Law:

Section:

Section 80HH, read with section 80-I, of the Income-tax Act, 1961 - Deductions - Profits and gains from hotels or industrial undertaking, etc., in backward areas - Assessment year 1995-96 - Assessee was engaged in manufacture and sale of portable gensets and water pumps - It imported certain spare parts and components and additionally imported gensets of a certain capacity which were not being manufactured in India - Assessee claimed deductions under sections 80HH and 80-I - Assessing Officer disallowed claim in respect of profits earned from both sale of spare parts and components as well as sale of imported gensets on ground that profits therefrom could not be considered to be income derived from activity of industrial undertaking which was manufacture of gensets - Whether Assessing Officer was justified - Held, yes FACTS The assessee was engaged in the manufacture and sale of portable gensets and water pumps. The assessee imported certain spare parts and components which were used in the manufacturing of gensets as well as for providing after-sale service to customers, and additionally, the assessee imported gensets of a certain capacity which were not being manufactured in India. The assessee claimed deduction under sections 80HH and 80-I. The Assessing Officer denied the claim in respect of the profits earned from both the sale of spare parts and components as well as sale of imported gensets on the ground that the profits therefrom could not be considered to be income 'derived from the industrial undertaking'. On appeal, the Commissioner (Appeals) allowed deduction in respect of the sale of spare parts, however, upheld disallowance in respect of profits derived from the sale of imported gensets. On cross appeals, the Tribunal disallowed the claim of the assessee in respect of sale of spare parts and in respect of sale of gensets holding that the same could not be said to have any nexus with any industrial activity of the assessee in India. On appeal : HELD Inasmuch as both sections 80HH and 80-I use the expression 'profits and gains derived from an industrial undertaking', the burden is upon the assessee to show that the income earned from an activity,…

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