TMI Blog2015 (5) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... derived from had a narrower connotation than the expression attributable to . After having considered the meaning of the words derived from , as per the various decisions of Supreme Court, in our opinion, the interest earned by the assessee from deposits made in trust and retention account maintained under the financing agreement with the lenders, cannot be considered as profits and gains of business derived from the industrial undertaking. Thus, we find no infirmity in the order of the Commissioner(Appeals) in following the judgment of the Supreme Court in the case of Pandian Chemicals Ltd. (supra). DR was of the opinion that benefit of netting of interest cannot be allowed in this case, as the interest paid and interest received do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent : Shri E.S.Nagendra Prasad, CIT ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER The appeals by the assessee in ITA Nos.569 570/Mds/12 are directed against different orders of the Commissioner of Income-tax(Appeals) for the assessment years 2006-07 and 2007-08 and ITA Nos.1188/Mds/13 is directed against the order of the Commissioner of Income-tax passed under sec.263 of the Income-tax Act, 1961 for the assessment year 2008-09. 2. First, we take up ITA Nos. 569 570/Mds/2012. The facts of the case as narrated for the assessment year 2006-07 are that the assessee has earned interest on deposit to the tune of ₹ 5.65 crores and considered the same as part of the business income so as to claim deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's income. As the monies are held on behalf of lenders, but assessee is not permitted to prepay the lenders or the Bank, the interest receipt should be netted off against the interest income of the trust. As the activity from inception is inextricably and directly connected with setting up of and continuing of the manufacturing activity, the income should be considered as derived from the business of the undertaking and should not be excluded for computation of relief u/s 80 lA. In support of his submission, he relied on the following cases: 1. CIT Vs Indo Swiss Jewels Ltd anr - 284 ITR 389 (Bom) 2. CIT Vs Jagdishprasad M.Joshi - 318 ITR 420 (Bom) 3. CIT Vs Kansara Modler Ltd - 218 CTR 21 (Raj) 4. CIT Vs Karnal Co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the lenders. It is to be seen whether the interest income earned by the assessee on the fixed deposits is business income derived from the industrial undertaking or it is an income from other sources. Sec.80IA allows deduction on profits and gains derived from any business of an industrial undertaking. This issue is covered by the following judgments of the Supreme Court: 1. Hindustan Lever Ltd. vs. CIT (239 ITR 297) 2. Pandian Chemicals vs. CIT (262 ITR 278) 3. CIT vs. Sterling Foods (237 ITR 579) 6. In these cases, it was looked into the meaning of the word derive . It was held that the word derive usually followed by the word from and it means; get, to trace from a source, arise from, originate in, show the origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (supra). The ld. DR was of the opinion that benefit of netting of interest cannot be allowed in this case, as the interest paid and interest received do not partake the same character, as held by the Supreme Court in the case of CIT v. Keshavji Ravji (183 ITR 1) and CIT v. V. Chinnapandi (282 ITR 389). Therefore, no benefit of netting of interest is allowed. Accordingly, this ground is dismissed in both the appeals. 7. Coming to ITA No.1188Mds/2013, the assessee has challenged invoking the provisions of sec.263 so as to withdraw deduction given to the assessee, after considering the interest income received from fixed deposits made with the trust and arising from trust and retention account required to be made with the intention to s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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