TMI Blog2019 (3) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... between the actual purchases made as per the invoices produced by the assessee and actual entries shown in the books of account of the assessee. Being so, we are of the opinion that it is appropriate to opportunity to the assessee to reconcile the same before the AO. Hence, this issue is remitted to the file of the AO with a direction to the AO to give opportunity to the assessee to reconcile the same and decide thereof. Denial of deduction of lease rent u/s. 80IB - whether receipt of lease of commercial asset is business income or income from other sources? - HELD THAT:- Deduction u/s. 80IB is available only in respect of such profits and gains which have direct proximity and nexus with the activities of manufacturing or production of an article or thing. Profits and gains attributable to the business of the industrial undertaking would not be entitled for deduction u/s. 80IB. The profits and gains accrue to the assessee only in the course of business of manufacturing or production of an article or thing. Viewed from this angle, the lease rent earned by the assessee by letting out the industrial undertaking to other parties cannot be equated with the profits and gains derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the Ld. AR was with regard to denial of deduction u/s. 80IB of the Act on subsidies. The assessee claimed deduction u/s. 80IB on receipt of subsidies but the same was rejected by the Assessing Officer and the CIT(A). 3. Against this, the assessee is in appeal before us. 4. After hearing both the parties, we are of the view that a similar issue was considered by the Supreme Court in the case of Meghalaya Steels Ltd. (383 ITR 217) wherein it was held that when income from cash assistance received against export schemes are included as income under the head profits and gains of business or profession, it is obvious that subsidies which go to reimbursement of cost in the production of goods of a particular business would also have to be included under the head profits and gains of business or profession and not under the head income from other sources. Therefore, the asssessee is entitled to deduction u/s. 80IB of the Act. In view of the above judgment, subsidies is to be considered for deduction u/s. 80IB of the Act. Accordingly, we allow this ground of appeal taken by the assessee. 5. Ground No. 5 relating to denial of deduction of other income amounting to ₹ 99 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturing activity of the assessee and therefore, qualified for deduction u/s. 80IB of the Act. 3. The learned officers ought to have appreciated that all the receipts for which deduction u/s. 80IB was claimed are based on the activities of the appellant firm and that the industrial undertaking though leased out, carried out manufacturing activity which is sufficient compliance of law for the purpose of deduction u/s. 80IB of the Act. However, the Ld. AR did not press grounds relating to denial of deduction of job work charges and sale of scrap and hence, they are dismissed as not pressed. 12. With regard to the ground relating to denial of deduction of subsidies u/s. 80IB of the Act, as discussed earlier in para 4, the assessee is entitled for the same and accordingly, this ground of appeal of the assessee is allowed. 13. The next issue is with regard to denial of deduction of lease rent u/s. 80IB of the Act. 14. The facts of the case are that the assessee had received lease rent to the tune of ₹ 63 lakhs by leasing/renting of factory and one building and claimed it as income from business and on the profit, the assessee claimed deduction u/. 80IB of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income would have to be taken as eligible for relief u/s. 80IB of the Act. 16. On the other hand, the Ld. DR submitted that the relevant part of Section 80-IB of the Act reads as follows; (1) Where the gross total income of an assessee includes any profits and gains derived front any business ............................................ . a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. . According to the Ld. DR, Section 80IB provides for a deduction from the profits and gains of an amount equal to a certain percentage and for a certain number of assessment years as specified in sub-section (3) and sub-section (4) of that section. One of the conditions of eligibility is that the assessee must be an industrial undertaking which manufactures or produces an article or thing not being an article or thing specified in the list in the Eleventh Schedule or operates one or more cold storage plant or plants in any part of India. The Ld. DR relied on the judgment of the Supreme Court in the case of Cambay Electrical Supply Co. Ltd. (113 ITR 84) wherein it was held that the expression &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 80IB of the Act. The Hon'ble Supreme Court in the case of Cambay Electrical Supply Co. Ltd. 113 ITR 84 (SC) held that the expression 'derived from' is much narrower than the expression attributable to . According to the Court, whenever legislature intended to give narrower meaning, it has used the word derived from . In view of the above judgment of the Supreme Court, let us now examine the scope of word derived from used by the Legislature u/s. 80IB of the Act. Section 80-IB provides for deduction in respect of profits and gains derived from industrial undertaking to which section 80IB(1) applies. Sub section (2) to the said section prescribes various conditions which are to be fulfilled for claiming the deduction. One of the conditions of eligibility is that the assessee must be an industrial undertaking which manufactures or produces an article or thing not being an article or thing specified in the list in the Eleventh Schedule. A reading of the section shows that deduction is available in respect of profits and gains which are derived from industrial undertaking which is engaged in the activity of manufacture or production of an article or thing. Applying th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessories for manufacturing or production of its products. However, in the case of CIT vs. Universal Radiators (P) Ltd. cited supra, the products manufactured by the lessee was made available to the lessor (assessee) so as to enable manufacture or production of its products. Being so, the ratio laid down by the judgment of the Madras High Court in the case of CIT vs. Universal Radiators (P) Ltd. cited supra cannot be applied to the facts of the present assessee s case. Further, in the case of Vikram Cotton Mills Ltd. (169 ITR 597) (SC), the issue was with regard to leasing out assets to another assessee for a temporary period as part of exploitation and temporary suspension of business without any intention to permanently closing down of the business. In that case, the question was whether receipt of lease of commercial asset is business income or income from other sources. There was no issue relating to granting of deduction u/s. 80IB of the Act. The ratio laid down in this case cannot be applied to the facts of the present case. 18.1 In view of this, the lease rent received by the assessee by letting out the industrial undertaking is not having any direct connection with the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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