TMI Blog2017 (5) TMI 1595X X X X Extracts X X X X X X X X Extracts X X X X ..... orm a part of income since it was written off deposit which was kept in separate account. This is not an income derived. The issue is decided in favour of Department and against the assessee. For issue on recovery of rent as relied upon decisions reported in Commissioner of Income Tax vs. Indo Swiss Jewels Ltd. and Anr. (2005 (9) TMI 47 - BOMBAY HIGH COURT) as held it is clear that the inter-corporate deposits were made by the assessee from the surplus funds that were set apart for the payment of imported machinery. That the said deposits were withdrawn and payment was made towards import of the machinery is also not questioned by the Revenue. The interest earned on the short-term deposits of the money kept apart for the purpose of business has to be treated as income earned on business and cannot be treated as income from other sources. - D.B. Income Tax Appeal No. 679/2011 - - - Dated:- 16-5-2017 - Mr. K.S. Jhaveri And Mr. Vijay Kumar Vyas JJ. For the Appellant(s) : Mr. Sanjay Jhanwar with Ms. Archana For the Respondent(s) : Mrs. Parinitoo Jain JUDGMENT 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Deposit Rules 1975 2 Interest on Deposits and Others Interest on Staff Vehicle Loans 426,232 Income directly derived from eligible business Interest on Staff Furniture Loans 168,885 Income directly derived from eligible business Interest on Staff Housing Loans 2,183,140 Income directly derived from eligible business Intt-dealers on delayed payts 12,272,442 Income directly derived from eligible business Interest on ICD s/Other Interest 60,149,960 Directly covered by the decision of the High Court of Bombay in the Interest on Fds with Banks 202,365 case of CIT V/s United Carbon India Ltd. 190 ITR 622 75,403,024 3 Dividend Income 3,564,159 4 Rent Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and is not to be included in the profits of the business of the assessee as computed under the head Profits and Gains of Business or Profession , ninety per cent of such quantum of the receipt of rent or interest will not be deducted under clause (1) of Explanation (baa) to Section 80HHC. In other words, ninety per cent of not the gross rent or gross interest but only the net interest or net rent, which has been included in the profits of business of the assessee as computed under the head Profits and Gains of Business or Profession , is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. 13. The view that we have taken of Explanation (baa) to Section 80HHC is also the view of the Delhi High Court in Commissioner of Income-Tax v. Shri Ram Honda Power Equip (supra) and the Tribunal in the present case has followed the judgment of the Delhi High Court. On appeal being filed by the Revenue against the order of the Tribunal, the High Court has set aside the order of the Tribunal and directed the Assessing Officer to dispose of the issue in accordance with the judgment of the Bombay High Court in Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue whether ninety per cent deduction is to be made from the gross or net income of any of the receipts mentioned in clause (1) of the Explanation (baa). 6. Regarding issue No.1(b), interest on deposits and so on, he relied on decision in CIT Vs. Advance Detergents Ltd. (2010) 228 CTR (Del) 356 wherein while considering the provisions of 80IA, the Delhi High Court considered the issue and held in favour of the assessee against the revenue. He has specifically relied upon the following observations which reads as under: 7. As pointed out above, the Tribunal has referred to various judgments of the High Courts as well as other Benches of the Tribunal. We may, however, begin our discussions with the recent case decided by the Supreme Court in Liberty India v. CIT MANU/SC/1585/2009 : (2009) 225 CTR (SC) 233 : (2009) 28 DTK (SC) 73 : (2009) 317 ITR 218 (SC) in which it has discussed and explained the contents and scope of said provision in a very lucid manner. The interpretation of Section 80-IA and other sections in the said judgment would provide sufficient guidelines to decide the question of law which has arisen for consideration in the present case. 8. In that ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted in favour of assessee. 6.2. In support of contention regarding expenses returned back he relied on decision of Punjab Haryana High Court in CIT vs. Metalman Auto (P.) Ltd. (2011) 336 ITR 434 wherein it has been held as under: 6. The Assessee admittedly did the job work qualifying as eligible business under Section 80-IB. On the said issue, view taken by the Tribunal earlier was upheld by this Court vide judgment dt. 5th Dec, 2008 in case of IT Appeal No. 543 of 2008 (CIT v. Impel Forge Allied Industries Ltd.). The view taken by the Tribunal being consistent with the earlier view taken by this Court, the said question cannot be held to be substantial question of law. Miscellaneous receipts from rebate, discount and balances written off are incidental to the profits and gains derived from eligible business under Section 80-IB. The air conditioners though purchased in the name of the managing director and his wife are for the Assessee and were to be used for the business of the Assessee and not for personal use of the managing director or his wife. Depreciation was, thus, admissible thereon. Electrical installations were part of plant and machinery and even for the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this connection the appellate authority held that the balance-sheet for the next year also showed that all these deposits were withdrawn and paid for the machinery. The appellate authority was satisfied with the explanation put forth by the assessee. The Tribunal did not find any error in the approach of the appellate authority. That the machinery was in fact imported by the assessee is not in question. From the facts and circumstances of the present case it is clear that the inter-corporate deposits were made by the assessee from the surplus funds that were set apart for the payment of imported machinery. That the said deposits were withdrawn and payment was made towards import of the machinery is also not questioned by the Revenue. The interest earned on the short-term deposits of the money kept apart for the purpose of business has to be treated as income earned on business and cannot be treated as income from other sources. 7. We, accordingly, answer the question in favour of the assessee and against the Revenue. The tax appeal is dismissed. Since the assessee has chosen not to appear, no order as to costs. 6.7 In Commissioner of Income Tax vs. Eastern Tar P. Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear from Subsection (2) of Section 80-IA whereby such businesses are not considered for taking advantage of the deduction under Section 80-IA if either it is formed from splitting up of an existing business or by use of machinery or plant previously used and so on. The object is clearly to give fillip to the economy and to investment. This object will have to be kept in view while interpreting the provisions of Section 80-IA. 9. At this stage, it may be stated that the fact that there was a fire in the unit of the assessee company is an undisputed fact. It is not as if the event is questionable. If that be so, there is no reason why keeping in account the intent of the provision of Section 80-IA and the fact that an industrial undertaking has already been established and is running, (i.e. investment done, machinery purchased, employment and revenue generated etc.) a restricted interpretation be given to the expression derived from any business of an industrial undertaking . As held by the Supreme Court in the case of Raghuvanshi Mills Ltd. definitely a nexus to the business is there in case the goods of a business are destroyed and for which an insurance amount is claimed. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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