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TMI Blog2003 (3) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... e file of the Assessing Officer as per our observations in para 6 of the said order. Following the aforesaid order, we restore this issue to the file of the Assessing Officer and direct him to follow our directions in our aforesaid order and readjudicate upon the issue. 3. Ground No. 3 reads as under: "On the facts and in the circumstances of the case, the ld. CIT(A) has erred in law and on merit in not accepting the valuation of closing stock as done by the assessee and in revaluing the same: At the time of hearing, this ground was not pressed. The same is accordingly dismissed. 4. Ground No.4 reads as under: "Any other ground that the appellant may raise at the time of the hearing of the appeal." Obviously, this ground is general in nature and calls for no comments. 5. Vide letter dated 29-6-2001, the assessee raised the following two additional grounds: "(1) On the facts and in the circumstances of the case and in law and in the absence of any specific mention of the assessing authority in the assessment order charging interest under section 234B no interest could be recovered from the assessee merely by way of demand notice as held by the Hon'ble Supreme Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic mention of the Assessing Authority in the assessment order charging interest under sections 234A and 234B, no interest could be recovered from the assessee merely by way of demand notice." The Hon'ble Supreme Court, vide its judgment in Ranchi Club Ltd.'s case has affirmed the above two judgments of the Hon'ble Patna High Court by stating, "We have heard learned counsel for the appellant. We find no merit in the appeals". The Hon'ble Supreme Court in the case of V.M. Salgaocar & Bros. (P.) Ltd. v. CIT [2000] 243 ITR 383, has held that when a Special Leave Petition is summarily dismissed under Article 136 of the Constitution, such dismissal would not lay down any law, rather it would be deemed that the Supreme Court had simply held that it was not a fit case where Special Leave Petition could be granted. It was further held that the same principle will not apply in a case where a Civil Appeal was dismissed by the Supreme Court holding that the appeal had no merit and when once the Civil appeal was dismissed after hearing the parties holding, that the appeal had no merit, then such order becomes one which attracts article 141 of Constitution of India, which provides that the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend income. The Assessing Officer observed that interest and dividend income are assessed to the income-tax under the head 'other sources' and therefore, cannot be termed as income derived from Profits and Gains of business. Moreover, the wording in section 80-I/80-IA are clear that only incomes 'derived from' an industrial undertaking are eligible to be considered while claiming deduction under section 80-I/80-IA Therefore, it was opined that the deductions under these sections are not available on the incomes discussed above. This view has been confirmed by the CIT(A) in assessee's own case for the assessment year 1990-91. This being the case, the deduction of the different units are calculated excluding interest and dividend income as under: ------------------------------------------------------------------------------- Name of the Unit Interest Dividend Total ------------------------------------------------------------------------------- Dakhane 6,66,366 3,750 6,70,116 Indore 2,950 - 2,950 Bangalore 172 - 172 ------------ 6,73,238 ------------ In view of the above, it was held that no deduction under section 80-I is available which has been claimed only on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as business income allowable for deduction under sections 80HHA and 80-I. As far as the income from dividend is concerned, the order of CIT(A) is upheld: 6. It will be imperative to note that this very issue has been decided against the assessee by the rune Bench comprising of the present Members taking conscious decision that interest received on FDRs kept in order to maintain overdraft facilities cannot be said to be income 'derived from industrial undertaking' and preferred to take a different and contrary view than taken by the Tribunal in the case of Dy. CIT v. Jagdish Electronics (P.) Ltd. [1998] 66 ITD 542 (Pune) and in order to arrive at the conclusion reliance was placed on various Supreme Court and High Courts decisions, in the case of Vardhini Udyog v. Dy. CIT [in IT Appeal No. 411/Pune of 1995, dated 21-8-2001] for assessment year 1991-92. This view has further been followed by this Bench in the case of same assessee for the assessment year 1992-93 in ITA No. 908/PN/1995 date 30-8-2001 (authored by the learned A.M.). Therefore, the learned A.M. was requested vide note sent on 30-8-2001 to reconsider the decision in the proposed order by giving a reference of decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that whenever the Legislature wanted to give a restricted meaning in the manner suggested by the Ld. Solicitor-General, it has used the expression 'derived from', as, for instance, in section 80-J. In our view, since the expression of wider import, namely, 'attributable to' has been used, the Legislature intended to cover receipt from sources other than the actual conduct of the business of generation and distribution of electricity." 