TaxTMI 
TaxTMI 
2009 (11) TMI 638
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....1 (hereinafter referred to as "the Act"). On being questioned, the explanation of the assessee was that this amount represented interest on late payment charges by the purchaser of the goods, to whom the goods had been exported. The Assessing Officer reduced this amount from the profits of the business for the purposes of computing deduction under section 80-IA of the Act treating the aforesaid income of Rs. 12,60,540 as "Income from other sources" and not "Business income". The view of the Assessing Officer was that the interest receipts had not been earned by the assessee out of its manufacturing activities and it had no direct or immediate access with the industrial undertaking of the assessee. 5. The order of the Assessing Officer was confirmed by the Commissioner of Income-tax (Appeals). However, on further appeal preferred before the Tribunal, the appeal of the assessee has been allowed by the Tribunal by directing the Assessing Officer to compute the deduction under section 80-IA of the Act and treating the aforesaid income as business income. The Tribunal, for arriving at this conclusion, has referred to various judgments of different High Courts and different Bench....
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....arket. It had claimed deduction under section 80-IB of the Act on the increased profits of Rs. 22,70,056 as profit of the industrial undertaking on account of the DEPB and duty drawback credited to the profit and loss account. The question which fell for consideration before the Supreme Court was as to whether profits from the DEPB and duty drawback scheme could be said to be profits derived from the business of industrial undertaking. It was in this context that the apex court discussed the meaning of the words "derived from". Even before discussing the implication of the aforesaid words, the court pointed out that though focus was on the analysis of section 80-IB, the basic scheme of sections 80-I, 80-IA and 80-IB remains the same. The court was of the view that the words "derived from" are narrower in convocation as compared to the words "attributable to". Thus, by using the expression "derived from", Parliament intended to cover sources not beyond the first degree. Accordingly, only such profits are to be computed as if such eligible business is the only source of income of the assessee. Therefore, the devices adopted to reduce or inflate the profits of the eligible business ha....
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....or the purpose of section 80-I of the Act. Answering the question in favour of the assessee, the Gujarat High Court relied upon the judgment of the apex court in the case of CIT v. Govinda Choudhury and Sons [1993] 203 ITR 881 (SC) in which case the Supreme Court had held that interest was of the same nature as other trading receipts in the following manner (page 884) : "The assessee is a contractor. His business is to enter into contracts. In the course of the execution of these contracts, he has also to face disputes with the State Government and he has also to reckon with delays in payment of amounts that are due to him. If the amounts are not paid at the proper time and interest is awarded or paid for such delay, such interest is only an accretion to the assessee's receipts from the contracts. It is obviously attributable and incidental to the business carried on by him. It would not be correct, as the Tribunal has held, to say that this interest is totally de hors the contract business carried on by the assessee. It is well settled that interest can be assessed under the head 'Income from other sources' only if it cannot be brought within....
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....stinction as to the source. Looking from this angle, the interest becomes part of the higher sale price and is clearly derived from the sales made and is not divorced therefrom. It is, thus, the direct result of the sale of goods and the income is derived from the business of industrial undertaking. 17. The same view is expressed by the various other High Courts in the following judgments : (i) Phatela Cotgin Industries (P) Ltd. v. CIT [2008] 303 ITR 411 (P&H) ; (ii) CIT v. Flender Macneill Gears Ltd. [1984] 150 ITR 83 (Cal) ; (iii) Tata Sponge Iron Ltd. v. CIT [2007] 292 ITR 175 (Orissa) ; and (iv) CIT v. Indo Matsushita Carbon Co. Ltd. [2006] 286 ITR 201 (Mad). 18. There is no reason to depart from the aforesaid view taken consistently by various High Courts, which is in tune with the principle laid down by the Supreme Court in Liberty India [2009] 317 ITR 218 (SC). We answer this question in favour of the assessee and against the Revenue. I. T. A No. 545 of 2006, I. T. A. No. 18 of 2007, I. T. A. No. 765 of 2007, I. T. A. No. 816 of 2007 and I. T. A. No. 796 of 2007 19. These appeals came up for hearing on November 16, 200....
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....it against interest received by it while calculating deduction under section 80HHC read with Explanation (baa) of the Income-tax Act, 1961 ?" 25. This question is answered in favour of the Revenue in view of the judgment of this court in Shri Ram Honda Power Equip [2007] 289 ITR 475 (Delhi). I. T. A. No. 18 of 2007 26. The following questions of law have been framed for consideration : "1. Whether the Tribunal was correct in law in holding that the assessee was entitled to reduce the interest paid by it against the interest received by it while calculating deduction under section 80HHC read with Explanation (baa) of the Income-tax Act, 1961 ? 2. Whether the Tribunal was correct in law in holding that the assessee is entitled to deduction under section 80-IA of the Act on the interest received from the trade debtors and also on the interest earned on FDRs ? 3. Whether the Tribunal was correct in law in holding that the assessee is entitled to deduction under section 80-IA of the Act on the amount of Rs. 25,200 being the duty drawback and the amount of Rs.26,64,455 received on sale of the DEPB and the....