TMI Blog2018 (3) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee for deduction, with respect to profits and gains derived from the industrial undertakings of its sister concerns, under Section 80I was declined by the AO and affirmed by the first appellate authority. There was no appeal to the Tribunal by the assessee. We are of the opinion that no question of law arises under Section 80I. The assessee is engaged in the processing of cashew nuts and such processing is done in its own factories and also in the factories of other assessee, who are sister concerns. The derivation of income of the assessee is from such processing and it cannot be said to be income which is derived other than from the activity of processing. We find from the order of AO that the rejection was made for the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue has raised a question of law as to whether the assessee is entitled to claim deduction under Sections 80HH and 80I of the Income Tax Act, 1961, with respect to the profit derived by the assessee from the processing of cashew in the factories owned by outsiders. 2. Admittedly, the assessee had been carrying on processing of cashew nuts in its own factory and also in the factories of sister concerns, which were in backward areas. There was also processing done by the assessee in factories which were not in the backward areas. Section 80I does not speak of industrial undertakings in backward areas. Section 80I speaks of 20% deduction in respect of profits and gains derived from industrial undertakings if it is a newly established one. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to profits and gains derived from the industrial undertakings of its sister concerns, under Section 80I was declined by the Assessing Officer and affirmed by the first appellate authority. There was no appeal to the Tribunal by the assessee. We are of the opinion that no question of law arises under Section 80I. 4. With respect to Section 80HH, admittedly, the assessee had been carrying on processing of cashew nuts in its own factories as also in its sister concerns and the claim was only with respect to those situated in backward areas. The question of law, hence, is reframed as follows:- Whether the Tribunal was right in allowing deduction under Section 80HH as claimed by the assessee, even with respect to the profits a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to the interest derived from the deposit made for supply of electricity. Admittedly, in that case, the manufacturing process in the industrial undertaking could be carried out only with electricity. The deposit was made with the licensee for supply of electricity and the income by way of interest was said to be an income derived from the processing. The Hon'ble Supreme Court held so at page 280: It is clear, therefore, that the words derived from in Section 80-HH 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not result in the dis-allowance. On the contrary, the benefit being conferred on the industrial undertakings within backward areas; the assessee who entrusts the processing to third parties would be entitled to claim the deduction for the profits and gains arising from the processing, if the factory is in a backward area. The emphasis is on the profits and gains derived from an industrial undertaking in backward areas whether it be the assessee's own industrial undertaking or of another. 11. As has been held by the first appellate authority, an assessee carrying on processing of another will not be able to claim such benefit. But an assessee who carries on processing in an industrial undertaking belonging to another, but situat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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