2014 (7) TMI 1313

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....the order of the learned Tribunal, the revenue has come up. Briefly stated facts and circumstances are as follows: The assessee is engaged in manufacturing of plastic clad, aluminum tape clad, stainless tape etc. The assessee had earned interest from two sources : (a) from the customers on account of delayed payment of the sale proceeds; and (b) from the fixed deposit made in order to provide margin money to the lending banker. The question arose whether these two types of interests earned by the assessee are eligible for deduction under Section 80 IB. The assessing officer held against the assessee. The CIT(A) allowed an appeal preferred by the assessee holding, inter alia, that the interest earned by the assessee on account of....

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....ard for the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking itself and was not profits or gains derived by the undertaking for the purpose of the special deduction under section 80HH." He also drew our attention to a judgment of the Apex Court in the case of CIT vs. Sterling Foods, reported in [1999] 237 ITR 579, wherein the following view was taken : "The word "derive" is usually followed by the word "from" and it means: "get, to trace from a source; arise from, originate in, show the origin or formation of". The source of import entitlements could not be said to be the industrial undertaking of the assessee. The source of the import entitlements co....

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.... incentives such as DEPB/Duty drawback cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression "profits derived from industrial undertaking" under Section 80-IB." Both, in the case of CIT vs. Sterling Foods (supra) and in the case of Liberty India vs. CIT (supra), Their Lordships have laid emphasis to find out whether there is a direct nexus between the money earned and the activity pursued by the assessee. In the case of Pandian Chemicals (supra), interest was earned by the assessee from out of deposits made with the electricity board. It could, therefore, be said that the income arising out of interest did not have any direct nexus with the industrial....