TMI Blog1996 (5) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act, 1961, the Tribunal was correct in holding that the interest income of Rs. 6,06,943 and profit on sale of fixed assets amounting to Rs. 7,469 derived by the assessee did not form part of profits and gains derived from an industrial undertaking and that the assessee was not entitled to deduction under section 80HH on such profits and gains ? " The facts for the purpose of this case may be briefly stated as follows : The assessee was assessed as a company for the year 1985-86. Amongst other things, it derived some income from interest to the extent of Rs. 6,06,943. After depreciation, income from business worked out at a loss of Rs. 4,01,918. After adding back the interest income mentioned above, the net result was a positive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Besides, the amount received after sale of some of the assets are also profits and gains earned from the industrial undertaking, therefore, according to Mr. Goenka, the Tribunal was not justified in disallowing the claim. Dr. Saraf, on the other hand, submits that the interest is covered under clause (E) of section 14 and falls within the meaning of "income from other sources" and the profits and gains of business is mentioned in clause (D) of section 14, therefore, by no stretch of imagination the interest can be included as profits and gains earned from the industrial undertaking. Besides, Dr. Saraf submits that when a part of the industrial undertaking is sold it cannot be termed as profits and gains from the industrial undertaking an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of a hotel. It is just not sufficient if a commercial connection is established between the profits earned and the industrial undertaking. The law requires that such profits must have been derived from the industrial undertaking. The industrial undertaking must itself be the source of that profit. The business of that industrial undertaking must directly yield that profit. It must be the direct source of that profit and not a means to earn any other profit. " In Cochin Company v. CIT [1978] 114 ITR 822 (Ker), Justice Balakrishna Eradi (as he then was) speaking for the Bench, observed thus (at page 830) : " There must be a direct nexus between the activity and the earning of the profit or gain. The income, profit or gain can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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