Madras High Court
Commissioner Of Income-Tax vs N.S.C. Shoes on 7 October, 2002
Equivalent citations: (2003)179CTR(MAD)524, [2002]258ITR749(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, K. Raviraja Pandian
JUDGMENT R. Jayasimha Babu, J.
1. The question referred to us, at the instance of the Revenue, for our consideration is, "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that interest on amount deposited as guarantee fund forms part of profit derived from the export business and should be included in the profit of the assessment for computing deductions under Sections 80HH, 80HHC and 80-I ?". The assessment year is 1986-87.
2. The interest that the assessee derived on the deposits that it had made with the bank, which deposits had been made for the purpose of opening the letters of credit for the purpose of import of material, has been held by the Tribunal to be an amount which is not derived from the industrial undertaking for the purpose of Sections 80HH, 80HHC and 80-I. While that decision is correct in so far as Sections 80HH and 80-I are concerned as in the case of CIT v. Jameel Leathers and Uppers , it has been held that the term "derived from" is narrower than the term "attributable to" and that the amounts which do not have a direct nexus with the industrial undertaking cannot be regarded as having been derived from the industrial undertaking. The interest received on deposits cannot be regarded as income derived from the industrial undertaking but as it is derived from the deposits made by the assessee with the bank. The direct and proximate link is with the deposit in the bank and not with the industrial undertaking.
3. In so far as Section 80HHC is concerned, it stands on a different footing as Sub-section (3) of Section 80HHC, as it stood during the relevant assessment year, equated the profits derived from the export of goods with the profits of the business as computed under the head "Profits and gains of business or profession". As in this case, the interest which the assessee derived from the bank deposits had been included in the computation and had been assessed under the head "Profits and gains of business or profession", this amount will have to be regarded as having been derived from the export effected by the assessee.
4. The question referred to us is, therefore, answered partly in favour of the assessee, i.e., in relation to the deduction under Section 80HHC, and partly in favour of the Revenue in so far as the deductions claimed under Sections 80HH and 80-I are concerned.