TMI Blog1998 (4) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... . Act"), in respect of (i) profit on sale of scrap ; (ii) interest earned by the industrial undertaking ; and (iii) cash assistance received from the Government, on account of exports made by the assessee. The Income-tax Officer disallowed the relief in respect of those items under section 80HH of the Income-tax Act. On appeal, the Commissioner (Appeals) upheld the assessee's claim for deduction in regard to the profit on sale of scrap and interest earned by the industrial undertaking, but disallowed such relief, in respect of the third item, namely, cash assistance received from the Government on account of exports made by the assessee. On further appeal by the Revenue, the Tribunal, following its order for earlier year, reversed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial undertaking. The moot question that arises for consideration is as to whether the assessee is entitled to deduction of an amount equal to twenty per cent. on the profits earned out of the sale of scrap materials under section 80HH of the Income-tax Act. Sub-section (1) of section 80HH, relevant for the present purpose, reads as under : "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". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not sufficient, if a commercial connection is established between the profits earned and the industrial undertaking and the law requires that such profits must have been derived from the industrial undertaking. The industrial undertaking itself must be the source of that profit. The business of the industrial undertaking must strictly yield that profit. It must be the direct source of profit and not a means to earn any other profit. As already stated, in the industrial undertaking in the manufacture of V-belts, oil seals, O-rings and rubber moulded products, certain scrap materials resulted, which has a saleable value. To say that the scrap materials had no direct link or nexus with the industrial undertaking cannot at all be expected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate Tribunal has committed an error of law in holding that the interest earned on the deposit with the Tamil Nadu Electricity Board by the assessee should be treated as income derive, I from industrial undertaking for the purpose of the relief under section 80HH of the Income-tax Act. This decision, being that of a Division Bench of this court, is binding on us and in this view of the matter, there is no other go for us, except to conclude that the interest earned by the industrial undertaking cannot at all be eligible to be included in the gross total income for claiming deduction of an amount equal to twenty per cent. in the process of computation of the profits and gains of the said industrial undertaking and this part of the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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