2014 (11) TMI 63

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....tself registered as 100% Export Oriented Unit. In its returns, for the assessment year 1995-96, it claimed certain deductions, or exemptions referable to Section 10B of the Income Tax Act, 1961 (for short the Act). They included, (a) the interest earned in respect of bank deposits kept for opening Letters of Credit, being Rs. 1,89,270/- (b) interest given by banks in respect of moneys received by them, on behalf of the respondent, against public issue of shares, Rs. 3,48,214/- and (c) interest earned in respect of temporary inter- corporate deposits kept by the respondent with other companies out of the proceeds of the public issue of shares, Rs. 10,09,981/-. The Assessing Officer disallowed the same in his order of assessment, ....

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.... must be derived from the concerned activity, is common to both the provisions. In the instant case, the respondent claimed exemption from tax, the three amounts, referred to above. There should not have been much difficulty as regards the first one. The reason is that obtaining of letters of credit is an essential activity for undertaking exports, and the deposit of amounts for that purpose is a condition precedent. If the deposits so made have yielded interest, it certainly is attributable to or can be said to be derived from, the activity of export. However, as regards the remaining two, it is difficult to relate, or connect them, to the activity of export. The respondent has gone for public issue to mobilise the resources. The int....

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....so relied upon. The Tribunal reversed the findings of the Commissioner, just by making a reference to its own order. That was an order, passed before the Madras High Court rendered its judgment in Pandian Chemicals Limited v. Commissioner of Income Tax , which, in turn, was upheld by the Supreme Court in Pandian Chemicals Limited v. Commissioner of Income Tax . The principle of law laid down therein was referred to Section 80HH of the Act. Their Lordships held that, unless the amount is referable to the activity of the concerned industry and it has close nexus with such activity, it cannot be brought under the purview of Section 80HH of the Act. In the light of that judgment, the order of the Tribunal, be it in the instant case, or the o....