9911796707
TMI Blog2012 (4) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... sment years in question, it had claimed deduction under Section 80 I of the Income Tax Act, 1961 (Act, for short) in respect of its manufacturing activity, which was allowed by the Assessing Officer. While claiming and calculating the said deduction, the assessee had included interest income on short term bank deposits and tank hire charges received from third parties. The Assessing Officer in the assessment order did not disturb the computation and accepted the claim that short term bank deposits and tank hire charges should be included for calculating the deduction under Section 80-I of the Act. 4. The Commissioner of Income Tax, Delhi-IX (Commissioner) issued notices under Section 263 of the Act, dated 27th March, 1998 and 12th March, 1999 in respect of the assessment years 1993-94 and 1994-95 to the assessee, why the two amounts should not be excluded from the deduction claimed under Section 80 I of the Act. After considering the reply and hearing the assessee, the Commissioner has passed two orders dated 31st March, 1998 and 30th March, 1999 modifying the assessment orders in the two years and holding that the two amounts were not entitled to deduction under Section 80 I as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm an essential part of industrial undertaking nor were they in any manner directly related to the industrial activities of the company. The interest income and tank hire charges had no direct and proximate nexus with the activity or the earning of the business profit or gains of the industrial undertaking. 6. With the introduction of Sec. 80I w.e.f. 1.4.81, the legislature has substituted the word „attributable to‟ with the words „derived from‟ which have been construed to have a definite, narrow and restrictive meaning as compared to the word „attributable to‟. For this purpose, industrial undertaking must itself be the source of profits and gains and it would not be sufficient if commercial connection is established between the profit and gains earned and industrial undertaking. The aforesaid view was held by the Hon‟ble Supreme Court in the case of M/s Cambay Electric Supply Indl. Co. Ltd. Vs. CIT, Gujrat-II 113-ITR-84. 7. The assessee has placed reliance on the decision of Supreme Court in the case of M/s Vellore Electric Corp. Ltd. Vs. CIT (1997) 227-ITR-557. This decision interprets Sec. 80I when the term „attributable toR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial undertaking‟ mean that the income has been derived from industrial activity of the undertaking and it does not mean any commercial activity undertaken by the assessee. The words „industrial undertaking‟ have to be construed narrowly and cannot be given a wide meaning. In the instant case, the industrial undertaking of the assessee was involved in the manufacture of urea and ammonia and not in the business of making deposits for interest. Hence, interest earned on deposits cannot be considered to be an income derived from industrial activity as envisaged u/s 80I w.e.f. 1.4.1981. 16. The Ld. counsel has argued that the provisions of the Act should be liberally construed so as to promote economic growth. It has been held by the Delhi High Court in the case of Escorts Ltd. Vs. Union of India 189 ITR 81 that "merely because of provision of Act is harsh .... this is no ground for discarding one of the cardinal rules of interpretation of statue(sic) that if the language of the statute is clear and unambiguous, then resort cannot be bad to the aims and objects or to the minister‟s speech with a view to interpret the provisions of the statue(sick)." 17. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have conducted further inquiries, but the primary and core reasoning and the ground for invoking jurisdiction under Section 263 was that the Assessing Officer had wrongly interpreted the expression "derived from" and the narrow meaning and interpretation given by the Supreme Court was applicable. The reasoning and the grounds given by the Commissioner are correct and as per law. 12. We may reproduce our observations in Income Tax Officer versus D. G. Housing Project Ltd. ITA No. 179/2011 dated 1st March 2012:- "10. Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression „prejudicial to the interest of the Revenue‟ is of wide import and is not confined to merely loss of tax. The term „erroneous‟ means a wrong/incorrect decision deviating from law. This expression postul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. 18. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase „prejudicial to the interest of Revenue‟ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is cause ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
