1980 (1) TMI 26 - HC - Income Tax

Deduction allowed for machinery rent and export incentives under Income-tax Act

Commissioner Of Income-Tax, Tamil Nadu V Versus Universal Radiators

The court held that the rent received from leasing machinery and the export incentives qualify for deduction under section 80-I of the Income-tax Act, ... Priority Industry Tax Relief Issues Involved:1. Whether the rent received from the lease of machinery qualifies for deduction u/s 80-I of the Income-tax Act, 1961.2. Whether the export incentive received qualifies for deduction u/s 80-I of the Income-tax Act, 1961.3. Whether the interest received from bank deposits qualifies for deduction u/s 80-I of the Income-tax Act, 1961.Summary:1. Rent Received from Lease of Machinery:The court examined whether the rent received by the assessee from leasing its machinery could be considered as profits attributable to a priority industry under s. 80-I of the Income-tax Act, 1961. The assessee leased its machinery to another company to manufacture automobile accessories, which are listed in the Sixth Schedule of the Act. The court referred to the Supreme Court's interpretation of the term 'attributable to' in Cambay Electric Supply Industrial Co. Ltd. v. CIT, noting that it is broader than 'derived from.' The court concluded that the rental income from leasing the machinery used in the priority industry qualifies for the deduction u/s 80-I, as it has a direct nexus with the priority industry.2. Export Incentive Received:The court considered whether the export incentive received by the assessee from the Government of India qualifies for deduction u/s 80-I. The export incentive was provided to compensate for the loss incurred due to exporting goods at a lower price than the domestic market. The court held that the export incentive is closely linked to the manufacture and sale of automobile ancillaries, thus qualifying as profits attributable to the priority industry and eligible for the deduction u/s 80-I.3. Interest Received from Bank Deposits:The court analyzed whether the interest earned from fixed deposits with Canara Bank qualifies for deduction u/s 80-I. The assessee argued that the deposits were made from surplus funds and were later used as security for business loans. The court, however, found that the surplus funds deposited in the bank were not directly required for the priority industry. The court referred to a similar case, Addl. CIT v. Vellore Electric Corporation Ltd., where interest from statutory reserves invested in government securities was not considered attributable to the priority industry. The court concluded that the interest income from the fixed deposits does not qualify for the deduction u/s 80-I, as it lacks a direct nexus with the priority industry.Conclusion:The court ruled that the rental income and export incentives qualify for the deduction u/s 80-I, while the interest income from bank deposits does not. The questions were answered accordingly, with no order as to costs.