TaxTMI 
TaxTMI 
2009 (11) TMI 638
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.... assessee had shown a sum of Rs. 12,60,540 under the head "Miscellaneous receipts" and had taken that amount into consideration while computing deduction under section 80-IA of the Income-tax Act, 1961 (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. 4. 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 se....
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....lines to decide the question of law which has arisen for consideration in the present case. 8. In that case, the assessee was engaged in the manufacturing of fabrics out of yarns and also various textile items purchased from the market. 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 b....
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....es Ltd. v. Deputy CIT [2006] 283 ITR 402 (Guj). That was also a case where interest was received by the assessee from the debtors for late payment of the sale proceeds and the question was as to whether this interest can be treated as the income derived from the business for 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 cor....
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....he outstanding sale proceeds. 14. Thus, according to the Gujarat High Court, when interest is paid on delayed payment, it can be treated as higher sale price which is converse situation to offering of cash discount because the transaction remains the same and there is no distinction 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. 15. 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). 16. 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....
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.... "Whether the Tribunal was correct in law in holding that the assessee was entitled to reduce interest paid by it against interest received by it while calculating deduction under section 80HHC read with Explanation (baa) of the Income-tax Act, 1961 ?" 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 20. 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,....