TMI Blog2016 (8) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... al judgment. 2. Tax Appeal No.1829 of 2009 challenges the order dated 26/09/2008 made by the ITAT in ITA No.1391/Ahd/2004 for assessment year 2001-2002 and is admitted on the following question of law: Whether the appellate Tribunal is right in law and on facts in reversing the order passed by CIT (A) in allowing the claim of deduction u/s. 80IA on interest amounting to ₹ 76,90,674/- received on margin money? 3. Tax Appeal No.2092 of 2010 challenges the order dated 08/01/2010 passed by the ITAT in ITA NO.844/Ahd/2006 for assessment year 2002-2003 and came to be admitted on the following question of law: Whether the Appellate Tribunal is right in law and on facts in allowing the claim of deduction u/s. 80IA on the interest amounting to ₹ 86,66,390/- received on margin money? 4. Tax Appeal No.2093 and 2094 of 2010 challenge the order dated 08/01/2010 passed by the ITAT in ITA No.2072/Ahd/2006 and in ITA No.2073/Ahd/2006 for the assessment year 2003-2004 and 2004-2005 respectively and came to be admitted on the following questions of law: [A] Whether the Appellate Tribunal is right in law and on facts in allowing the claim of deduction u/s.80I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and placed reliance on paragraph No.22 of the order passed by the tribunal which reads thus: 22. After careful consideration of the rival submissions, facts and circumstances of the case and the fact that the assessee was continuously making purchases of various machineries from both the parties under reference and also having gone through the requirement of provisions of section 32 of the Act, we are of the opinion that it is the availability of machines (physically) and use of the same for assessee's business during the previous year which are relevant for allowing assessee's claim of depreciation. If the Revenue had any doubt, with respect to existence of the machinery itself or its use, it was incumbent upon it either to bring sufficient evidence on record to prove that machines under reference was not available with the assessee and had not been used for assessee's business or to allow the assessee an opportunity to establish the existence of the machinery with it as well as user of the same was in assessee's business but in the present case, nothing is on record on this account. 9. Learned Senior Counsel for the assessee has invited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Emphasis Supplied] 6.1 Sections 80HH and 80-I of the Act are also reproduced hereunder: 80HH. Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) it has begun or begins to manufacture or produce articles after the 31st day of December, 1970 6 but before the 1st day of April, 1990 ], in any backward area; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence in any backward area: Provided that this condition shall not apply in respect of any industrial undertaking which is formed as a result of the reestablishment, reconstruction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) Where the assessee is a person other than a company or a co- operative society, the deduction under sub- section (1) shall not be admissible unless the accounts of the industrial undertaking or the business of the hotel for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub- section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. 1 (6) Where any goods held for the purposes of the business of the industrial under- taking or the hotel are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the industrial under- taking or the hotel and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the business of the industrial undertaking or the hotel does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, specify in this behalf : Provided that any notification under this sub- section may be issued so as to have retrospective effect to a date not earlier than the 1st day of April, 1983 .] Section 80-I(1). - In the case of a company to which this section applies, where the gross total income includes any profits and gains attributable to any priority industry, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such profits and gains of an amount equal to eight per cent. thereof, in computing the total income of the company. 7. In view of the above decision, we are of the opinion that the Tribunal has erred in reducing the other income received by the appellant as the entire income is incidental to manufacturing activities and therefore the deduction under section 80-I is required to be allowed on the gross total income before deduction of 80-HHA and income from others. Therefore, question no. 1 in Tax Appeals Nos. 186 of 2003 and 371 of 2002 is required to be answered in the affirmative i.e. in favour of the assessee and against the revenue. 8. So far as question no. 2 of Tax Appeal Nos. 186 of 2003 and 37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaken by the Delhi High Court in the case of Jaypee DSC Ventures Ltd (supra), we may not separately refer to in detail the facts and ratio of the various decisions of the Supreme Court, noted above. Suffice it to conclude, in the present case also, the assessee was compelled to park a part of its funds in fixed deposits under the insistence of the financial institutions. On such funds, the assessee received interest. Such income cannot be treated as income from other sources and must be seen as part of the assessee's business of manufacturing and selling of chemicals. The decision of the Apex Court in the case of Pandian Chemicals Ltd. (supra) would not be applicable. In the said case, the Apex Court was interpreting the phrase 'derived from' used in section 80HH of the Act. It was in this background that the Apex Court held that the words 'derived from' must be understood as something which has a direct or immediate nexus with the assessee's industrial undertaking. It was on that basis that the Apex Court held that interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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