2003 (6) TMI 198

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....n by the Tribunal holding that the assessee is entitled for exemption in respect of certain interest incomes is erroneous. The interest incomes in question are said to be the following- (a) Interest on deposit towards bank guarantee money in favour of Central Excise & Customs Department Rs. 6,484 (b) Interest on deposit with APSEB Rs. 3,190 It is mentioned that the SLP filed by the assessee against the decision of the Hon'ble Madras High Court in the case of CIT v. Pandian Chemicals Ltd. [1998] 233 ITR 497 holding that the assessee is not eligible for exemption in respect of interest on deposit with State Electricity Board, has been dismissed by the Apex Court, vide order dated 12-1-2001 in SLP (Civil) No. 8014 of 2000. It is stated th....

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....Act grants deduction in respect of profits and gains "derived from" an industrial undertaking. The contention of the appellant before us is that interest earned on the deposit made with the Electricity Board for the supply of electricity to the appellant's industrial undertaking should be treated as income derived from the industrial undertaking within the meaning of section 80HH. It is submitted that without the supply of electricity the industrial undertaking could not run and since electricity was an essential requirement of the industrial undertaking, the industrial undertaking could not survive without it. It is further pointed out that for the purpose of getting this essential input, the statutory requirement was that the deposit must....

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.... 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." This definition was approved and reiterated in 1955 by a Constitution Bench in this Court in the decision of Mrs. Bacha F. Guzdar v. CIT [1955] 27 ITR 1. It is clear, therefore, that the word 'derived from' in section 80HH of the Income-tax Act, 1961 must be understood as something which has direct or immediate nexus with the appellant's industrial undertaking. Although electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking. The derivation of profits on the deposit made wi....