2010 (11) TMI 1036

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.... together and are being disposed of by this common order, for the sake of convenience. In all these appeals the main issue involved is regarding allowability of deduction u/s. 80-IB in respect of scrap sales. For the assessment year 2003-04 one additional ground is also taken, which is deduction u/s.80IB(4) in respect of interest on bank fixed deposits. 2. First we take up the appeal for the assessment year 2003-04. The grounds raised by the assessee read as under: "1. Interest of Rs. 31,257/- received on Bank Fixed Deposits be treated as "Business Income" from manufacturing unit. 2. Deduction u/s.80IB(4) be allowed in respect of interest of Rs. 31,257/- received on Bank Fixed Deposits referred to in (1) above. ....

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....ains derived from the eligible business. The connotation of the words "derived from" is narrower as compared to that of the words "attributable to". By using the expression "derived from" Parliament intended to cover sources not beyond the first degree. Therefore, ground Nos.1 & 2 raised by the assessee are dismissed. 5. In the appeals for the assessment years 2003-04, 2004-05 and 2005-06 the assessee's claim under section 80IB in regard to scrap sales from Unit I and Unit II was disallowed as under: Assessment year   2003-04 Rs. 57,20,061/- 2004-05 Rs. 98,78,838/- 2005-06 Rs. 52,95,310/-   The Assessing Officer noticed that the assessee had credited receipts from scrap sales from Unit -I and U....

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....able as business income. Now, the only issue that remains for consideration is whether the scrap was derived from industrial undertaking as per the mandate of section 80IB or not. The generation of scrap to the extent the same is incidental to the industrial operation meets the tests laid down by the Hon'ble Supreme Court decision in the case of Liberty India (317 ITR 218). The Hon'ble Supreme Court has observed that section 80IB refers to profits derived from eligible business meaning thereby that it is not the ownership of the business which attracts the incentives but what attracts the 4 ITA Nos.7142/M/2008, 6084/M/2007 & 909/M/07 Mamania Family Trust incentives u/s.80IB is the generation of profit. The connotation of the words &....