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2016 (11) TMI 372 - DELHI HIGH COURT

2016 (11) TMI 372 - DELHI HIGH COURT - TMI - Entitlement to deduction under section 80HHC - profits and gains "derived from" an industrial undertaking - Held that:- The word "derived from" in Section 80HH of the Income-tax Act, 1961, must be understood as something which has direct or immediate nexus with the appellant's industrial undertaking. Although electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the busin .....

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ge and procuring orders of export for others. The question as to whether that income was “income derived from export business” therefore could not be said to have arisen. In any event P.R.Prabhakar’s case (supra) does not refer to the previous judgment in Cambay Electric Supply Industrial Co. Ltd.’s case (1978 (4) TMI 1 - SUPREME Court)where this court had clearly stated that the expression "derived from" had a narrower connotation than the expression "attributable to" and Pandian Chemicals Limi .....

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low the assessee's claim regarding deduction under section 80HHC? The assessee is engaged in garment export and had inter alia during the relevant assessment year AY 1990-1991 reported a certain amount as commission income for export sales, so the assessee claimed the benefit of Section 80 HHC. The AO rejected the assessee s contention; the appellate commissioner confirmed the views of the AO. However, the ITAT allowed the appeal by the impugned order. While doing so it followed its previous .....

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that the expression derived from has been interpreted in a narrow manner consistently by the Supreme court which has held that there should be an immediate proximity between the nature of the income earning activity and the export business of the assessee for the income to be covered under the provision. 3. Counsel for the assessee relied upon the ruling in P.R.Prabhakar vs. CIT (2006) 6 SCC 86. It is submitted that like in this case in P.R.Prabhakar s case (supra) too the assessee had earned c .....

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ome derived from the industrial undertaking within the meaning of Section 80HH. It is submitted that without the supply of electricity the industrial undertaking could not run and since electricity was an essential requirement of the industrial undertaking, the industrial undertaking could not survive without it. It is further pointed out that for the purpose of getting this essential input, the statutory requirement was that the deposit must be made as a pre-condition for the supply of electric .....

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to" (page 93) : "In this connection, it may be pointed out that whenever the Legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression 'derived from', as, for instance, in Section 80J. In our view, since the expression of wider import, namely, 'attributable to', has been used, the Legislature intended to cover receipts from sources other than the actual conduct of the business of generation and .....

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gree, but the immediate and effective source is rent, which has suffered the accident of non-payment. And rent is not land within the meaning of the definition." (p.328) This definition was approved and reiterated in 1955 by a Constitution Bench of this court in the decision of Mrs. Bacha F. Guzdar v. CIT (1955) 27 ITR 1 . It is clear, therefore, that the word "derived from" in Section 80HH of the Income-tax Act, 1961, must be understood as something which has direct or immediate .....

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