CIT v. Khattri Perfumers (P.) Ltd.

INCOME TAX ACT, 1961

--Deduction under sections 80HH and 80-I--Profits and gains derived from indsutrial undertakingConsultancy charges--Assessee entered into an agreement with HLL where assessee as the Licensor had licensed the formula developed through its research and gave exclusive right to HLL to use to said formula in their products. In addition to the consideration, the assessee had also received consultancy charges from HLL for further research work. Assessee considered the consultancy charges as profits and gains derived from industrial undertakings. AO, however, denied deduction under sections 80HH and 80-I on the same. Held: Rightly so. Consultancy activity might be incidental to the business of assessee, but it had no direct nexus with the activity of industrial undertaking which was the manufacturing unit of the products in the backward area, as such consultancy charges could not be held to be 'derived from industrial undertaking'.