Income derived from repair and maintenance not eligible for Sec 80IB benefits – ITAT Kolkatta

DCIT, Kolkata Vs Rajesh Kumar Drolia- (ITAT Kolkata)- The assessee is earning job work charges as well as repairs and maintenance, which are included in job work charges, no doubt it is established that there is commercial connection between profits earned on account of repairs and maintenance and the industrial undertaking but for that source of profit is not directly from industrial undertaking. The business of industrial undertaking had directly to yield that profit to claim deduction u/s. 80-IB of the Act.

But Provision of section 80-IB of the Act is in pari materia with the provisions of section 80HH and 80I of the Act, wherein Hon’ble Apex Court in Sterling Food, Pandian Chemicals Ltd. and Cambay Electric Supply Industrial Co. Ltd. (supra) has discussed the expression in the context of these sections that the use of expression profits and gains derived from an industrial undertaking, there is distinction between the expressions ‘derived from’ and ‘attributable to’. Hon’ble Apex Court held 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 “profits and gains derived from an industrial undertaking”, the burden is on the assessee to show that the income earned from an activity, the profits from which are claimed to qualify for deduction, has an immediate and direct nexus to the essential activity of the industrial undertaking. Hence, our answer to first question referred is that the assessee is entitled for deduction u/s. 80-IB on income earned from job work charges but excluding repairs and maintenance charges. Our answer to second question referred is that the income from repair and maintenance cannot be treated at par with the income from manufacturing for the purposes of deduction u/s. 80-IB of the Act.

IN THE INCOME TAX APPELLATE TRIBUNAL

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