TMI Blog2000 (1) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... Subsequently, another return was filed on September 30, 1986, in VDIW Scheme disclosing a total income of Rs. 35,56,620. The relevant assessment year is 1985-86 and the year ending is on March 31, 1985. During the course of assessment, the Assessing Officer found that the assessee has claimed the benefit of section 80HH of the Income-tax Act, 1961, on profits and gains derived from an industrial undertaking which includes the grant of subsidy of Rs. 6,29,871 under the Transport Subsidy Scheme, 1971. The Assessing Officer has considered the submissions on the issue whether the transport subsidy amount is eligible for deduction under section 80HH. According to the Assessing Officer, the assessee is not entitled for a deduction under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Co. Ltd. v. CIT [1982] 137 ITR 616 and the decision of the Madhya Pradesh High Court in the case of Gwalior Rayon Silk Manufacturing (Weaving) Co. Ltd. v. CIT [1983] 143 ITR 590. The facts are not in dispute that the assessee has received a sum of Rs. 6,29,871 as transport subsidy under the Transport Subsidy Scheme, 1971. The only controversy for our consideration in this case is whether this amount of subsidy has been treated as income derived from the newly established industrial undertaking or it is an income incidental to the business of the assessee. In CIT v. Pandian Chemicals Ltd. [1998] 233 ITR 497, the Madras High Court has considered whether the interest received on deposits with the Electricity Board made out of the statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import entitlements could not be said to be the industrial undertaking of the assessee. There must be, for the application of the words "derived from", a direct nexus between the profits and gains and the industrial undertaking. Therefore, the sale consideration on the sale of import entitlements could not be held to constitute a profit and gain derived from the assessee's industrial undertaking. For the benefit of section 80HH, the industrial undertaking itself had to be the source of profit. The nexus should be direct and not incidental. Mr. Khaitan placed reliance on the decision of the Gujarat High Court in the case of Ahmedabad Manufacturing and Calico Printing Co. Ltd. v. CIT [1982] 137 ITR 616, and the decision of the Madhya Prades ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madhya Pradesh High Court has taken the view that the Tribunal was not justified in not including the draw back of customs duty, refund of excise duty in calculating turnover of profits from exports under rule 2(3) for computation of qualifying income. The limited question for our consideration is whether the amount of transport subsidy is a profit for the purpose of deduction under section 80HH of the Income-tax Act. As referred to above, their Lordships in their latest decision in the case of CIT v. Sterling Foods [1999] 237 ITR 579 (SC), had made a distinction between the words "derived from" and "attributable to". The words "attributable to" have wider import than the words "derived from" and when the Legislature has used the words "d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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