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TMI Blog1996 (2) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... me was not allowed by the Assessing Officer who brought to tax the amount as income under the head ' other sources '. In the first appeal, the CIT (Appeals) held that interest on the bank deposits was assessable as income from business under section 28(1) of the Income-tax Act, in view of the fact that the interest was received on the deposits made with the money received on export of goods. In that view, the first appellate authority followed the decision of the Bombay Bench of the Tribunal in the case of ITO v. Paramount Premises (P.) Ltd. [1984] 9 ITD 263. The Department is in appeal before us challenging the finding that the interest income is assessable as income from business. 4. On behalf of Revenue, Shri O.P. Sachan, the Departmental Representative submitted that the receipt of the interest had nothing to do with the assessee's business and that the direct source of the income was the deposit in the bank and so the same was assessable as income under the head ' other sources '. The learned Departmental Representative submitted that the CIT (Appeals) was not justified in holding that the interest was assessable as business income merely because the surplus funds available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of the amount as a business loss was not admitted by the Assessing Officer on the view that the assessee had not done any business in sea food and that the assessee had purchased goods at the same price as the export price, and there was no need to incur any expenditure by way of commission on the purchases. The CIT (Appeals) noticed that Memorandum and Articles of Association authorised the carrying on of business in sea food and that during the relevant accounting period, the assessee had purchased sea food from various parties paying commission and sold the goods to parties outside India. It was also noticed that the loss actually represented the commission paid to various parties from whom purchases were made, as the sales were on the same price as the purchase price without adding further cost. The CIT (Appeals) held that the assessee was entitled to adjust the loss in this business against other income of the year. Before us, the learned Departmental Representative submitted that the assessee had no processing unit and as per the accounts, the assessee had also not accrued any profit or loss when the goods were sold at the same price, and so there was no need for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest on bank deposits would not qualify as profits and gains derived from the industrial undertaking. Relying on the decision of the Calcutta High Court in the case of Indian Aluminium Co. Ltd. v. CIT [1980] 122 ITR 660, the CIT (Appeals) held that the interest on the bank deposits would not be entitled to the exemption under section 10A of the Income-tax Act. Before us, Shri Bhaskar, the assessee's representative submitted that the CIT (Appeals) was not justified in upholding the denial of exemption under section 10A on the interest income earned in the Kandla Unit when he himself had held that it formed part of the business income. The learned counsel contended that in view of the decision in the case of Paramount Premises (P.) Ltd. interest on bank deposits was not only assessable as business income but it should also be considered as income derived from the industrial undertaking, in the free trade zone entitled to all benefits available to business income. The Departmental Representative strongly supported the decision of the CIT (Appeals) and contended that in view of the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd v. CIT [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Calcutta High Court in Indian Aluminium Co. Ltd.'s case which the CIT (Appeals) has referred, in support the view that ' derived from ' has a restrictive meaning compared to ' attributable to '. In the above circumstances, we hold that the assessee is not entitled to the exemption under section 10A in respect of the interest income on the bank deposits. 10. Assessment year : 1984-85. For this year, the assessee is in appeal on two items (1) under section 10A on the interest income and (2) assessability of income from Kandla Unit. 11. As regards the first ground in regard to the exemption under section 10A, it has been earlier held in respect of the assessment year 1983-84 that the interest on bank deposits does not qualify as income derived from an industrial undertaking in free trade zone, and so the assessee is not entitled to the exemption under section 10A. For this assessment year also, we hold that the assessee is not entitled to the deduction under section 10A on the interest income. 12. In the next ground, the assessee contends that the income arising from the Kandla Unit should not be assessed in its hands. The claim is that the income should not be taxed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een accepted as could be seen from the assessment of the income of the subsequent year in the hands of the holding company. The learned Departmental Representative strongly supported the order of the first appellate authority and made an earnest plea for dismissing the assessee's appeal on this ground. 14. The assessee-company had an industrial undertaking in the free trade zone at Kandla for the manufacture of cosmetics and a unit at Kodaikanal for manufacturing thermometers. The assessee's claim is for assessing the income from these two units in the hands of M/s. Ponds (India) Ltd., the holding company. Under the agreement dated 10-12-1983, the assessee agreed to transfer and assign to the holding company, the undertakings and business of the Kandla and Kodaikanal units as a going concern with effect from the opening of the business on the 2nd January, 1983. All the total assets, stock-in-trade, etc., were transferred to the holding company, for consideration to be paid partly in cash and partly in instalments to the agreed upon from time to time, but not later than 31-12-1983. In the assessee's profit and loss account for the period ending on 1-1-1984 (which is the previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso paid on that basis. Evidently, at least till 15-9-1983 the business was carried on by the assessee only. Later on 15-12-1983 the assessee filed a nil estimate of advance tax in Form No. 29. As rightly observed by the CIT (Appeals), the business carried on at the Kandla and the Kodaikanal units required the use of certain licenses granted by various statutory authorities. These licenses also formed part of the items transferred to the holding company. But during the previous year, the licenses used by the assessee only for the purpose of carrying on the business in these two units. We have already seen that the legal ownership was transferred to the holding company only on 29-12-1983, with the execution of the transfer deed. It is, therefore, evident that apart from continuing to be the legal owner of the business till 29-12-1983, the business was also carried on by the assessee only. Hence the income was rightly assessed to tax in the hands of the assessee-company. 16. In this context reference may be made to the provisions of section 170 of the Income-tax Act relating to succession to business. It is provided in section 170(1) that where a person carrying on any business or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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