Meaning of “Derived”

Case Name :Cit vs. Modi xerox ltd. 

Citation : [2014] 50 Taxmann.Com 201/226 taxman 152 (mag.)/365 Itr 200 (all.)

Court : Allahabad high court

Section : 80HH

Meaning : The word ‘derived from’ under section 80hh has to be understood as something which has immediate nexus with the industrial undertaking. When the scrap generated from the concerned units has direct and immediate nexus with the industrial undertaking since the said scrap has been generated from the manufacturing process itself, benefit under section 80hh is available.

Case Name : Deccan cements ltd. Vs. Cit 

Citation : [2014] 41 taxmann.Com 536/223 taxman 194 (mag.)/360 Itr 444/268 ctr 212 (ap)

Court : Andhra pradesh high court

Section : 80HH

Meaning : The words ‘profit derived from’ and not ‘attributable to’. Therefore, what is the import of the words ‘derived from’ has been explained by the supreme court in the case of liberty india v. Cit [2009] 317 itr 218/183 taxman 349. Therein the supreme court had made it clear that the connotation of the words ‘derived from’ is narrower as compared to that of the words ‘attributable to’. Hence, while reading the provision of section 80hh, the profit derived from the cement manufacturing activity is deductible thereunder and not otherwise.

Case Name : Cit vs. Alpine solvex ltd.

Citation : [2005] 144 Taxman 67/276 itr 92 (mp)

Court :Madhya pradesh high court

Section : 80HH

Meaning : The words ‘derived from’ as used in section 80hh/80-i have got to be given restricted meaning.

Case Name : Cit vs. Alpine solvex ltd.

Citation : [2005] 144 Taxman 67/ 276 itr 92 (mp)

Court : Madhya pradesh high court

Section : 80-i

Meaning : The words ‘derived from’ as used in section 80hh/80-i have got to be given restricted meaning.

Case Name : Pandian chemicals ltd. Vs. Cit

Citation : [2003] 129 taxman 539/262 itr 278 (sc)

Court : Supreme court

Section :  80HH

Meaning : It is clear that the words ‘derived from’ in section 80hh must be understood as something which has direct or immediate nexus with an industrial undertaking.

Case Name :  Cit vs. Pandian chemicals ltd.

Citation : [1998] 233 Itr 497 (mad.)

Court : Madras high court

Section : 80HH

Meaning : A restricted meaning is given when the legislature uses the expression, ‘derived from’. There is no justification to give the expression ‘derived from’ a wider meaning to cover every receipt connected with the industrial undertaking.

Case Name : Cit vs. Paras oil extraction ltd. 

Citation : [1998] 96 Taxman 234/ 230 itr 266 (mp)

Court : Madhya pradesh high court

Section : 80-i

Meaning : Expression ‘industrial undertaking’, used in sections 80hh and 80-i, has to be considered to mean essential trade activity of the assessee and not otherwise. The word ‘derive’ means derived from industrial activity and industrial activity means business in which industry is involved.

Case Name :  CIT Vs. Cement Distributors Ltd.

Citation : [1994] 208 ITR 355 (delhi)

Court : Delhi high court

Section : 80HH

Meaning : The word ‘derived’ has to be assigned a restricted meaning as compared to the words ‘attributable to’ or ‘referable to’ and, therefore, to avail of a rebate under section 80hh, an assessee must establish that he has derived profits or gains from an industrial undertaking.

Case Name : Mazagaon Dock Ltd. Vs. CIT

Citation : [1958] 34 ITR 368 (sc)

Court : Supreme court

Section : 92

Meaning : The word ‘derived’ in section 42(2) of the 1922 act must be interpreted as referring to the business of the resident.

Case Name : Cit vs. Raja bahadur kamakhaya narayan singh 

Citation : [1948] 16 itr 325 (pc)

Court : Pondicherry high court

Section : 2(1a)

Meaning : The word ‘derived’ is not a term of art. Its use in the definition indeed demands an enquiry into the genealogy of the product. But the enquiry should stop as soon as the effective source is discovered. In the genealogical tree of the interest land indeed appears in the second degree, but the immediate and effective source is rent, which has suffered the accident of non-payment. And rent is not land within the meaning of the definition.

