TMI Blog2009 (6) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... 83 & 384 of 2004 - - - Dated:- 24-6-2009 - JUSTICE F. M. IBRAHIM KALIFULLA and JUSTICE B. RAJENDRAN Mrs. Pushya Sitaraman, for the Appellant Mr. R. Venkatanarayanan for M/s.Subburaya Iyer., for the Respondent. JUDGMENT The Judgment of the Court was delivered by F. M. IBRAHIM KALIFULLA, J. - In these appeals the substantial question of law raised by the revenue is : "Whether in the facts and circumstances of the case, the Tribunal was right in holding that the miscellaneous accounts viz., scrap sales, freight charges, insurance claim, refund from customs department, interest, rectification charges etc., should be treated as income derived out of business for computation of deduction u/s.80HH?" 2. The various miscell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is settled law that there can be no doubt that the interest earned on the belated payment would, however, be directly relatable to the business of the assessee of forgings. If the purchasers of the forgings did not make the payments for the forgings and then agree to pay the interest on the delayed payments, the said interest would have direct nexus with the business of forgings…... The interest being directly relatable only to the amounts receivable by the assessee during the course of its business on account of the sale of forgings, this interest would have to be included as the profits and gains derived from the business of the assessee-vide : CIT V. Madras Motors Ltd./M. M. Forgings Ltd. (2002) 257 (ITR) 60 (Mad)." 4. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee were to be accepted, there should be materials to show that such scrap sold by it were the by-products in the process of its manufacturing activity. If really it is a by-product in the process of manufacture, such scrap sold would have definitely suffered excise duty. Therefore, in the interest of justice, we are of the view that the assessee can be permitted to place before the Tribunal such materials in support of its stand that the scrap sold by it were the by-products of its main manufacturing activities of Vacuum Cleaners and that it had suffered Excise Duty in the course of its sale. For that purpose, while setting aside that part of the income allowed under Section 80HH to the tune of Rs.16,04,663/-, we direct the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of manufacturing or selling raw materials. The source of this receipt not being the industry, it cannot be said that the income was derived from this industrial undertaking. The Supreme Court in the case of Pandian Chemicals Ltd. (2003) 262 ITR 278, held that the interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for securing supply of electricity for running the industrial undertaking cannot be said to flow directly from the industrial undertaking itself, and was not derived by the undertaking for the purpose of the special deduction under Section 80HH of the Act. The principle of that decision applies to the facts of this case as well." In the light of the above said categor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from contending that the scope of the term derived from in section 80HH is narrower than the term attributable to and that the benefits accruing to the assessee under the schemes formulated by the Government to reward the location of the industry in a backward area or for having effected exports are benefits which accrued to the assessee under the relevant schemes of the Government, which constitute the immediate source for those benefits and, therefore, such benefits are not to be regarded as having been derived from the industrial undertaking." 12. Here again in the case on hand, we are concerned with the application of Section 80HH vis-a-vis the deduction claimed under the head receipt of excise duty paid by the assessee. Having reg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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