TaxTMI 
TaxTMI 
1997 (2) TMI 175
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.... purpose of section 32AB. Details of which are as under: "Part-A : Amount Utilised Total purchase as per list Rs. 83,59,033 Less : Advance considered last year 19950 " Cases where payments (5,39,283) for P & M not made 519333 Rs. 5,99,283 &....
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.... of machinery. Then only deduction under section 32AB would be allowed. 5. The ld. counsel for the assessee submitted that deduction under section 32AB is allowed for utilisation of amount for purchase of machinery. In this case the assessee has given the advance for purchase of machinery. Machinery were in fact supplied in subsequent year. He submitted that unlike section 32A there is no condition for installation or putting into use of the machinery during the year under consideration. For allowability of deduction under section 32AB main emphasis is on "utilisation of amount" during the year under consideration. Therefore, CIT(Appeals) was fully justified in directing the Assessing Officer to consider the sum of Rs. 15,55,875 for working out deduction under section 32AB. In support of his contention he relied upon guidance notes issued by the Institute of Chartered Accountants of India and following decisions of ITAT :--- (i) Reliable Cigarette & Tobacco Industries (P.) Ltd. v. CIT 51 TTJ (Ind.) 103 (ii) C.P. Foundry Works v. ITO [1996] 53 ITD 176 (Nag). 6. We have carefully considered arguments of both the sides and have perused the material placed before us. During the acc....
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....Rs. 15,55,875 given during the year under consideration, can be considered as "amount utilised" for the purchase of plant and machinery within the meaning of section 32AB. Section 32AB, as it stood at the relevant time, reads as under : " 32AB (1) Subject to the other provisions of this section, where an assessee whose total income includes income chargeable to tax under the head "Profits and gains of business or profession", has, out of such income,---- (a) deposited any amount in an account (hereafter in this section referred to as deposit account) maintained by him with the Development Bank before the expiry of six months from the end of the previous year or before furnishing the return of his income, whichever is earlier; or (b) utilised any amount during the previous year for the purchase of any new ship, new aircraft, new machinery or plant, without depositing any amount in the deposit account under clause (a), in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) to be framed by the Central Government, or if the assessee is carrying on the business of growing and manufacturing tea in India, to be approved in ....
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....lly adjusted against the cost of such machineries. In view of these facts we find no infirmity in the order of the CIT(Appeals) directing the Assessing Officer to consider the advance of Rs. 15,55,875 for the purpose of working out deduction under section 32AB. We may also, mention that the ITAT, Indore Bench in the case of Reliable Cigarette & Tobacco Industries (P.) Ltd. and the ITAT, Nagpur Bench in the case of CP. Foundry Works have taken the similar view. Accordingly, Ground No. 1 of the Revenue's appeal is rejected. 7. Ground No. 2 reads as under :--- " 2. The ld. CIT(Appeals) erred in directing the Assessing Officer to include the amount of Rs. 10,22,476 representing misc. income of the assessee company for the purpose of computation of relief under section 80HH and 80I without proper appreciation of complete facts of the case and provisions of law. " The facts in this respect are that the assessee derives income from manufacturing of jelly filled telephone cable. The assessee is entitled to deduction under section 80HH and 80I. While examining the assessee's claim, the Assessing Officer found that the assessee has received interest amounting to Rs. 10,66,276 and has incl....
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....s), the assessee conceded that the interest received on income-tax refunds amounting to Rs. 40,811 and interest on delayed payment of allotment money from share-holders amounting to Rs. 2,968 was not income derived from Industrial Undertaking. In respect of the remaining interest amounting to Rs. 10,22,497, the CIT(Appeals) was of the view that all these receipts arose and emanated from the Industrial Undertaking itself and not from any other source. He directed the Assessing Officer to consider the said sum of Rs. 10,22,497 for the purpose of computation of relief under section 80HH and 80I. The revenue aggrieved with this direction of the CIT(Appeals) is in appeal before us. 8. At the time of hearing before us it is submitted by the ld. DR that deduction under section 80HH and 80I is allowable in respect of the income derived from an industrial undertaking. Any income can be said to be derived from the industrial undertaking only if it has a direct nexus with such industrial undertaking. In the present case, the interest income received from various sources had no direct nexus with the industrial undertaking and, therefore, cannot be said to be income derived from industrial und....
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....e case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 has observed at Page 93 as under :--- " As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of" the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relief, it will be pertinent to observe that the legislature has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have with some force been contended that a balancing charges arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression "derived from", as, for instance, in section 80J. In ou....
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..... In other words, Whether the income resulting from import entitlements can be said to be profits and gains derived from export business. Their lordships for interpreting the words "derived from" relied upon the decision of Hon'ble Privy Council in the case of CIT v. Raja Bahadur Kamakhaya Narayan Singh [1948] 16 ITR 325. The following observations of the Hon'ble Privy Council as considered by the Hon'ble Madhya Pradesh High Court is reproduced below : " The word 'derived' is not a term of art. Its use in the definition [Section 2(1) of the Indian Income-tax Act, 1922] indeed demanded 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. " Applying the ratio of above decision to the facts of the case, their Lordships of Madhya Pradesh High Court observed as under : " Applying the test laid down by the Privy Council, let us examine as to what is the source of the profits resultin....