TMI Blog2014 (12) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... elation to a product, what becomes relevant from the point of view of Section 80HH of the Act, is the profit and gain, which the assessee has derived from the activity - not only from the point of view of Section 80HH of the Act but also in the ordinary parlance, the interest paid by the purchaser on account of bleated payment, becomes part of the consideration and partakes the character of price – relying upon CIT v. Raja Bahadur Kamakhaya Narayan Singh [1948 (7) TMI 1 - Privy Council] - the interest payable to him certainly partakes of the same character as the receipts for the payment of which he was otherwise entitled under the contract and which payment has been delayed as a result of certain disputes between the parties - It cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from Trade Debtors on account of delayed payment should be treated as profits derived from the Industrial Undertaking of the assessee for the purpose of computing the relief u/s 80HH of the Income Tax Act, 1961 Sri J.V.Prasad, learned counsel for the appellant submits that the profits and gains, that are derived by the respondent from the activity of manufacture of cold roll strips alone, that qualify for deduction, to the extent of 20% under Section 80HH of the Act and the interest on belated payment does not at all fall into that category. He submits that it is only the cost of the product manufactured and sold by the respondent that becomes the income, and thereby, the profit, referable to Section 80HH of the Act and not interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that occur in all these provisions that occur in Chapter VIA of the Act particularly under the Heading C-Deduction in respect of certain incomes, is where the gross total income of an assessee includes any profits and gains derived from concerned activity, there shall, in accordance with and subject to the provisions of the Section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to 20% thereof. Almost all the principal sections, which provide for deductions, employ this language and the details as to the deduction or the definition of the activity are supplemented in Sub-sections or Clauses thereof. Sub-Section (1) of Section 80HH of the Act reads as under: Where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage, and the purchaser paid interest thereon, as per the terms of sale, the actual sale consideration and the component of interest were shown separately. Honestly enough, the respondent has shown the actual consideration of the product manufactured and sold by it on the one hand, and the interest received by it on account of belated payment of the consideration by the purchasers, on the other hand. The interest component aggregated to ₹ 20,40,341/- for the concerned assessment year. The Assessing Officer treated this as not falling within the ambit of Section 80HH of the Act. The income of a manufacturer of a particular item is mostly in the form of the receipt of sale consideration. What constitutes consideration, is not susc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest for the belated payment. Even these aspects become almost irrelevant in the context of Section 80HH of the Act and what becomes material is the actual amount that is received by the manufacturer. Not only from the point of view of Section 80HH of the Act but also in the ordinary parlance, the interest paid by the purchaser on account of bleated payment, becomes part of the consideration and partakes the character of price. Another way of looking at the matter is as to what was the occasion or basis for a person to pay the amount representing the interest. The answer would connect the same to the product and one does not have to put any further questions to relate the same, to the activity of the assessee. This fits into the obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant relied upon the judgment of the Supreme Court in Pandian Chemicals Ltd s case (1 supra). In that case, the assessee sought to add to his income derived from manufacture of chemicals, the interest which was paid by the electricity supplier on the deposits made by the assessee. The Supreme Court held that hardly there exists any nexus between the two. There is not even a remote possibility to apply the ratio laid down in that case to the facts of the present case. It is a different matter that the Assessing Officer can certainly verify as to whether the interest was in fact paid or whether it was claimed on imaginary or surreptitious manner. In a given case, if it is found that the consideration was paid at the time of sale its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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