2014 (9) TMI 1267 - HC - Income Tax

Deduction u/s 80-IA - Interest Income from employees on advances Equipment Hire charges Crane Hire charges Ammonia Tank Wagon Hire Charges AND Interest Income from Banks and Financial institutions - HELD THAT - The issue stands decided by this Court against the appellant-assessee in favour of the revenue in 2013 (10) TMI 1036 - DELHI HIGH COURT and 2012 (4) TMI 454 - DELHI HIGH COURT . The aforesaid factual position and that the amounts/income mentioned in Serial No. (i) to (v) are covered by the said decisions is accepted by the counsel for the appellant- assessee who states that appeals are preferred and pending before the Supreme Court. Following the aforesaid orders the present appeal in respect of Serial Nos. (i) to (v) has to be dismissed and is accordingly so ordered. Interest income earned by the Appellant from investment deposit under Section 32AB of the Act in IDBI Bank - The appellant-assessee had deposited certain amounts in the account maintained under Section 32-AB of the Act with the Development Bank. The deposits so made were out of the sale proceeds i.e. income chargeable under the head Profits and gains of business or profession. Interest was earned on the said deposits and the appellant-assessee claims that the interest earned should be included in the income derived from the industrial undertaking and accordingly was eligible for deduction under Section 80-IA - Section 80-IA of the Act does not apply and cover income in the nature of profits and gains of business or profession but is restricted only to income derived from an industrial undertaking after a certain date etc. The expression derived from refers to the first or the immediate cause/source of income earned which in the present case would be the deposits in the bank and interest paid by the said bank and not the industrial undertaking. The aforesaid interest income therefore cannot be treated as income derived from the industrial undertaking covered under Section 80IA - Tribunal has rightly relied upon the decision of the Supreme Court in CIT Vs. Pandian Chemicals Ltd 2003 (4) TMI 3 - SUPREME COURT in which it has been held that the word derived from is narrower than the word attributable to and the earlier term should be interpreted as something which has direct and immediate first source nexus with the industrial undertaking. We are not inclined to issue notice on the Serial No. (vi). The appeal is accordingly dismissed in limine.

Summary

Issues:
- Deduction under Section 80-IA of the Income Tax Act, 1961 for various incomes including interest income, equipment hire charges, crane hire charges, and ammonia tank wagon hire charges.
- Eligibility of interest income earned on deposits under Section 32-AB of the Act for deduction under Section 80-IA.

Analysis:
1. The appeal by a Cooperative Society engaged in fertilizer manufacturing relates to the Assessment Year 1996-97 and challenges the impugned order of the Income Tax Appellate Tribunal (Tribunal) dated 21.03.2014.

2. The appellant-assessee raised the issue of deduction under Section 80-IA of the Income Tax Act, 1961 for various incomes, including interest income, equipment hire charges, crane hire charges, and ammonia tank wagon hire charges. Previous decisions by the Court have already ruled against the appellant on these issues, and the present appeal is dismissed accordingly.

3. However, a separate issue arises concerning interest income earned on deposits made under Section 32-AB of the Act. The appellant claimed that this interest income should be included in the income derived from the industrial undertaking for eligibility under Section 80-IA. The Court clarified that Section 80-IA does not cover income in the nature of profits and gains of business or profession but is restricted to income directly derived from an industrial undertaking. The interest income from bank deposits does not qualify as income derived from the industrial undertaking as per the Supreme Court's decision in CIT Vs. Pandian Chemicals Ltd., 262 ITR 278 (SC).

4. Since the interest income on deposits does not meet the criteria for deduction under Section 80-IA, the Court dismissed the appeal concerning this specific issue without further notice. The judgment upholds the distinction between income directly derived from an industrial undertaking and other sources of income, emphasizing the strict interpretation of the term "derived from" in the context of tax deductions.