ORDER
R.C. Sharma, A.M.
This is an appeal filed by the revenue against the order of the CIT(A) dated 9-6-1997 for the assessment year 1995-97. The revenue has taken the following grounds of appeal.
“On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in allowing deduction under section 80-IA ignoring the fact that the assessee has claimed under section 80-IA on other income in the nature of Net Courier Charges, labour income and miscellaneous income, these income are ‘attributable to’ the business of the assessee. Whereas, section 80-IA provides deduction only on income derives from business and not on income attributable to the business.”
2. Rival contentions have been heard and record perused. During the course of assessment, the assessing officer found that the assessee-company is engaged in the process of printing of continuous and non-continuous stationery required by corporate sectors, such as printing of prospectus, share certificate, share issue forms, dividend /interest warrants mass stationery and computer stationery. In addition to the above, the company was also having income by way of sale of waste paper, kasar, courier charges, labour income, miscellaneous income during the year. The assessee has claimed deduction under section 80-I of the Act on all of these incomes. The assessing officer was satisfied with the assessee’s claim with regard to its printing activity and allowed deduction under section 80-IA. However, the assessing officer was not satisfied with regard to other income shown by the assessee on which deduction under section 80-IA was claimed, with reference to courier income, sale of scrap and job charges income. With regard to courier income, it was submitted before the assessing officer that the company has entered into lump sum contract with customers which covered printing of share issue forms, numbering it, packing it appropriately in the required number and taking responsibility of despatching it to the different cities and Stock Exchange of India. It is the part of the contract that such forms should reach to the above places before the cut off date. It is the liability of the company to see that the forms are properly printed, packed, numbered and dispatched and reached to the station. It was also submitted that if the forms do not reach to the destination, the company looses and, therefore, the courier charges forms a part of contract and it is an income “attributable to” business of the company. As per the assessee such courier charges is in fact part of sale, but as per the accounting system, a debit note is raised and, therefore, it has been shown separately, otherwise, it is a part of sale.
Various judgments were also cited before the assessing officer in support of the contention that the income from the completed contract should be taken into account for judging the assessee’s claim for deduction under section 80-IA. In respect of profit on sale of scrap, it was submitted that the scrap was generated out of printing process undertaken by the assessee and its sale is actually part of the total sales of the assessee. In respect of labour income of Rs. 4,80,000 it was submitted that it was an income from printing of share forms of Saurashtra Paper Mills where papers were supplied by the parties, hence it is an income for printing activity and allowable for deduction under section 80-IA. Miscellaneous income of Rs. 95,900 was an income from sale of paper scraps made out from printing which again, as per the assessee form part of the business activity of printing carried out by the assessee. The assessing officer held that the assessee-company has two sources of income viz., sale of printing articles and books and another income by way of net courier charges, labour income and miscellaneous income. Regarding other income earned by the assessee, assessing officer held that it cannot be said to be profit derived from activity of manufacture of production of articles or thing by the industrial undertaking as required and defined under section 80-I of the Act. He, therefore, declined the assessee’s claim for deduction under section 80-I, in respect of courier charges, labour income and miscellaneous income.
3. By the impugned order, the CIT(A) allowed assessee’s claim for deduction under section 80-IA with the following observations :
“16. I have considered the facts of the case. As the contract for printing was part and parcel of the distribution of the share application forms, the courier charges have to be taken as part of the printing work. If this work had not been undertaken by the appellant, then the appellant would not have received the contract for printing. As the courier work was part and parcel of the printing work, the courier charges have to be taken as derived from an industrial undertaking. Further, the labour charges disclosed were for printing work and though it bore the nomenclature of labour charges, it was in fact job work for printing and, therefore, income derived from an industrial undertaking. The sale of scrap generated in the printing work is as a result of the main work of printing and has got to be treated as a profit derived from an industrial undertaking. The earning of these receipts have a near and proximate nexus with that of an industrial undertaking. The assessing officer is, therefore, directed to allow deduction under section 80-IA of the Income Tax Act of these receipts also.”
