COMMISSIONER OF INCOME TAX Vs. VISWANATHAN AND CO

JUDGEMENT

(1.) THE question referred to us, at the instance of the Revenue, for our consideration is : 'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the cash assistance, duty drawback and air subsidy should be treated as income 'derived from' the industrial undertaking and included in the business income for the purpose of deduction under Section 80HH of the IT Act, 1961?' The asst. yr. is 1986 -87.

(2.) THE items referred to in the question are matters which have been considered in the decision of this Court in the case of CIT v. Jameel Leathers and Uppers (2000) 246 TR 97 (Mad). The Court held that cash assistance, duty drawback and import entitlements though undoubtedly attributable to business carried on by the assessee as the assessee would not have been in a position to receive any of those benefits, had the assessee not been carrying on business, it cannot be said that such income was 'derived from' business as to qualify for deduction under Sections 80J and 80HH of the Act. The Court reviewed the applicable law before so holding and referred to and relied upon the decision of the apex Court in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT : [1978]113ITR84(SC) , wherein it was held that the expression 'derived from' is narrower than the expression 'attributable to' as also the decision rendered by the apex Court in the case of National Organic Chemical Industries Ltd. v. Collector of Central Excise : 1997(89)ELT643(SC) , wherein it was held that the word 'derived' is usually followed by the word 'from' and, it means get or trace from a source; arise from, originate in; show the origin or formation of.

(3.) LEARNED counsel for the assessee, however, submitted that the CBDT itself had, on 5th July, 1990, issued a circular giving certain clarifications relating to deductions under Section 80HHC of the IT Act, 1961, wherein it was stated that in view of the amendment to Section 28 of the IT Act, by the Finance Act, 1990, by which Clauses (iiia), (iiib) and (iiic) were inserted with retrospective effect, those three import incentives will have to be included in the profits of the business for computing the deduction under Section 80HHC. An illustration has also been given in that circular to further clarify the clarification.