9. Similarly, Karnataka High Court in the case of Sterling Foods v. CIT [1984] 150 ITR 292 has discussed the expression 'derived from' and observed that expression 'derived from' has a definite but narrow meaning and it cannot receive a flexible or wider concept. 10. To the same effect, Hon'ble Madras High Court in the case of CIT v. Jameel Leathers & Uppers [2000] 246 ITR 97 has taken the view in favour of the revenue. In the case of Ashok Leyland Ltd. v. CIT [1997] 224 ITR 122 Hon'ble Supreme Court had again reiterated the same view as laid down in the case of Cambay Electric Supply Industrial Co. Ltd. And while upholding the above view, Hon'ble Delhi High Court in the case of CIT v. Cement Distributors [1994] 208 ITR 355 has opined that commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in the case of Pandian Chemicals Ltd. (in which S.L.P. has also been rejected as noted in the earlier part of the order) this item of income could not be held to be derived from industrial undertaking as there is no direct nexus between the income earned and industrial undertaking and moreover, it is found that industrial undertaking is immediate and effective source of the said income. Income can be said to be derived from an activity if the said activity is immediate and effective source of the said income. To my mind, even income cannot be said to be derived from an activity merely by reason of the fact that activity may have to earn the said income is an indirect, incidental or remote manner. Since commercial connections are irrelevant and it is also not sufficient even if such income is assessable as business income, therefore, interest earned from fixed deposits with the Bank which was the direct source of that income cannot be said to have been derived from the industrial undertaking. Therefore, following earlier decision of the Pune Bench in the case of Vardhini Udyog and dated 30-8-2001 in ITA No. 908/PN/95, whereby the Bench comprising of the present members preferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he file of the Assessing Officer following the decision of this Bench in the case of Jagdish Electronics (P.) Ltd. So the matter already stands restored and now an opposite view cannot be taken, when in the same year in the cross objection the matter has been restored back to the file of the Assessing Officer. In the Cross Objection we had followed an earlier order in the assessee's own case relating to assessment year 1990-91 in ITA No. 1160/PN/92. In any case the matter is being restored to the file of the Assessing Officer keeping in view the facts of this particular case and accordingly the ratio laid down in Vardhini Udyog's case which was later on passed will not apply to this case. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 Since there is a difference of opinion between the Members constituting the Bench, therefore, we state and formulate following points of difference for reference to the Hon'ble President, Income-tax Appellate Tribunal for their necessary action: "Whether, action in holding that interest income on FDRs is not eligible for deduction under section 80-IA and for that purpose, gross interest is excludible, is justified Or action in setting as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember on this aspect. 3. The matter will now go before the regular Bench for deciding the appeal in accordance with the opinion of the majority. Per V.B.S. Bedi, J.M.--As there was a difference of opinion between the Accountant Member and the Judicial Member, following question was referred to a Third Member: "Whether, action in holding that interest income on FDRs is not eligible for deduction under section 80-IA and for that purpose, gross interest is excludible, is justified or action in setting aside the issue and restoring it back to the Assessing Officer for determining whether FDRs were for business expediency and to follow the decision in the case of Jagdish Electronics (P.) Ltd. [1998] 66 ITD 542, is justified?" 2. The learned Vice-President, Shri M.K. Chaturvedi, sitting as Third Member by his opinion dated 7-3-2003 has concurred with the view of the Judicial Member that the interest income on FDRs is not eligible for deduction under section 80-IA of the Income-tax Act. In accordance with the majority view, we hold that interest income on FDRs is not eligible for deduction under section 80-IA of the Act. The assessee fails on this ground of appeal and other part o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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