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TMI Blog2001 (7) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... completed under section 143(l) was set aside by CIT under section 263, on the ground whether interest received from fixed deposit could be attributed and the business activities of the assessce and if the investment had been made in the course of and for the purpose of the business. As such, the order was set under sections 263 to reconsider the point for entitlement of deductions under section 80HH for the assessment year 1987-1988 and under section 32AB and 80-I for the assessment years 1988-1989 and 1990-1991. Before the Assessing Officer, it was contended by the assessee that fixed deposit along with interest thereon has been utilised for the purpose of industrial activities of the assessee's company. A certificate from the United Bank of India was also filed which showed that the assessee-company had a fixed deposit with the Bank which had been credited out of mobilising advance received from State Electricity Department against Bank guarantee. The Assessing Officer declined assessee's claim by observeing that deduct" under section WHH/80-I is allowable on the income derived from 'Industrial Undertaking' only and deduction under section 32AB is allowable on the income derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es (P.) Ltd. v. Dy. CIT [1999] 64 TTJ (Pune) 839; (iii) Snam Progetti PA. v. Addl CIT [1981] 132 ITR 70 (Delhi); (iv) Pink Star v. Dy. CIT [2000] 66 TTJ (Mum.) 885; (v) CIT v. Bokaro Steel Ltd [1999] 151 CTR (SC) 276, (vi) CIT v. Tamil Nadu Dairy Development Corpn. Ltd [1995] 216 ITR 535 (Mad.); (vii) CIT v. Calcutta National Bank Ltd. [1959) 37 ITR 171 (SC); (viii) CIT v. K.S. Kannan Kunhi [1973] 87 ITR 395 (SC); (ix) M. Tomba Singh v. ITO [1979] 8 TTJ (Gauhati) 225. 5. On the other hand, the Id. Departmental Representative strongly objected to the arguments put forward by the Id. A.R. He further placed strong reliance on the order of the Assessing Officer and reliance was also placed on the following decsion - . (i) North East Gases (P.) Ltd v. CIT [1996] 220 ITR 372 (Gauhati), (ii) CIT v. Sterling Foods [1999] 237 ITR 579 (SC); (iii) Tuticorin Alkali Chemicals Fertilizers Ltd v. CIT [1997] 227 ITR 172 (SC). 6. We have heard and considered the rival submission perused the material facts on record. We have also perused the various case laws relied upon by both the parties. The main thrust of the issue is that in order to be eligible source of income, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without offering any fixed deposit as a security to the Bank. On the face of it appears that interest receipt and interest payment are two, but actually it is an arrangement only to facilitate the industrial undertaking in procuring Bank guarantee and overdraft facilities against the security of fixed deposit. The liability side of audited balance-sheets of respective years placed in the paper book also. establish the fact that loan from Bank has been availed against the security of Bank deposits. The assets side of the Balance-sheet reflect the deposit with Bank for procuring Bank guarantee required to be furnished to ASEB. In view of the above observations, we are of the considered view that fixed deposit with the Bank was inextricably linked with and is directly incidental to the carrying on of the business of the industrial undertaking by the assessee. The claim of the assessee under sections 80HH, 80-I and 32AB on the profit of undertaking inclusive of interest income was within the frame work of law, insofar as, both receipt and payment of interest are for the purpose of business. Moreover, interest on fixed deposit made by the assessee with the Bank for furnishing Bank guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Bank guarantee and overdraft limit there against. Without obtaining Bank guarantee from Bank, it was not possible to procure Govt. orders and Bank deposit was required to be furnished to be Bank as security for procuring Bank guarantee. Similarly, Bank overdraft was availed on the security of Bank deposit. Thus instant case in distinguishable on facts. Ld. D.R. also relied on Hon'ble Supreme Court decision in the case of Sterling Foods . In this case, profit on sale of import entitlement, entitlement was held to be not derived from industrial undertaking, therefore, not includible in income for computing special deduction under section 80HH. In this case, the nexus was not direct but only incidental. This case is distinguishable from the instant case insofar as no Bank guarantee or overdraft was required to run industrial undertaking. Tuticorin Alkali Chemicals Fertilizers Ltd. 's case : In this case, interest earned on borrowed funds prior to commencement of business was held to be 'income from other sources'. Whereas, in the instant case, the deposit was given out of business receipts in the course of carrying on the business of industrial undertaking and interest was ea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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