4. Aggrieved by the above order of the CIT(A), the revenue is in further appeal before us.
5. It was argued by the learned Departmental Representative that benefit of deduction under section 80-IA is restricted to the income which is directly, derived from the manufacturing process, it could not be extended to the other income which only “attributable to” the main activity of assessee. He, therefore, justified the order of the assessing officer for declining the claim for deduction under section 80-IA in respect of such other income.
6. On the other hand, the learned Authorised Representative argued that the assessee had entered into consolidated contract, according to which, it has to undertake not only printing of form and stationery etc., but they have to be supplied at the destination agreed as per the agreement. As per the learned Authorised Representative the income was part of the sale and only due to the system of accounting followed by the assessee, the income was credited under the different heads. In respect of income from labour charges and sale of scrap, he submitted that the issue is squarely covered by the order of jurisdictional High Court in the case of Dy. CIT v. Harjivandas Juthabhai Zaveri (2002) 258 ITR 785 (Guj.), according to which, amount received from job work and sale of empty barrels and scrap was to be qualified for deduction under section 80-I of the Act.
7. We have considered the rival contentions and gone through orders of the authority below and also deliberated on the case laws cited at Bar and also discussed by the lower authorities in their respective orders.
8. With regard to the income from job work, we find that the assessee had earned labour income of Rs. 4,80,000 from printing of share forms of Saurashtra Paper Mills wherein the papers were supplied by the parties. Miscellaneous income of Rs. 95,900 was an income from sale of paper scrap made out from printing. We had also gone through the judgment of jurisdictional High Court in the case of Harjivandas Juthabhai Zaveri (supra) wherein the Hon’ble High Court categorically observed that it is required to be noted that if the assessee was not engaged in the industrial activity, there was no question of empty barrels or scrap. Instead of manufacturing, if the assessee was doing the trading activities, dealing in raw-material and if the assessee has sold the material on retail basis and earned amount by sale of bardana, then obviously this section will not apply. It was also made clear that the amount received towards job work and sale of empty ash bardana, empty barrels and plastic wastes qualifies for section 80-I deduction. Respectfully following the judgment of the jurisdictional High Court, we are inclined to agree with the learned Authorised Representative that the income from job work and sale of scrap was eligible for deduction under section 80-I. We, therefore, do not find any reason to interfere in the order of the CIT(A).
9. With regard to courier income, we find that the assessing officer denied the deduction only by stating that in its written submission, the assessee himself has stated that such income is “attributable to” the business of the company. The assessing officer, however, had categorically noted that the assessee had undertaken “lumpsum” contract with the customers for related after-manufacturing services like courier charges, labour works etc. The CIT(A) has allowed the deduction under section 80-IA on the plea that the courier charges was part of the sale profits even though for accounting purpose it has been credited separately by the assessee.
10. Let us now discuss various case laws with reference to the deduction under sections 80HH and 80-I in which it was held that only income derived from industrial undertaking qualifies for deduction. As per our considered view that section 80HH/80-I provides that certain category of profits and gains included in gross total income only falls for relief and not the entire income of the assessee. The conditions being that such profits and gains must have been derived from an industrial undertaking. For getting these deductions, the assessee himself have to establish that these profits and gains were derived from his industrial unit. It is not just sufficient if a commercial connection is established between the profits earned and industrial undertaking. The law requires that such profits must have been derived from industrial undertaking. The industrial undertaking must itself a source of profit. The Hon’ble Karnataka High Court in the case of Sterling Foods v. CIT (1984) 150 ITR 292 (Karn) held that sale consideration of import entitlement cannot be held to constitute profit or gains derived from the assessee industrial undertaking for the purpose of computing deduction under section 80HH, as the source of import entitlement is the export promotion scheme of Central Government and not the industrial undertaking. Similarly in Pandian Chemicals Ltd. v. CIT (2003) 262 ITR 278 (SC), the Hon’ble Supreme Court observed that the interest earned by the industrial undertaking on deposit with Electricity Board does not qualify for relief under section 80HHC. Various case laws cited clearly indicate that a restricted meaning is given when the Legislature uses expression “derived from”. However, where the Legislature wants to give benefit in broader way, it has used words “attributable to”. All the case laws discussed above are related to deduction under sections 80HH and 80-I. However, when we minutely go through the provisions of section 80-IA, we find a difference to the effect that the legislature has used the words “any profit and gains derived from any business of an industrial undertaking”. However, in section 80-I, word used by the statute are profit derived from industrial undertaking. Thus, the use of additional word “business” conveys that Legislature intend to give benefit of section 80-I in broader sense and not to confine it to the profit derived from industrial undertaking; but to extend the benefit to the profit derived from the ‘business of an industrial undertaking’. The crux of the issue revolves around the determination of the nature of income which qualifies for deduction under section 80-IA. The provisions of section 80-IA as contained in the statute book for the relevant assessment year under consideration reads as follows :
