In the case of Synergies Casting Ltd. v. DCIT it was held that exemption under Section 10B of the Income-tax Act, 1961 (the Act) is not available to an undertaking taken over on lease. Further, the Tribunal held that in order to get the benefit of Section 10B of the Act, for the unexpired period, the taxpayer must prove that it is a successor to the predecessor company. Since the taxpayer was only a lessee it was not a successor to the lessor.

The controversy squarely involves interpretation and, construction of the words “manufacture” and, “production” . The word `manufacture’ was not defined under the Act, uptill the insertion of section 2(29BA) by the Finance (No. 2) Act, 2009, w.r.e.f. 1-4-2009, which reads as under:-

Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof:

The next two items are penal charges of Rs.5,11,688/ – and Rs. 10,970/-. These amounts have already been held to be business income while discussing the issues of section 80IB. Accordingly, we direct the AO to treat these two amounts as part of business income for computation under section 80HHC.

This article summarizes a recent ruling of the Supreme Court (SC) [2009-TIOL­100-SC-IT] in the case M/s Liberty India (Taxpayer), in which the SC held that the receipts, by way of Duty Drawback and sale of Duty Entitlement Pass Book (DEPB) licence by the Taxpayer, do not form part of the profits ‘derived from’ the industrial undertaking (IU), eligible for tax holiday under the Indian Tax Law (ITL). The SC further held that the Duty Drawback and sale of DEPB licence are incentives which flow from the schemes framed by the Government of India (G01) and do not have any direct nexus with the profits derived from the eligible IU of the Taxpayer.

Taxpayers in the infrastructure sector are often engaged in the execution of construction activities, which form a minor portion of a contract for the development of an infrastructure facility. This ruling provides guidance on whether a contactor simplicitor would be entitled to tax holiday under the ITL, in respect of the construction activities carried out by it. This ruling makes it clear that tax holiday would be denied to a person who merely executes any works contract/construction activity but does not own the infrastructure developed by it. The ruling also holds that the person who does not undertake development of the entire facility but develops only part of it would not be entitled to tax holiday benefit.

The state of Punjab has challenged in the Supreme Court the validity of Union government notification giving concessions in taxes and also providing subsidy to the new as well as existing industries in the states of Jammu and Kashmir, Himachal Pradesh and Uttarakhand. Contending that such concessions provided on selective basis would adversely affect the industrial development of Punjab, the state government prayed for quashing of these notifications as null and void.

Definitions – Manufacture – Clause 3 – S 2 (29BA):- Clause 3 of the Finance Bill 2009 has sought to introduce sub section 29BA in section 2 of the Income Tax Act wherein the manufacture is defined for the first time The amendment is to take effect retrospectively from 1st April, 2009 and would apply in relation to Assessment Year 2009-2010 and subsequent years. . The amendment read as follows:

The use of word developing’ in juxtaposition to infrastructure facility in section 80-1A(4) indicates that what is eligible for deduction under this sub-section is the profits and gains derived from the development of infrastructure facility and not something de hors it; so in order to be eligible for deduction the development should be that of the infrastructure facility as a whole and not a particular part of it; it may be possible that some part of development work is assigned by the developer to some contractor for doing it on his behalf; that will not put the doer of such work into the shoes of a developer; therefore, a mere contractor cannot be conferred with the benefit as provided in section 80-IA.

This articles summarizes a recent ruling of the Larger Bench (LB) of the Mumbai Income Tax Appellate Tribunal (ITAT) [2009-TIOL-692-ITAT-MUM-LB] in the case of M/s B.T. Patil & Sons Belgaum Construction Pvt. Ltd.(Taxpayer) v. ACIT. Due to contradictory views expressed by the two-member bench of the ITAT, an LB was constituted to examine the issue of whether the Taxpayer, who is engaged in executing construction contracts for and on behalf of the Government/statutory bodies, is eligible for tax holiday under the Indian Tax Law (ITL).