TMI Blog1997 (2) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... d claimed deduction of Rs. 1,61,49,222 under section 32AB of the Income-tax Act. The assessee had claimed to have utilised a sum of Rs. 1,63,75,625 for the purpose of section 32AB. Details of which are as under: " Part-A : Amount Utilised Total purchase as per list Rs. 83,59,033 Less : Advance considered last year 19950 " Cases where payments (5,39,283) for P M not made 519333 Rs. 5,99,283 Rs. 78,19,750 Add : Advance paid towards pur- chase of plant Machinery Rs.15,55,875 Rs. 93,75,625 Add : Deposit with IDBI made vide receipt No. DB/ 1.70 dated 16-5-89 (evidence on record) 70,00,000 Rs. 163,75,625 " However, 20% of profit was worked out at Rs. 1,61,62,646. Hence deduction under section 32AB was claimed at Rs. 1,61,62,646. The Assessing Officer found that a sum of Rs. 15,55,875 was paid by the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Amount Payment No. details ----------------------------------------------------------------------------- 1. ASA Machine Intermediate 2 6,76,500 Ch. No. 255143 dt. Tools, Secune- Wire Drawing 28-2-89 erabad. Machine 2. ----do--- Rod Breakdown 1 8,79,375 Ch. No. 355142 dt. Machine 28-3-89 --------- Total : 15,55,875 ----------------------------------------------------------------------------- It is not in dispute that the above machineries were purchased in the subsequent years. Now the question is whether the advance of Rs. 15,55,875 given during the year under consideration, can be considered as "amount utilised" for the purchase of plant and machinery within the meaning of section 32AB. Section 32AB, as it stood at the relevant time, reads as under : " 32AB (1) Subject to the other provisions of this section, where an assessee whose total income includes income chargeable to tax under the head "Profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have been worded differently. It would not be out of place to mention here that almost similar allowance was allowable under section 32A of the Income-tax Act as investment allowance. In that section the deduction was permissible in the year in which plant or machinery was installed or it was first put to use. However, section 32AB, which is introduced later on, has utilised altogether different words and in this section there is no such condition of either installation of the plant and machinery or its utilisation. Therefore, we are of the opinion that the amount advanced for purchase of plant and machinery is the amount utilised for the purpose of section 32AB(1)(b). It is not in dispute that the machineries were in fact supplied in the subsequent years and the advance of Rs. 15,55,875 was actually adjusted against the cost of such machineries. In view of these facts we find no infirmity in the order of the CIT(Appeals) directing the Assessing Officer to consider the advance of Rs. 15,55,875 for the purpose of working out deduction under section 32AB. We may also, mention that the ITAT, Indore Bench in the case of Reliable Cigarette Tobacco Industries (P.) Ltd. and the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to consider the said sum of Rs. 10,22,497 for the purpose of computation of relief under section 80HH and 80I. The revenue aggrieved with this direction of the CIT(Appeals) is in appeal before us. 8. At the time of hearing before us it is submitted by the ld. DR that deduction under section 80HH and 80I is allowable in respect of the income derived from an industrial undertaking. Any income can be said to be derived from the industrial undertaking only if it has a direct nexus with such industrial undertaking. In the present case, the interest income received from various sources had no direct nexus with the industrial undertaking and, therefore, cannot be said to be income derived from industrial undertaking. In support of his contention, he relied upon the decision of Hon'ble Karnataka High Court in the case of Sterling Foods v. CIT [1984] 150 ITR 292/[1985] 20 Taxman 55. He further submitted that the decision of the Hon'ble Madhya Pradesh High Court in the case of Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. CIT [1983] 143 ITR 590 has wrongly been applied by the CIT (Appeals). 9. The ld. Counsel for the assessee submitted that the only source of income of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have with some force been contended that a balancing charges arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression "derived from", as, for instance, in section 80J. In our view, since the expression of wider import, namely, "attributable to", has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity. " Now, under section 80HH and 80I the legislature has used the words "derived from" as against the use of the words "attributable to" in section 80-I. Therefore it has to be concluded that the legislature intended to give the narrower mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived' is not a term of art. Its use in the definition [Section 2(1) of the Indian Income-tax Act, 1922] indeed demanded an enquiry into the genealogy of the product. But the enquiry should stop as soon as the effective source is discovered. In the genealogical tree of the interest, land indeed appears in the second degree, but the immediate and effective source is rent, which has suffered the accident of non-payment. And rent is not land within the meaning of the definition. " Applying the ratio of above decision to the facts of the case, their Lordships of Madhya Pradesh High Court observed as under : " Applying the test laid down by the Privy Council, let us examine as to what is the source of the profits resulting from the import entitlements. In the genealogical tree of this income, import comes first and export appears in the second degree. The income arising from import entitlement is directly related to the import activities or the import business of the assessee. It may be that it was because of the export business that the assessee got import licences, yet the connection of the income resulting from import entitlements to the export business is indirect and the dire ..... X X X X Extracts X X X X X X X X Extracts X X X X
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