“Deduction in respect of profits and gains from industrial undertakings, etc., in certain cases.Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship or the business of a hotel …….” (Emphasis here italicised in print supplied)
11. It is crystal clear from the reading of the above provisions that the income derived from business of industrial undertaking is eligible for deduction under section 80-IA. There is no dispute to the fact that there are plethora of judgments which lays down the proposition that the words “derived from industrial undertaking” had been used by statute to restrict the deductions of only those income which has directly derived from the industrial undertaking and not to other income which is incidental to the carrying of industrial undertaking. There is also no dispute to the fact that these judgments have been rendered in the context of deduction under sections 80-I and 80HH. Let us know find out what the section 80-I speak for :
“Deduction in respect of profits and gains from industrial undertakings after a certain date etc.Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship …..” (Emphasis here italicised in print supplied)
12. It is crystal clear from the language used in section 80-I that the deduction is to be restricted to income which is derived from industrial undertaking. Now we have to examine what is the difference between provisions of sections 80-I and 80-IA. Minute reading of both the provisions clearly indicate that in the earlier section 80-I, the statute has used the expression ‘derived from” with a view to give a restricted meaning to the income of the Industrial Undertaking. However, in section 80-IA, expression used is “profits and gains derived from any business of Industrial Undertaking”. It clearly shows that the intention of the legislature while inserting the additional words in section 80-IA, i.e., ‘any business of’ was to give benefit of deduction not only to the profits and gains derived from Industrial Undertaking but also to give benefit of deduction in respect of the income having a close and direct nexus with the profit and gains of the business of Industrial Undertaking.
13. The word “business” is a word of wide amplitude so as to cover any trade, industry or any act of adventure in the nature of trade where as the word “industry” is a word of very limited meaning. Whenever the legislature had intended to give benefit of deductions to the wider extent of income and not only to the income derived from Industrial undertaking, it has used the expression like “profit attributed to”. Now we find that to give more extended benefit the statute has used the word 1ncome derived from business of Industrial Undertaking”. Thus legislature certainly wants to give benefit of deduction not only to the income derived from industrial undertaking but to all sort of income which is derived from business of industrial undertaking. in the instant case, deduction claimed by the assessee is under section 80-IA, therefore, we are persuaded to take broader meaning of word “derived from business of industrial undertaking”. The word business is a word is wide amplitude and does not restrict to purely carrying out of the industrial undertaking. As the assessee has undertaken a contract for printing and supply of forms, stationery etc. to the destination to the concerned parties, the entire amount received is a part of the sale proceeds. Only making of entry in the books of account to the effect that part of the receipt was on account of printing and part of receipt was on account of courier charges will not disqualify the assessee from claiming deduction in respect of its product manufactured out of its industrial undertaking. There are plethora of judgments to the effect that accounting entry is not decisive to allow a claim given under statute. Merely on the basis of accounting entry, the assessee cannot claim a deduction which is not available to him under the Act. Similarly on the basis of book entry department cannot restrain or deny a claim of deduction which is otherwise available as per provisions of law. From the order of the assessing officer, we find that the case laws discussed by him pertain to sections 80-I and 80HH. We have already discussed above the insertion of ‘any business of’ in section 80-IA, during the assessment year 1995-96 under consideration.
14. In view of the above discussion and in the interest of justice, we restore this ground to the file of assessing officer to examine assessee’s claim under section 80-IA in the light of composite contract for supply of goods manufactured by it to the destination and amount received on such sales, if part of sales itself. We direct accordingly.
15. In the result, appeal of the revenue is allowed in part for statistical purpose.