- (1.) This is an appeal filed by the assessee raising following substantial questions of law, arising out of order passed by the Income-tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh (for short 'the Tribunal'), in ITA No. 76/Chd/2002 dt. 28th July, 2005, for the asst. yr. 1998-99: (i) Whether, on a correct and proper interpretation of the provisions of Section 80-IA of the Act and application thereof to the facts and circumstances of the case, was the Tribunal legally correct in holding that the claim of deduction under Section 80-IA in respect of interest income and income by sale of import licences derived from its business, made by the appellant was not sustainable ? (ii) Whether, on the facts and in circumstances of the case, the Tribunal has misdirected itself in law and as well as on facts in holding that the appellant was not entitled to deduction under Section 80-IA of the Act claimed by the assessee ? (iii) Whether the finding returned and recorded by the Tribunal while holding that appellant was not entitled to deduction under Section 80IA by wrongly applying the earlier decision given in CO. No. 130/Chd/1993 for asst. yr. 1990-91 which was in respect of Section 80-1 of the Act, is perverse and vitiated in law ?
(2.) The facts in brief are that the assessee, who is engaged in the business of manufacture, export and trading in cotton yarn, during the assessment year, declared income from sale of import licence and claimed a deduction under Section 80-IA of the IT Act (for short 'the Act") for the same. Claim of the assessee was disallowed by the AO relying upon judgments of Hon'ble the Supreme Court of India in CIT v. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC) and Madras High Court in Fenner (India) Ltd. v. CIT (1999) 151 CTR (Mad) 30.
(3.) The appeal on this issue filed by the assessee against the assessment order was rejected by the CIT(A) vide order dt. 24th Dec, 2001 relying upon the order passed by its predecessor rejecting a similar claim for the earlier year. Even the second appeal of the assessee before the Tribunal was also rejected with the following findings: 6. The first ground raised by the assessee pertains to deduction under Section 80-IA on interest income derived from the business of industrial undertaking is concerned, the same has been decided by the Hon'ble Supreme Court in the case of CIT v. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC) wherein the assessee was engaged in processing prawns and other sea food, which was exported. It also earned some income from the import entitlements granted by the Central Government under the Export Promotion Scheme. The assessee was entitled to use the import entitlements itself or sell the same to others. The assessee claimed relief under Section 80HH in respect of sale proceeds of import entitlements. The Tribunal held that relief could not be granted. The Hon'ble apex Court reversing the decision of the High Court thrown light on the word 'derive from' and held there must be direct nexus between profit and gains of the industrial undertaking. As the nexus was only incidental and not direct, the receipts from the sale of import entitlements could not be included in the income of the assessee for the purpose of computing relief under Section 80HH of the Act. Similar issue was decided against the assessee in the case of Nahar Spinning Mills. No contrary decision was produced by the assessee before us from a higher forum. In view of the decision from the Hon'ble apex Court as we have discussed in the case of Sterling Foods (supra) and the decision in the case of Nahar Spinning Mills for the asst. yr. 1998-99 wherein it was held that the interest income is business income and not income derived from industrial undertaking. We have no option but to upheld the order of the learned CIT(A) as far as the income derived from the business of sale of import licenses received from the Government is concerned, the same could not be included in the income of the assessee for the purposes of computing the relief under Section 80HH of the Act as was held in Sterling Foods (supra) as in the present case the nexus was not direct but only incidental. Similar views were expressed by the Hon'ble apex Court in the case of Pandian Chemicals Ltd. v. CIT (2003) 183 CTR (SC) 99 : (2003) 262 ITR 278 (SC). Therein also the meaning of word 'derived from' has been elaborated in Section 80HH of the Act by opining that there must be direct or immediate nexus with the assessee's industrial undertaking. In view of these facts, ground No. 1 raised by the assessee deserves to be dismissed.;