2014 (11) TMI 563 - HC - Income Tax

Computation of profits of industrial undertaking – Interpretation of section 80HHA and 80I – interest income being business interest from trade debtors and on miscellaneous receipts - Held that:- Following the decision in Nirma Industries Limited Versus Deputy Commissioner of Income-Tax [2006 (2) TMI 92 - GUJARAT High Court] - section 80I of the Act uses the phrase 'derived from' and hence the interest received by the assessee from its trade debtors cannot be taken into consideration for the purpose of computing profits derived from an industrial undertaking.

When one reads the opening portion of section 80I of the Act it is clear that words used are: "gross total income of an assessee includes any profits and gains derived from an industrial undertaking" - Once this is the position then, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the prescribed percentage is to be allowed - the gross total income of the assessee included profits and gains from business, and this is apparent on a plain glance at the computation in the assessment order - Both in relation to Vatva unit and Mandali unit the computation commences by taking profit as per statement of income filed alongwith return of income - the Tribunal has erred in reducing the other income received by the appellant as the entire income is incidental to manufacturing activities and therefore the deduction u/s 80-I is required to be allowed on the gross total income before deduction of 80-HHA and income from others – Decided in favour of assessee.

Interest from IDBI – Held that:- The institution with which the assessee was carrying on business is required to be borne in mind - The interest from Bajaj Institution has direct nexus with the business and therefore the interest is required to be considered as derived from business – Decided in favour of assessee.

The income earned from fixed deposit placed for business purpose cannot be treated as income from other source but must be seen as part of the assessee’s business income - the assessee was compelled to park a part of its funds in fixed deposits under the insistence of the financial institutions and therefore the income received thereupon cannot be termed to be income from other sources – Decided in favour of assessee.