TMI Blog1999 (9) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... t. yr. 1989-90, "because all actions relating to accrual of liability had been undertaken or done during that previous year. 2. That the CIT(A) erred on facts and in law in confirming the expenditure on rent, repairs and depreciation amounting to Rs. 2,32,434 under s. 37(4). 3. That the CIT(A) erred on fact and in law in not holding that other income amounting to Rs. 8,32,191 was part of profits and gains derived from the industrial undertaking for purposes of deduction under s. 80-I. 3.2 That the CIT(A) erred on facts and in law in observing inter alia, that the source referable to the aforesaid receipts was not the business of the undertaking." 3. In regard to the first ground, we have heard the rival submissions. The AO disallowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. 6. Having regard to the facts and respectfully following the precedent, we decide this issue in favour of the assessee and against the Revenue. 7. In regard to ground No. 2 we tested the prescription of s. 34 on the touchstone of Hyden's Rule. We find that expenditure on maintenance of guest house was allowable till28th Feb., 1987, as a deduction in computing the profits and gains of the business. It was subject to the limits as prescribed in r. 6C as existed at that time. It was felt by the legislature that business houses were incurring lavish expenditure on maintenance of guest house and claiming the same as deduction. In order to put a check on such lavish expenditure, s. 37(4) was inserted. The rule of construction which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,019.00 (f) Interest received from customers (on late payment) 85,834.75 ----------- 1,27,216.00 2. Profit on sale of raw materials and stores. 1,02,558.00 3. Misc. receipts: (i) Sales of Scrap (Coal ash, iron) 2,90,116,64 (ii) Insurance claim 5,59,730.00 ----------- 8,49,847.00 4. Liabilities no longer required written back 46,842.00 5. Profit/loss on sales of fixed assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of interest from employees interest from HSEB and interest received from customers. 12. Interest on fixed deposit, interest received from bank and interest on NSCs are not to be considered for computing the claim made under s. 80-I. 13. The deduction under s. 80-I is available to an assessee whose gross income includes any profits and gains derived from an industrial undertaking which fulfils all the conditions laid down in the section. The assessee complied with the conditions laid down in the section. But in respect of the aforesaid items, Revenue opined that profits are not derived from the industrial undertaking. As such, the claim of the assessee was not accepted. However, in relation to the sales of scrap, the CIT(A) allowed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the words "derive from", a direct nexus between the profits and gains and the industrial undertaking. 15. In the case of Sterling Foods, apex Court found that direct nexus was not direct, but only incidental. The industrial undertaking exported processed sea foods. By reason of such export, the export promotion scheme applied. Thereunder the assessee was entitled to the import entitlement which it could sell. The sale consideration therefrom could not be held to constitute a profit and gain derived from the assessee's industrial undertaking. The receipts from the sale of import entitlements could not be included in the income of assessee for the purpose of computing the relief under s. 80HH of the IT Act, 1961. 16. The expression ..... X X X X Extracts X X X X X X X X Extracts X X X X
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