TMI Blog2022 (12) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... n the argument that in order to meet the requirement of cargo services 365* 7*24, it is essential for the licensees to operate within the cargo terminal so that the assessee can provide uninterrupted cargo service as committed to BIAL. From the perusal of the various terms of the sample agreements entered by the assessee with the licensees it is noticed that the licensees cannot use the facility for any purpose other than for supporting the cargo services. Renting of the space is an integral part of the cargo business of the assessee since the licensees are using the space to render services which are committed by the assessee to BIAL as part of Cargo services. Rental income is inseparably connected with the business carried on by the assessee and emanate directly from the business of the undertaking. Accordingly we hold that the rental income derived by the assessee from Cargo Agents, Airlines, Banks etc., is derived from the cargo business and eligible for deduction u/s. 80IA. The addition is deleted. Appeal by the assessee is allowed. - ITA No.854/Bang/2022 - - - Dated:- 5-12-2022 - Shri N.V. Vasudevan, Vice President And Ms. Padmavathy S, Accountant Member For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is liable to be taxed under the head income from other sources and accordingly made an addition towards the same. 4. Aggrieved, the assessee filed appeal before the CIT(Appeals), who upheld the disallowances/additions. The assessee is in appeal before the Tribunal aggrieved by the order of the CIT(A). 5. The ld AR furnished a detailed written submission which is taken on record in page no.2 to 17 of paper book. The ld. AR submitted that assessee has been awarded the concession by BIAL to build and operate the cargo handling facility for a period of 15 years till 2023. The cargo terminal is a custodian under the Customs Act (pg. 97 of PB) and accordingly a customs bonded area for handling international and domestic cargo. He submitted that the terminal is an integrated facility for receipt, storage and transfer of inbound and outbound cargo. The assessee provides services to cargo agents, cargo handlers, airlines, banks, post office, etc. for which the assessee provided office space for smooth functioning of operations and quick handling of various documentations in the cargo terminal. It is also submitted that subletting is done in accordance with the terms agreed with B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted the eligibility of rental income being allowed as deduction u/s. 80IA. The ld. DR submitted that if rental income is treated as income from other sources, then the issue may be remitted to the AO to examine the related expenses and allow the claim. 11. We have considered the rival submissions and perused the material on record. According to the provisions of section 80IA where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any eligible business referred to in sub-section (4) shall be allowed a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years in accordance with and subject to the provisions of this section, be allowed. 12. It is not in dispute that the rental income is part of the business income of the assessee. The main issue for our consideration is whether the rental income earned by the assessee is derived from the cargo business and thereby eligible for deduction u/s.80IA. The concept of income derived from in contrast to other related concept like income attributable to has been a subject matter of dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electricity. In short, a step removed from the business of the industrial undertaking would also be subsumed within the meaning of the expression attributable to . Since we are directly concerned with the expression derived from , this judgment is relevant only insofar as it makes a distinction between the expression derived from , as being something directly from, as opposed to attributable to , which can be said to include something which is indirect as well. 18. The judgment in Sterling Foods case (supra) lays down a very important test in order to determine whether profits and gains are derived from business or an industrial undertaking. This Court has stated that there should be a direct nexus between such profits and gains and the industrial undertaking or business. Such nexus cannot be only incidental. It therefore found, on the facts before it, that by reason of an export promotion scheme, an assessee was entitled to import entitlements which it could thereafter sell. Obviously, the sale consideration therefrom could not be said to be directly from profits and gains by the industrial undertaking but only attributable to such industrial undertaking inasmuch as such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... went towards reimbursement of actual costs of manufacture and sale of the products of the business of the assessee. 20. Liberty India's case (supra) being the fourth judgment in this line also does not help Revenue. What this Court was concerned with was an export incentive, which is very far removed from reimbursement of an element of cost. A DEPB drawback scheme is not related to the business of an industrial undertaking for manufacturing or selling its products. DEPB entitlement arises only when the undertaking goes on to export the said product, that is after it manufactures or produces the same. Pithily put, if there is no export, there is no DEPB entitlement, and therefore its relation to manufacture of a product and/or sale within India is not proximate or direct but is one step removed. Also, the object behind DEPB entitlement, as has been held by this Court, is to neutralize the incidence of customs duty payment on the import content of the export product which is provided for by credit to customs duty against the export product. In such a scenario, it cannot be said that such duty exemption scheme is derived from profits and gains made by the industrial undertakin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. The benefit under section 80IC could not therefore have been granted. He also relied on a judgment of the Supreme Court in the case of Liberty India v. Commissioner of Income Tax, reported in (2009) 317 ITR 218 (SC) wherein it was held that subsidy by way of customs duty draw back could not be treated as a profit derived from the industrial undertaking. We have not been impressed by the submissions advanced by Mr. Bandhyopadhyay. The judgment of the Apex Court in the case of Liberty India (supra) was in relation to the subsidy arising out of customs draw back and duty Entitlement Pass-book Scheme (DEPB). Both the incentives considered by the Apex Court in the case of Liberty India could be availed after the manufacturing activity was over and exports were made. But, we are concerned in this case with the transport and interest subsidy which has a direct nexus with the manufacturing activity inasmuch as these subsidies go to reduce the cost of production. Therefore, the judgment in the case of Liberty India v. Commissioner of Income Tax has no manner of application. The Supreme Court in the case of Sahney Steel and Press Works Ltd. Others versus Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial unit in the remote area, so that the industry could become competitive and economically viable. (Paras 14 and 15) 25. The decision in Sahney Steel and Press Works Ltd.'s case (supra) dealt with subsidy received from the State Government in the form of refund of sales tax paid on raw materials, machinery, and finished goods; subsidy on power consumed by the industry; and exemption from water rate. It was held that such subsidies were treated as assistance given for the purpose of carrying on the business of the assessee. 26. We do not find it necessary to further encumber this judgment with the judgments which Shri Ganesh cited on the netting principle. We find it unnecessary to further substantiate the reasoning in our judgment based on the said principle. 27. A Delhi High Court judgment was also cited before us being Dharam Pal Prem Chand Ltd.'s case (supra) from which an SLP preferred in the Supreme Court was dismissed. This judgment also concerned itself with Section 80-IB of the Act, in which it was held that refund of excise duty should not be excluded in arriving at the profit derived from business for the purpose of claiming deduction under Section 80-I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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