Income Tax Appellate Tribunal - Madras
Deputy Commissioner Of Income-Tax vs Tamilnadu Warehousing Corpn. on 31 July, 2000
Equivalent citations: [2003]84ITD51(MAD)
ORDER
N.D. Raghavan, Judicial Member
1. These are appeals of the Revenue challenging the orders dated 4-8-1992 of the CIT(Appeals) as erroneous. Facts of the cases, issues involved, rival submissions as well as the assessee therein happening to be one and the same, these proceedings are consolidated together for the sake of convenience by this common order.
2. The learned representative for the Revenue submitted that: The Appellate Commissioner erred in holding that in terms of Section 10(29) of the Act, the receipts of income from property, interest on loans and advances made to staffs, interest collected on belated refund of advance made to India Cement Company and Madras Cement and interest on State Bank account with banks, are exempt. These receipts cannot be said to be derived from lofting of goods owners or warehouses on storage, processing or facilitating the marketing of commodities. For the assessment years 1983-84 and 1984-85, the decision rendered on 5-4-1991 in ITA Nos. 3010 and 3011 /Mad./89 by the Tribunal in assessee's own case have been appealed against and that the issues have not become so far final and conclusive. Hence, the orders of the CIT(Appeals) are contrary to the law and facts of the case. Reliance is also placed on the decision in the case of Orissa State Warehousing Corporation v. CIT [1999] 237 ITR 589 : 103 Taxman 623 (SC).
3. On the other hand, the learned counsel for the assessee countered, to say in brief by defending the orders impugned and also by relying upon the decision dated 5-4-1991 in the case of the same assessee herein in ITA Nos. 2649 & 2650/M/87 and 3010 & 3011/M/87 for the earlier assessment years 1983-84 and 1984-85 being the cross appeals.
4.1 Rival submissions heard and relevant orders read including the earlier orders of the Tribunal, a copy of which has been filed by and on behalf of the assessee, before us, on record. The assessee has relied upon the aforesaid earlier order of the Tribunal in its own case decided in its favour besides relying upon the Apex Court decision in the case of Union of India v. U.P. State Warehousing Corporation [1991] 187 ITR 54 : [1990] 53 Taxman 581. While so, the Revenue has relied upon the Supreme Court decision in the case of Orissa State Warehousing Corpn. (supra) dis-entitling the assessee for exemption by distinguishing its earlier decision in the case of U.P. State Warehousing Corpn. (supra) holding that in view of the observations of the Court dealt with at pages 601 & 602 as regards the undisputed facts, the question of drawing any inspiration or obtaining support from the decision does not and cannot arise and the same is thus clearly distinguishable. This decision of the Apex Court in the case of Orissa State Warehousing Corpn. (supra) which was rendered on 1st April, 1999 was not available for the benefit of the Tribunal which delivered its decision in the case of the assessee herein on 5-4-1991. Consequently, the latest decision of the Supreme Court reported in Orissa State Warehousing Corpn. 's case (supra) squarely applies to the instant cases.
4.2 The words "derived from" have to be given only restricted meaning and not wider meaning. This view of ours also gets strength from the decision in the case of CIT v. Pandian Chemicals Ltd. [1998] 233 ITR 497 (Mad.). The jurisdictional High Court has followed the decision of the Apex Court in CIT v. P.J. Chemicals Ltd. [1994] 210 ITR 830 : 76 Taxman 611 and dealt with the expression "derived from". The expression "derived from" should be given a restricted meaning and whenever the Legislature wants to give a wider expression, the Legislature employs the expression "attributable to". The use of the expression, "derived from" indicates that the profit or gain should be derived from the conduct of the business. There is no justification to give the expression "derived from" a wider meaning to cover every receipt connected with the industrial undertaking. It is not all business receipts that would qualify for the deduction and the Legislature has apparently not intended to give the benefit of deduction to all business income. If the intention of the Legislature was to grant relief to all business income, it could have used the expression, "profits and gains of industrial undertaking". The fact that the Legislature has used such latter expression has some significance and it connotes that the immediate and effective source of income eligible for grant of relief under Section 80HH must be industrial undertaking itself and not any other source. The mandate of law is that unless the source of the profit is the undertaking, the assessee is not eligible to claim deduction under Section 80HH and that mere commercial connection between the income and the industrial undertaking would not be sufficient. Though the assessee had to necessarily make the deposit with the Electricity Board for running the industry and the power supply would not be made without the deposit in favour of the Electricity Board, the income derived from the deposit with the Electricity Board could not be said to have been derived from the industrial undertaking. The immediate source of interest was the deposit itself. In other words, the immediate and effective source of the interest was the deposit and not the industrial undertaking. The fact that the amount was assessable as business income would not be sufficient to hold that the interest income was derived from the actual conduct of the business of the industrial undertaking. Hence, the interest could not be treated as income derived from an industrial undertaking for purposes of relief under Section 80HH.
4.3 The question whether interest on fixed deposits could be treated as part of the income eligible for exemption or deduction came up before the Supreme Court in the case of Orissa State Warehousing Corpn. (supra). The issue involved arose under Section 10(29) in respect of exemption of income from letting out warehouses. The assessee in this case was a State undertaking, which had obviously kept its funds pending use for its business of letting warehouses on hire and therefore it was incidental to its business. It was claimed that any income of an entity, which qualifies for exemption under Section 10(29) should get exemption. Even so interest income being not an income from business but from other sources, it was held, it will not be eligible for exemption. The argument that a liberal construction should be placed on such incentive provision was not found acceptable in the view that 'any income' refers to income derived for the purpose for which the exemption is granted and that income from fixed deposits cannot be treated as part of eligible on the plea of liberal construction, since no such liberal construction is possible where the statute is reasonably clear and lacks any ambiguity. It was felt "artificial and unduly latitudinarian rules of construction which with their general tendency to 'give the taxpayer breaks' are out of place where legislation has a fiscal mission".
4.4 Where the interest is from long-term fixed deposits made out of surplus funds, such interest should be assessable under the head "income from other sources" so that the question of such income being eligible for deduction under Chapter VI-A or for that matter under Sections 10A & 10B would not arise. Where the deposits have close nexus with business as from security deposit for power connection or margin money for getting loan for the industrial undertaking, the interest should merit deduction. In the case of Orissa State Warehousing Corpn. (supra), the Supreme Court has held that the income from the fixed deposits in the hands of the company claiming total exemption as one engaged in letting out warehouse would not be exempt. The difference between the language "attributable to" in some provisions and "derived from" in some others have led the authorities to believe that even in the case of close nexus as in the case of security deposits or margin money, relief may not be available to such income where the language used is "derived from" and not "attributable to". But the Hon'ble High Court without stressing the difference in the language went by 'nexus' as between the preferred activity and the receipt under consideration though both Sections 80E & 80-I used the more liberal expression "attributable to". It was deciding that the selling agency commission, interest on surplus funds deposited with bank and chit deposits and interest on advance tax could not be treated as eligible profits while receipts for job works, interest on delayed job receipts and security deposits with electricity board were held eligible.
4.5 In the light of the discussions mentioned above and the case laws cited before us particularly of the Apex Court in the case of Orissa Slate Warehousing Corpn. (supra), the benefit of which was not available to the Tribunal when it passed its order dated 5-4-1991 in the case of the assessee referred to above, we have no other alternative than to apply the latter ratio decidendi of the Apex Court in Orissa State Warehousing Corpn. 's case (supra) and to decide the issue against the assessee by restoring the assessment orders through reversion of the orders impugned before us.
5. In the result, the appeals of the Revenue are allowed hereby.