AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 1729
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.... the interest income was disallowed. 3. Against the said order, the Assessee preferred an appeal before the Commissioner of Income Tax, (Appeals) [in short, CIT-A ], which was allowed by the CIT-A, by order dated 11.02.2004. Aggrieved by the same, the Revenue preferred an appeal before the Income Tax Appellate Tribunal (in short the Tribunal ). The Tribunal vide order dated 17.03.2006 allowed the appeal filed by the Revenue holding that the income derived from eligible business of an undertaking alone was eligible for deduction and the interest income derived from an industrial undertaking is not eligible for deduction under Section 80IA of the Act. In so doing, the Tribunal relied on a decision of the Hon'ble Supreme Court in the case of Pandian Chemicals Limited V. CIT, (2003) 262 ITR 0278. The Assessee did not appear before the Tribunal and the order was passed taking into consideration the submission of the Department's representative. 4. After the appeal filed by the Revenue was allowed by the order dated 17.03.2006, the Assessee filed a Miscellaneous Petition to recall the order. The Tribunal allowed Miscellaneous Petition and restored the matter for being heard and....
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....erived from the business of the industrial undertakings, namely, manufacturer of wind mill, would be entitled for deduction under Section 80IA of the Act. 7.1. Further, it is submitted that the Tribunal ought to have noted that Section 80IA of the Act provides for claiming the benefits which is much wider and that any profits derived from business undertaking is exempted. The Tribunal failed to note that the business is a compounding term and much larger than an industrial undertaking and business includes all facilities of an undertaking by which profits or gains are made. Further, it is submitted that the word business in Section 80IA would certainly go to enlarge the scope of deduction allowable in the said Section. Therefore, it is the contention of the learned Senior Counsel for the petitioner that margin money, which had been kept with the bank solely for business, qualifies for deduction. Furthermore, there is a direct nexus with the importation of the components from various suppliers outside India and the manufacture and sale of wind mill, opening of Letter of Credit and keeping margin money with the bank and no part of the above transactions can be curtailed from each ot....
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....ls Ltd., 2000 (9) SCC 493 and CIT V. Bokaro Steel Limited, (1999) 236 ITR 315 (SC). 7.8. Reliance was also placed on the decision of High Court of Delhi in the case of CIT V Jaypee DSC Ventures Limited, CDJ 2011 DHC 308, which also pertains to furnishing of a performance bank guarantee in favour of the National Highways Authority of India, wherein, the Court held that the Assessee has not made deposit of surplus money lying idle with it in order to earn interest ; on the contrary, the amount of interest was earned form fixed deposit which was kept in the bank for furnishing the bank guarantee. 7.9. On the above submissions, the learned counsel prayed for answering the substantial question of law framed for consideration, in favour of the Assessee. 8. Mr.S.Rajesh, learned Junior Standing counsel appearing for the Revenue, referred to the scheme of Section 80IA of the Act and pointed out that what is important to note is that the profits and gains should be derived by an undertaking or an enterprise from any business referred to in Sub-Section (4) of Section 80IA and such business being referred to as eligible business and subject to the provisions of the section, which allowed in....
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....of a case under Section 80HH of the Act, it will apply to cases of Section 80IA also, more particularly, in the light of the decision of the Hon'ble Supreme Court in Liberty India (supra). 8.6. Learned counsel also relied upon the decision of the Division Bench of this Court in the case of Cyber Pearl IT Park P. Ltd. V. ITO, (2017) 399 ITR 310 (Mad), and submitted that the term derived is critical in appreciating the kind of deduction, which would fall within the ambit of Section 80IAB. In the said case, the Court held that the expression derived is used as against attributable to , the width and amplitude is narrower and therefore, the Courts have held that in order to come to a conclusion as to whether such profits or gains, i.e., income would be amenable to deduction, the effective source of income is to be looked at and once, it is found that the income is derived from a secondary source, which is not the effective source, it falls outside the purview of such like provision, which provides for deduction with purpose of giving fillip to designated activity, which, in the said case, is the business of developing a Special Economic Zone. 8.7. On the submissions, learned coun....
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....r its supply is a step removed from the business of the industrial undertaking and the derivation of profits on deposits made with the Electricity Board cannot be said to flow directly from the industrial undertaking itself. 14. Firstly, we note that Section 80I, 80IA and 80IB have a common scheme and from the reading of those Sections it is clear that the said sections provide for incentive in the form of deduction(s), which are linked to the profits and not to investment, whereas, in the other provisions, namely, Sections 80H, 80HH, 80HHA, 80HHB, 80 HHBA and 80HHC, the scheme is different. In fact, this distinction was noticed by a Division Bench of the Kerala High Court in K.Ravindranathan Nair V. DCIT, (2003) 262 ITR 669 (Ker), wherein, the Court, while considering the decision of the Hon'ble Apex Court in Karnal Co-operative Sugar Mills Limited, pointed out that the said decision was not rendered in the context of all the provisions of Section 80HHC of the Act, as the decision in Karnal Co-operative Sugar Mills Limited followed the decision in the case of CIT V. Bokaro Steels Limited, (1999) 236 ITR 315 (SC). In Karnal Co-operative Sugar Mills Limited, the deposit of mone....
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....tion. The Court held that it is not the case, where, any surplus share capital money, which is lying idle has been deposited in the bank for the purpose of earning interest and the deposit of money is directly linked with the purchase of plant and machinery. Accordingly, the Court answered the question in favour of the Assessee. 18. In the case of CIT V. Shree Rama Multi Tech Limited, 2018 SCC Online SC 433, the Court, after taking note of various decisions including that of Bokaro Steel Limited and Karnal Co-operative Sugar Mills Limited, held as follows : "12. The common rationale that is followed in all these judgement is that if there is any surplus money which is lying idle and it has been deposited in the bank for the purpose of earning interest then it is liable to be taxed as income from other sources but if the income accrued is merely incidental and not the prime purpose of doing the act in question which resulted into accrual of some additional income then the income is not liable to be assessed and is eligible to be claimed as deduction. Putting the above rationale in terms of the present case, if the share application money that is received is deposited in the bank ....
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....the High Court of Himachal Pradesh in Himachal Futuristic Communication Ltd. V. CIT, (2014) 42 taxmann.com 179 (HP). Firstly, we may point out that there were two types of transactions, one by way of margin money for the purpose of purchase of raw material and the other by furnishing Bank Guarantee for due performance of the contract of sale to manufacture of goods. The question arose as to whether the same cannot be treated as income derived from the business, as such. The Court referred to the decision of the Apex Court in Liberty India (supra) and culled out the legal principle evolved therein stating that the profit must be generated from the business activity or operational profits. No more or no less. In fact, in paragraph 4 of the decision, the Court pointed out that the interpretation of Section 80HHC of the Act was entirely different, as it was a self-contained Code by itself. However, so far as the facts of the said case are concerned, the Court held that the expenditure incurred cannot be treated as a first source of income, which is the quintessence for attracting the benefit and incentive provided under Section 80IA of the Act. It was found that the monies, which were ....