INCOME TAX ACT, 1961

Section 80-IB

Deduction under section 80-IB - Hotel business - Income from the saloon section by assessee - Computation of

Issue arose under consideration was whether after holding the saloon activity as desirable and CIT(A) holding it to be an integral part of the Hotel business which finding holds goods, Tribunal was legally justified in holding that the receipts from saloon business were not derived from the hotel business for purpose of deduction under section 80-IB(7). Held: Apex Court in the case of CIT v. Sterling Foods [(1999) 237 ITR 579 (SC) : 1999 TaxPub(DT) 1271 (SC)] had inter alia held that the word 'derived from' restricts the qualifying profits to the profits directly arising from the particular activity and not the receipts unrelated to the eligible business. There must be, for the application of the word 'derived from', a direct nexus between profits and gains and the industrial undertakings. Authorities held that because assessee was not fulfilling any of the requisite conditions and the income was not directly derived from the business and had no direct nexus, the benefit of section 80-IB (7)(a) was rightly denied.