TMI Blog2007 (10) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... he industrial undertaking”. – Hence profits from such sale were not entitled to special deduction - 995 of 2007 - - - Dated:- 25-10-2007 - MADAN B. LOKUR and DR. S. MURALIDHAR JJ. Ajay Vohra with Ms. Kavita Jha for the appellant. Ms. Prem Lata Bansal with Vishnu Sharma for the respondent. JUDGMENT The judgment of the court was delivered by DR. S. MURALJ.DHAR J. - Aggrieved by a decision dated April 21, 2006, passed by the Income-tax Appellate Tribunal, Delhi Bench "C", New Delhi ("the Tribunal"), in I.T.A.Nos. 2852/Del/99 and 3144/Del/99 for the assessment year 1995-96, the assessee has filed an appeal under section 260A of the Income-tax Act, 1961 ("the Act"). 2. The assessee has urged that the following q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding after-sales service to the customers. Additionally, the assessee imported gensets of a certain capacity which were not being manufactured in India to complement its product profile and present to the customers a choice from a complete range of gensets. 4. The Assessing Officer ("AO") denied the claim of deductions under sec- 4 lion 8OHH and 80-I of the Act in respect of the profits earned from both the sale of spare parts and components as well as the sale of imported gensets on the ground that the profits therefrom could not be considered to be income "derived" from the industrial undertaking. 5. In the appeal filed by the assessee, the Commissioner of Income-tax (Appeals) ("CIT(A)"), by an order dated April 22, 1999, held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in CIT v. Sterling Foods [1999] 237 ITR 579 and Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278 to hold that profits from the sale of spare parts was not the immediate source of the business profits of the industrial undertaking, but one step was removed from it. Although such profits from the sale of spare parts or rendering after-sales service could be "attributable" to the industrial undertaking, it could not be considered as profits "derived" from the industrial under- taking. Accordingly, the Tribunal allowed the Revenue's appeal. 7. Appearing for the assessee, Mr. Ajay Vohra, learned counsel submits that the activity of import of gensets was integral to the business activity of the assessee. He sought to draw a distinction betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 distribution of electricity." 9. In the context of section 80-1, the Supreme Court underscored the above distinction in its decision in Vellore Electric Corporation Ltd. v. CIT [1997] 227 ITR 557. The decisions of the Supreme Court in Sterling Foods [1999] 237 ITR 579 and Pandian Chemicals Ltd. [2003] 262 ITR 278 reiterate this distinction and insist that only such business profits that have a direct nexus to the essential business activity of the assessee can qualify for deduction under section 80HH of the Act. Inasmuch as both sections 80HH and 80-I use the expression "profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t adverted, the assessee may not be able to claim deduction and that the facts of every case would determine whether the assessee should be deprived of the deduction only because a part of the income is earned from a trading activity. In our view, it is not possible to lay down a hard and fast rule since, according to us, that can be only lead to further complication. That also does not appear to be the intention of the Legislature in enacting the provision as it stands. Therefore, we find no infirmity in the conclusion arrived at by the Tribunal. 12. As regards the question whether profits and gains from the sale of imported spare parts used in providing after sales service to customers would qualify for deduction, we are in agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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