TMI Blog2007 (9) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the interest on FDR with bank and on deposit with IDBI is part of the profits and gains derived from an industrial undertaking to which section 80-I of the Income-tax Act, 1961, applies and thereby qualifying for deduction under section 80-I of the Income-tax Act l96l ?" 2. The facts of the case lie in a narrow compass. 3. The assessee is an industrial undertaking engaged in conversion of coal tar into hard pitch anthrance oil etc. being the priority industry. The assessee filed its income-tax return claiming deduction under section 80-I at Rs. 4,38,161 for the assessment year 1989-90 and Rs. 4,32,042 for the assessment year 1990-91 being 25 per cent. of profit. The Assessing Officer by two separate assessment orders passed under section 143(3) of the Income-tax Act allowed the deductions at Rs. 4,69,876 and Rs. 4,33,474 for the assessment years 1989-90 and 1990-91 respectively. The Commissioner of Income-tax, Ranchi, initiated revision proceedings under section 263 of the Act and alleged that the said assessment orders passed by the Assessing Officer were erroneous and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment deposit account. There is a condition in section 32AB that to avail of deduction under the section, the assessee has to deposit an amount in an account maintained by him with the Development Bank and accordingly the assessee claimed the deduction under the said section deposited the amount with the IDBI being the Industrial Development Bank of India. The interest income, which was generated from the fixed deposit in the bank and in IDBI, had a direct nexus with the business of the assessee and was a business income to be included in the profits and gains of the assessee. Learned counsel further submitted that the income earned by the assessee on the deposit with the bank and IDBI has a close nexus with the business of the assessee-company which is an industrial undertaking and, therefore, it is submitted that the interest generated from these deposits are the profits and gains from the business of the assessee and, therefore, he is entitled for allowance under section 80-I of the Act. 6. Learned counsel relied upon the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 and the decision of the Bombay Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Supreme Court. The Supreme Court observed that in computing the total income of the assessee carrying on the business of an industry specified under section 80E of the Income-tax Act, 1961, for the purpose of special deduction permissible thereunder, the balancing charge arising as a result of the sale of old machinery and buildings and worked out in accordance with section 41(2), irrespective of its real character, has to be taken into account and included as income of the business. In other words, the balancing charge will have to be taken into account before computing the deduction of 8 per cent. under section 80E. 9. In the case of CIT v. Ahmedabad Electricity Co. Ltd. [1993] 203 ITR 521 (Bom), the facts of the case were that the assessee was engaged in the business of generation and distribution of electricity. In the assessment originally framed under section 143(3) of the Act, the Income-tax Officer had granted deduction under section 80-I of the Act in respect of the fixed deposit receipts. However, subsequently, the Income-tax Officer took action under section 147(b)/148 of the Act in view of the objection raised by the Revenue audit in respect of the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in capital for purpose of section 80J ? The following questions were referred to the court for opinion (page 624) "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the cost of technical know-how which was paid for by the assessee by way of shares in the assessee-company is includible in the capital for the purpose of computation of relief under section 80J of the Income-tax Act, 1961, under rule 19A(2), clauses (ii) and (iii) of the Income-tax Rules, 1962, for 1970-71 and 1971-72 assessment years ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to relief at 8% under section 80-I on the interest income of Rs. 7,07,390 for the assessment year 1971-72 ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to relief under section 80J on the bank deposit of Rs. 1.40 crores which should be treated as capital employed in the industrial undertaking for the assessment year 1971-72 ?" 12. The Bombay High Court held (page 625) "The facts relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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