TaxTMI 
TaxTMI 
2007 (3) TMI 572
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....income filed for all the assessment years, the assessee had claimed deduction under section 80-IA, which included interest on FDRs as profit derived from an industrial undertaking. The Assessing Officer observed that interest on FDRs was not a profit derived from an industrial undertaking and, therefore, the assessee was not entitled to deduction under section 80-IA in respect of the same. The Assessing Officer relied on the judgment of Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278 ftn1Asstt. CIT v. Sutlej Motors Ltd..htm , where it was held that interest earned on deposits with the electricity board for supply of electricity to the industrial undertaking could not be said to flow directly from the industrial undertaking itself and was, therefore, not profits or gains derived from undertaking for the purpose of special deduction under section 80HH. The wording of section 80HH is similar to the wording of section 80-IA. The judgment of the Supreme Court in the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 ftn2Asstt. CIT v. Sutlej Motors Ltd..htm relied upon by the assessee during the course of assessment proceedings was found distinguish....
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....n it was concluded that the deduction claimed under section 80-IA of the Income-tax Act is allowable to the assessee. During the course of appellate proceedings, the Assessing Officer placed reliance on certain decisions and I find that the appellant has duly pointed out as to why the said decisions does not help the case of the Assessing Officer. I further find that the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Isher Dass Mahajan & Sons (supra) further goes to support the case of the appellant. The interest on FDRs not a case of idle funds, was relatable to the running of business as these were used for availing the credit facilities from the bank. It was not pointed out as to how the commission income gets relatable to the business of the appellant reflected as business income. Therefore, following the decision of my predecessor in part and following the broader interpretation of the term 'profits' in relation to eligible business as given in the case of Apollo Tyres Ltd.; I hold that the deduction as claimed by the assessee under section 80-IA is allowable with reference to interest income and the grounds taken in this regard are partly allowed." T....
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....sing Officer has mentioned in the-assessment orders that the assessee has been parking funds in the fixed deposits from year to year and earning interest on FDRs and such activity had nothing to do with the business activities of an industrial undertaking. section 80-IA of the Act provides deduction to respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development. This deduction is admissible in a case where gross total income of an assessee includes any profits or gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) of the said section. The deduction is admissible in the manner provided under sub-section (2) of the said section subject to the conditions stipulated under sub-section (3) of section 80-IA. There is no dispute about the fact that the assessee is an industrial undertaking entitled to deduction under section 80-IA. The only dispute relates to whether interest earned on FDRs constitutes a profit derived from an industrial undertaking for the purpose of deduction under section 80-IA. The expression "derived from" came to be considered by the Hon'ble Supreme Court in the case of S....
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....nt of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) which is clearly distinguishable on facts. The issue raised before the Hon'ble Supreme Court was whether the dividend income earned by the assessee company from its, investment made in the Unit Trust of India could be included in computing the profit of the eligible business under section 32AB of the Income-tax Act. The facts of that case were, that apart from manufacture and sale of tyres, the business of the assessee also included purchase and sale of units of the Unit Trust of India and both the businesses were interconnected, intertwined and interlaced and, therefore, the business in purchase and sale of units was held to be profit from eligible business within the meaning of eligible business for the purpose of deduction under section 32AB of the Act, section 32AB as it stood at the relevant time allowed deduction to an assessee whose .total income include income chargeable to tax under the head "Profits and gains of business or profession" and had out of such income utilized any amount during the previous year for the purchase of new plant and machinery or deposited the amount in an account maintained with t....
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.... Builders (P.) Ltd. for the assessment years 1991-92 to 1994-95 and no appeal was filed by the revenue. A copy of the order of the CIT(A) is placed on our record. However, a copy of the assessment order has not been placed on our file. A perusal of the same shows that in the first appeal, the learned CIT(A) upheld the action of the Assessing Officer. However, the order of the CIT(A) was set aside with the direction that the manner in which interest income was earned should be brought on record. A perusal of the order of the CIT(A) does not show in any manner that whether the directions of the Tribunal were taken into account. The learned CIT(A) by merely relying on the submissions of the assessee and the judgment of Bombay High: Court in the case of Nagpur Engg. Co. Ltd. (supra) and the judgment of the Apex Court in the case of Apollo Tyres Ltd. (supra) allowed the appeal of the assessee. We have already distinguished the facts of the case of Apollo Tyres Ltd. (supra) from the facts of the present case and held that the said judgment is not applicable to the facts of the present case. As regards the judgment of Hon'ble Bombay High Court in the case of Nagpur Engineering Co. Ltd. (s....
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.... of the contract business. However, the stand of the Department was that interest earned on FDRs was to be assessed as "income from other sources" and not as 'business, profit' The Special Bench of Tribunal after relying upon the judgment of Hon'ble Supreme Court in the cases of Pandian Chemicals Ltd. (supra) and Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997] 2 27 ITR 1 72 ftn8Asstt. CIT v. Sutlej Motors Ltd..htm (SC) and the judgment of Privy Council in the case of Raja Bahadur Kamakhaya Narayan Singh (supra) has held that interest income from FDRs was to be assessed under the head "Income from other sources" and not as part of the contract business. The Tribunal, further, held that it could not be said that interest paid to the bank was incurred for the purpose of earning interest income on FDRs and, therefore, it could not be allowed as deduction. Thus, netting of interest was not allowed. Now, if the interest income on the FDRs offered as security for various facilities availed by the assessee was held to be 'income from other sources', how could the same be held as profit derived from an industrial undertaking entitled to deduction under section 80-IA. 7.3 The le....