Livingstones Jewellery (P.) Ltd. Versus Deputy Commissioner of Income-tax, Range 5 (2), Mumbai
Income Tax
2009 (5) TMI 617 – ITAT MUMBAI – [2009] 31 SOT 323 (MUM.)
ITAT MUMBAI – AT
Dated:- 12-5-2009
IT APPEAL NO. 187 (MUM.) OF 2007
Income Tax
R.S. SYAL AND D.K. AGARWAL, JJ.
K. Gopal for the Appellant.
R.S. Srivastava for the Respondent.
ORDER
R.S. Syal, Accountant Member. – This appeal by the assessee arises out of the order passed by the Commissioner of Income-tax (Appeals) on 18-11-2006 in relation to the assessment year 2003-04.
2. The only issue raised through various grounds is against the denial of claim of the assessee for deduction under section 10A on the interest income of Rs. 9,00,961. Briefly stated the facts of the case are that the assessee was carrying on the business of manufacturing and export of stubbed and plain jewellery of gold and platinum. It had its factory at Gem & Jewellery Complex III, SEEPZ, Andheri (East), Mumbai-400 096.
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s and merchandise. After considering several judgments, the Assessing Officer came to hold that the interest received cannot, be said to have been derived from export of goods and merchandise. He took into consideration the distinction between the scope of “derived from” and “attributable to” with the help of certain judgments of the Hon'ble Supreme Court and other High Courts. It was, therefore, held that the assessee was not entitled to deduction under section 10A in respect of interest earned on fixed deposits. No relief was allowed in the first appeal.
3. Before us the learned Counsel for the assessee contended that the assessee had rightly claimed deduction on the interest income as the parking of funds in FDRs was necessitated for availing the benefit of credit facilities from the bank. It was therefore stated that but for the making of FDRs the assessee could not have enjoyed the credit facility from the bank and hence the interest earned on such FDRs be rightly treated as elig
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r things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee.”
On a careful perusal of the language of this section it is seen that prima facie only the profits and gains derived by an undertaking from the export of articles etc., are eligible for deduction. The expression used in this provision is “derived from the export of articles”. It is in contradistinction to the expression “attributable to” as employed in some other sections, which generally postulates that any income which has direct or indirect nexus with the stated undertaking or activity, can be considered as eligible for deduction. In such later cases, the income arising from any link, direct or indirect with the eligible activity, entitles the assessee to the bene
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ase of Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278 considered the question of deduction under section 80HH in respect of interest on deposits with the Electricity Board, in which again the expression 'derived from' was employed. A plea was taken before the Hon'ble Supreme Court that but for the deposit with the Electricity Board, the assessee could not have got the electricity connection and hence the interest on deposits with the Electri-city Board was to be considered as profits and gains derived from industrial undertaking. Repelling this contention, the Hon'ble Supreme Court held that the words “derived from” in section 80HH must be understood as something which has a 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 step removed from the business of the industrial undertaking. The derivation of the profits on the deposit made
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rom the export of articles in sub-section (1) has been given a go by in sub-section (4) and the scope of the benefit has been expanded by extending to the all profits of the business carried on by the undertaking. Once the expression 'derived from' having restricted scope has been specifically defined in the same section, then the meaning of such expression as understood in common parlance will not be applicable. Rather the specific meaning given to it will come into play. We further note that sub-section (4) has been worded on the pattern of section 80-IA, prior to its substitution with effect from 1-4-2000, which referred to 'profits and gains derived from any business of an industrial undertaking'. In the context of section 80-IA, the Amritsar Bench of the Tribunal in the case of Dy. CIT v. Chaman Lal & Sons [2005] 3 SOT 333 [to which one of us, namely the AM, is party] held that in such a worded section, the benefit of deduction has to be made available in respect of purchase and s
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