TaxTMI 
TaxTMI 
2015 (8) TMI 720
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....r not to exclude interest income for the purpose of computing the deduction u/s 32AB of the Act?" 2. Insofar as question No.2 in Tax Appeal No.256 is concerned, counsel for the Revenue candidly stated that such issue is concluded against the Revenue by virtue of the judgment of the Apex Court in the case of Joint Commissioner of Income Tax v. Mandideep Eng. & Pkg. Ind. P. Ltd., (2007) 292 ITR 1 (SC). This appeal was ordered to be heard with Tax Appeal No.99/99 in which also similar question was framed. Such appeal came to be dismissed by a Division Bench of this Court by order dated 16.6.2011. Under the circumstances, question No.2 is answered in the affirmative against the Revenue and in favour of the respondent-assessee. 3. This leaves us with the sole surviving question arising in both the Tax Appeals. For the purpose of considering such question, we may record the facts as emerging in Tax Appeal No.257 of 2000. 4. The respondent-assessee is engaged in the business of production and sale of chloral, spent sulphuric acid, chloroform, etc. During the previous year relevant to assessment year 1989-90, the assessee claimed deduction under section 32AB of the Act contending that a....
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.... ITR 263 (Gauhati) which was in favour of the Revenue. It is this decision of the Tribunal which the Revenue has challenged before us. 8. Learned counsel for the Revenue candidly pointed out that decision of the Kerala High Court in the case of Appollo Tyres Ltd (supra) was confirmed by the Apex Court in the decision reported in 255 ITR 237(SC). She, however, submitted that the issue involved in the present case was somewhat different from that which came up for consideration before the Kerala High Court. She pointed out that in the case before the Kerala High Court, it was held that one of the businesses of the assessee was to deal in UTI shares. On that basis income generated from such business was treated as part of the eligible business under section 32AB of the Act. She contended that in the present case, the assessee was not engaged in the business of earning interest. She relied on the decision of the Apex Court in the case of Pandian Chemicals Ltd. v. C.I.T, 262 ITR 278 (S.C.). 9. Though served no one appears for the respondent. 10. Before dealing with the contentions, we may notice the relevant provisions of section 32AB of the Act prevailing at the relevant time, which....
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.... undertaking, other than a small-scale industrial undertaking as defined in section 80HHA, engaged in the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule. ....." 11. Upon perusal of the above provisions, it emerges that if an assessee deposits any amount in an account maintained by him in the Development Bank within the time specified, out of the income chargeable to tax under the head of profits and gains of business or profession or utilizes such amount for the purchase of any new ship, new aircraft, new machinery or plant, he would be entitled to deduction as specified in sub-section (1) of section 32AB of the Act. Such deduction would be a sum equal to the amount or the aggregate of the amounts, so deposited and any amount so utilized or a sum equal to twenty per cent of the profits of eligible business or profession as computed in the accounts of the assessee audited in accordance with sub-section (5), whichever is less. In is in this context, to ascertain the assessee's ceiling for the deduction under section 32AB of the Act, computation of profit of eligible business or profession assumes signifi....
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....d as under : "Keeping in view the aforesaid pronouncements in the field, the present controversy is to be adjudged. As is noticeable from the stipulations in the agreement, the performance guarantee by way of bank guarantee was required for faithful performance of its obligations. The nonsubmission of the guarantee would have entailed termination of the agreement and NHAI would have been at liberty to appropriate the bid security. That apart, the release of such performance security depended upon certain conditions. Thus, it is clearly evincible that the bank guarantee was furnished as a condition precedent to entering into the contract and further it was to be kept alive to fulfill the obligations. Quite apart from the above, the release of the same was dependent on the satisfaction of certain conditions. Thus, the present case is not one where the assessee had made the deposit of surplus money lying idle with it in order to earn interest; on the contrary, the amount of interest was earned from fixed deposits which were kept in the bank for furnishing the bank guarantee. It had an inextricable nexus with securing the contract. Therefore, we are disposed to think that the factual ....