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TMI Blog2004 (4) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... d. v. CIT [ 1978 (4) TMI 1 - SUPREME COURT] . Therefore, only those profits and gains are to be exempted under section 10B which have direct and proximate relationship with the activities referable to Export Oriented Unit. Therefore, it cannot be said that income assessable under the head 'Income from Other Sources' can be exempted u/s 10B. Thus, the contention of the Ld. Counsel for the assessee is hereby rejected. Considering the fact that these FDRs were made out of Packing Credit Limit and the fact that the loans were taken against the security of these FDRs in order to maintain the liquidity, we are of the view that such interest income was attributable to the business activity of the assessee and, therefore, assessable as business income. Though the facts of the case indicate that such income was assessable as business income but it cannot be said that such income directly arose from the main activity of export business. Hence such income cannot be said to be derived from 100 per cent Export Undertaking. The explanation of the assessee shows that FDRs were made from Packing Credit Account. If this fact is correct, then interest paid on such borrowings would have direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 3. The explanation of the assessee was as under :- "Company had during the financial year 1996-97 had earned interest income of Rs. 27,02,538. The breakup of which has been submitted with your office vide separate letter of even date. With regard to interest income of Rs. 18,77,171 on FDRs deposited with Bank of Baroda, Sonepat, we wish to submit that this income is part of Business income, because the FDRs were given to bank in order to achieve the deposit target of the branch. This money was withdrawn from our PC/CC account maintained with the branch. Simultaneously, the company took loan against the FDR and utilized the money for its normal business activities. As you may appreciate that our company has substantial loan outstanding with the banks as on 31-3-1997 and company being a biggest customer of Bob, Sonepat branch had to keep harmonious relation with the branch manager and had contributed towards its target achievement by giving FDR deposits, though we had no surplus funds. And in order to keep our liquidity in place, immediately loan against FDR was taken. We are enclosing herewith a certificate from the bank, which clearly states that loan facilities sanctioned to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... litude. The word 'income' has been defined in clause 24 of section 2 which includes not only profits and gains but also various other income like dividend, perquisites, capital gains etc. etc. The business income is separately assessed under a specified head, "profits and gains of business or profession". In various sections under Chapter VI-A, the Legislature has used the words 'profits and gains', which also referred to the business income. Therefore, in view of the scheme of the Act, we are of the view that the expression any profits and gains would not include the income assessable under the head "Income from Other Sources". There is another reason for rejecting the contention of the Ld. Counsel of the assessee. The expression any profits and gains is qualified by the words "derived by an assessee from a 100% Export Oriented Undertaking". The words derived from have not been defined for the purpose of section 10B like section 80HHC and therefore its meaning has to be considered in the restricted sense as interpreted by the Hon'ble Supreme Court in various judgments including Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84. Therefore, only those profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel is that if interest income is held to be assessable as business income then assessee is entitled to exemption under section 10B in respect of such income. In support of this contention, he relied on the judgment of Bombay High Court in the case of CIT v. Punit Commercial Ltd. [2000] 245 ITR 550. Alternatively it has been contended that if it is to be taxed then net interest income should be taxed. He drew our attention to page 25 of the paper book to point out that assessee had paid interest of Rs. 18,26,851 on loans taken against such FDRs and therefore, it was pleaded that the same has to be allowed as set off against such interest income. The ld. DR has relied on the order of the CIT(A). 10. In our view the main contention of the assessee's counsel cannot be accepted. The exemption under section 10B is allowable only in respect of profits and gains derived by the assessee from 100 per cent Export Oriented Unit and not in respect of each and every item of income assessable as business income. The Legislature was well aware of the distinction between the scope of words 'derived from' and 'attributable to'. It had used both the expressions wherever it was considered necessary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome could not be said to be derived from industrial undertaking. 13. The above analysis shows that all business income of an undertaking do not fall within the ambit of profits derived from an undertaking. Therefore, in our opinion, if an income accrues to the assessee directly from the main activity of the undertaking, then only such income can be said to be profits derived from such undertaking. However, where income accrues from an activity which is incidental to main activity then such income would fall within the expression 'attributable to' which is of wide amplitude. For example, if interest income is received on delayed payments from the persons to whom the goods are sold, it would directly relate to the main activity of the undertaking and consequently would fall within the scope of the words 'derived from' but where the interest is received from other transactions which are independent and not connected with the main activity but are incidental to such activity then such interest income would fall within the expression 'attributable to' and not within the expression 'derived from'. 14. In the present case, the fixed deposits were made with the banks to facilitate them t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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