Case Name : A.M. Moosa, bharath sea food Vs. CIT

Citation : [1996] 135 CTR  (ker.) 110

Court : Kerala high court

Section : 80HH

Meaning : The law that the amount in regard to which exemption is sought must be relatable to an industrial undertaking, as the amount which would be understood to be ‘derived from’ is more than settled.

Case Name : Fenner (india) ltd. Vs. Cit

Citation : 1998 tax lr 927 (mad.)

Court : Madras high court

Section : 80HH

Meaning : The expression ‘derived from’ used in section 80hh implies that section 80-hh is confined only to profits and gains derived from industrial undertaking and cannot be attributed to the original source of product.

Case Name : Bio pharma vs. Dy. Cit 

Citation : [2003] 85 itd 575/

Court : Itat-ahmedabad

Section : 80HH

Meaning : The expression ‘derived from’ has a definite but narrow meaning and it cannot receive a flexible or wider concept. The phrase ‘profits and gains derived from an industrial undertaking’ has been judicially interpreted as meaning that direct and immediate source of receipt is the industrial undertaking and the nexus is of the first degree in the genealogical tree. The correct connotation of the expression ‘derived from’, as laid down and explained by the supreme court in various decisions does not leave any doubt or ambiguity that interest from fixed deposits does not directly flow from an industrial undertaking and cannot be treated as derived from the industrial undertaking.

Case Name : Dy. Cit vs. Vindhya telelinks ltd.

Citation : [1997] 63 Itd 127 (jab. – Trib.)

Court : ITAT- Jab

Section : 80HH

Meaning : An income can be said to be derived from an industrial undertaking only if it is directly related to the running of the industrial undertaking itself. The scope of the expression ‘derived from’ is much narrower than the expression ‘attributable to’.

Case Name : Dy. Cit vs. Vindhya telelinks ltd. 

Citation : [1997] 63 Itd 127 (jab. – Trib.)

Court : ITAT- Jab

Section :80-i

Meaning : Deduction under section 80hh/80-i is permissible on the profits and gains ‘derived from’ an industrial undertaking.

An income can be said to be derived from an industrial undertaking only if it is directly related to the running of the industrial undertaking itself. The scope of the expression ‘derived from’ is much narrower than the expression ‘attributable to’.

Case Name : Asstt. Cit vs. Priya paper works 

Citation : [2007] 15 sot 1 (jab. – Trib.) (Uro)

Court : ITAT- Jab

Section :80-i

Meaning : The words ‘derived from’ under section 80-i cannot have a wide import so as to include any income which can in some manner be attributed to the business. The derivation of the income must be directly connected with the business in the sense that the income is generated by the business from the industrial undertaking. It would not be sufficient if it is generated by the exploitation of a business asset.

Case Name : Kirloskar electrodyne ltd. Vs. Dy. Cit

Citation : [2003] 87 itd 264 (pune – trib.)

Court : Itat-pune

Section : 80-I

Meaning : The dictionaries state that the word ‘derive’ is usually followed by the word ‘from’, and it means –  get or trace from a source; arise from, originate in; so the origin or formation of. As a matter of plain english, when it is said that one word is derived from another language, what is meant is that the source of that word is another word, often in another language. As an illustration, the word ‘democracy’ is derived from the greek word ‘demos’, the people, and most dictionaries will so state. That is the ordinary meaning of the word ‘derived’ and there is no reason to depart from that ordinary meaning.

Therefore, the term ‘derive’ connotes to draw or receive or obtain as from a source or origin. The deduction under section 80-i of the act is to be allowed with reference to the profits and gains derived from an eligible industrial undertaking. The expression ‘derived from’ has a definite, but narrow meaning and it cannot receive a flexible or wider concept. If a word or expression has received judicial interpretation by the highest court and thereafter it is found to have been used in the legislative enactment, it must be presumed that the legislature must have used that word or expression with same meaning as judiciously determined unless the context apparently requires any other meaning.

There is no ambiguity in the provision. It would, therefore, not be apt to follow the purposive theory of interpretation. The word ‘derived’ cannot be construed on the pattern of the word ‘attribute’. There is ample authority on the proposition that the word ‘derived’ is narrower in application when compared with the word ‘attributable’.