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2007 (6) TMI 303 - AT - Income TaxComputation of deduction u/s 33AC - income generated during the course of business of operation of ships - Preliminary expenses - Whether business of operation of ships are considered to be industrial undertaking ? - HELD THAT:- If the FDRs are purchased to obtain the credit limit or on account of business exigencies the interest generated thereon certainly be business income and is eligible for deduction u/s 33AC. In case surplus funds were put in FDRs and interest was generated thereon that interest income would not qualify to business income of the assessee and also would not be eligible for deduction u/s 33AC of the Act. So far as sale of scrap is concerned it is certainly generated during the course of business of operation of ships. Sale proceeds of it will certainly be an income derived from the business of shipping operation and, as such, eligible for deduction u/s 33AC of the Act. Since the relevant information with regard to insurance claim and interest earned on FDRs are not available on record we restore the matter to the file of the Assessing Officer to readjudicate the issue in terms indicated above. If he comes to the conclusion that the insurance claim and interest on FDRs were received during the course of business of shipping operation of the assessee, deduction be allowed otherwise it would be treated as income from other sources. So far as variation in the figures of Return Income and assessee’s income are concerned we are of the view that assessee is entitled for deduction u/s 33AC on the finally assessed income from business of operation of ships. In this regard the CIT(A) has also issued directions for rectification by the Assessing Officer. As such no further direction is required. We, however, of the view that the deduction is always available on the assessed income and not on the Returned income. Disallowance of claim u/s 35D - incurred public issue expenses - industrial undertaking - Whether business of operation of ships are considered to be industrial undertaking ? - HELD THAT:- In a common parlance the industrial undertaking means an undertaking engaged in the business of manufacture or processing of goods. The words ‘industrial undertaking’ has been defined in the case of CIT v. Textile Machinery Corpn.[1970 (7) TMI 15 - CALCUTTA HIGH COURT] in which they have held that the words "industrial undertaking" in the Income-tax Act, 1922 should be interpreted to mean any venture or enterprise which a person undertakes to do which has relation to some industry or has some industrial consequences. The notion of any undertaking basically means that it has got complete, concrete and tangible nature in the part of industry to make it industrial undertaking. To understand the real meaning of Industrial Undertaking one should go either to the plain or general meaning or the meaning adopted in various provisions of the Act. As per plain and general meaning, industrial undertaking should be an undertaking engaged in the manufacture or processing of goods. The similar definition is also in Explanation 1 to section 33B, according to which industrial undertaking means any undertaking which is mainly engaged in the business of generation of or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. We, therefore, do not find any merit in the arguments of the assessee. We, however, carefully examined the order of the lower authorities in this regard and we find that they have given valid reasons for treating business of operation of ships not to be an industrial undertaking. We therefore find no infirmity in the order of the CIT(A) and we confirm the same. Deduction u/s 80-IA or 80-IB - profit earned by other barges - HELD THAT:- Following the judgment in the case of Ipca Laboratory Ltd. v. Dy. CIT [2004 (3) TMI 9 - SUPREME COURT], deductions are to be computed as per Chapter VI-A of the Act. In the light of these judgments we do not find any infirmity in the mode of computation adopted by the lower authorities. We, however, of the view that loss suffered by any of the barge will not be adjusted/set off against the profit earned by other barges which is eligible for deduction u/s 80-IB if the accounts are separately maintained but total deduction under this chapter should not exceed the gross total income of the assessee as held in Synco Industries Ltd. v. Assessing Officer [2001 (7) TMI 45 - BOMBAY HIGH COURT] by the jurisdictional High Court. We, therefore, restore the matter to the file, the Assessing Officer to recompute deduction in terms indicated above. In the result, appeals of the assessee are partly allowed for statistical purpose and that of the revenue is dismissed.
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