mean drawing of a conclusion in respect of subjects that lie beyond the direct expression of the text. 13.14. It is well understood that the Court on .....

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hey have no powers to legislate. A matter which, for the sake of an argument, should have been provided for in a statute cannot be supplied by the Courts as to do so will be an act of legislation and not of interpretation. Reliance may be placed on Smt. Kanta Devi vs Union of India (2003) 4 SCC 753 & 757. 13.15. A legal fiction treating something not done as done, requires legislative authority and without it, it can neither be indulged in by Courts not it can be created by an administrative .....

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f the legislature falls short of the mark, the Court can do nothing more than declare it be thus, giving its reasons, so that the Legislature may take notice and promptly remedy the situation. Reliance can be placed on Standard Chartered Bank vs Directorate of Enforcement [2005] 275 ITR 81 at page 86 (SC). 13.17. The settled principles of interpretation are that the Court must proceed on the assumption that the legislature did not make a mistake and that it did what it intended to do. The Court .....

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2699 at 2703. Any presumption to the contrary in the absence of any ambiguity would be contrary to the settled legal position as the legislature as far as possible is presumed to know what it intends to stay. 13.18. Thus reverting again to considering the words use in sub-section (2) the proviso thereto and sub-section (2A) it is seen that whereas in sub-section (2) and the proviso thereto the restrictions on the profits as set out in sub-section (1) is retained and intended businesses are given .....

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om the beginning developing or operation and maintaining the infrastructure facility. Thus the legislature in its wisdom giving due consideration to still longer gestation periods which may be required by such high investment infrastructure related enterprises which may need more time for generating profits. However, the requirements of derived from as set out in sub-section (1) has not been done away with. When juxta-posed with this the language used in sub-section (2A) is considered the legisl .....

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rtion the percentages to the extent of which deduction was to be allowed. The use of the term anything contained in pre-fixed by notwithstanding by the legislature makes the meaning and intention of the legislature crystal clear. The arguments to the contrary advanced by the Revenue relying on case laws based on different sets of provisions is of no help as the clear meaning of the words used by the legislature leads to only one conclusion namely that sub-section (1) and (2) of section 80-IA for .....

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not the profits and gains derived from can be claimed as a deduction in the first five assessment years by such an enterprise commencing at any time during the periods as specified in sub-section (2) and thereafter thirty percent of such profits for further five assessment years. Thus giving due recognition for the peculiarities of the telecommunication services where heavy investment costs in the initial years are a necessity they have been allowed to be recovered by way of profits to the exte .....

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of the undertaking is very long. Thus, for the purposes of the time frame the legislature has given the timeline of fifteen years from which ten consecutive years could be opted. The fact remains that the legislature aware of the differences in the use of terms used consciously ensures that profits and gains derived from used in subsection (1) is not used in sub-section (2A). Instead in sub-section (2A) the term used is profits and gains of eligible business juxta posed with the glaring fact tha .....

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have advanced their case duly supported by case laws, relying on principles of interpretation as settled by the Magnum Opus of Justice G.P.Singh s Principles of Statutory Interpretation and Kanga Palkivala & Vyas The Law and practice of Income Tax and various decisions of the Courts wherein applying those yardsticks the decisions have been rendered. Reference to the specific principles invoked and the proposition of law and the ratio laid in the decisions relied upon are not being separately .....

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parties to address their respective stands by written submission and synopsis being conscious of the fact that the preliminary argument if allowed would address the issues raised in both the appeals and more so since these arguments admittedly on the legal issue were not so argued before the tax authorities. We record our appreciation for the confident and effective representation of Ld. CIT DR, Ms. A.Mishra. We also put on record our appreciation for the well-seasoned and tempered arguments adv .....

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