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2022 (9) TMI 1383 - HC - Income TaxDeduction u/s 80(I) - scope of the word ‘derived’ and the word ‘industrial undertaking’ - applicability of the words “derived from an industrial undertaking” as mentioned u/s 80(I) - whether the interest paid on delayed payments form part of profits and gains derived from an industrial undertaking? - HELD THAT:- Section 80HH of the I.T. Act, which deals with deductions in respect of the profits and gains from newly established industrial undertakings or Hotel business in backward areas also contains the phrase “profits and gains derived from an industrial undertaking.” The word ‘derived’ has been construed by the Privy Council in CIT vs. Raja Bahadur Kamakhaya Narayan Singh [1948 (7) TMI 1 - PRIVY COUNCIL] Hon’ble Supreme Court in Pandian Chemicals Ltd. [2003 (4) TMI 3 - SUPREME COURT] observed that the word “derived from” in Section 80-HH must be understood as something which has direct or immediate nexus with the appellant’s industrial undertaking. The fact situation in the case on hand also relates to payment of interest on delayed payments of sale proceeds to the assessee. As observed in the Gujarat High Court that there are two methods of realizing sale consideration, the object being to realise sale proceeds at the earliest and without delay. To avoid any loss to the assessee on account of the delayed payments, for the goods supplied, two contingencies can be stipulated (1) charging little higher rate or (2) collecting interest on delayed payments. By this, the transaction would not be incidental or different. In our view, it forms part of the same transaction as the amount due for the goods sold is being paid with some delay for which an interest is being collected. Applying the ratio laid down in the above judgments to the case on hand, it is clear that there is direct nexus between the interest received, goods sold and the payments made including interest for the goods sold. Hence, it can be said that the profits and gains derived was from the business of the assessee and accordingly the interest received on delayed payments for the goods supplied/sold would be entitled to relief of exemption u/s 80(I) of the I.T. Act. Appeal allowed.
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