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TMI Blog2013 (1) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the circumstances of the case, the Income Tax Officer has been right in law in refusing deduction u/s 80-IB on interest earned on FDRs made for securing bank limits under business compulsions and not as Investments by choice for earning interest income, when,, interest earned on FDRs pledged for getting bank limits/overdrafts have been assessed under the Head business income. (ii) Whether on the facts and in the circumstances of the case interest earned on FDRs pledged as security with P.D.D. Department and Sales Tax Department for securing electric connection and sales tax registration have direct and proximate connection with the business of industrial undertaking thus eligible for deduction under section 80-IB of the Act. (iii) Whether in the facts and circumstances of the case even assuming but not admitting that deduction u/s 80-IB on interest earned on FDRs pledged for overdraft is not allowable, whether the Hon'ble Tribunal has erred in law in not allowing netting of interest earned on pledged FDRs against interest paid in bank overdraft raised for the purpose of business of the appellant as the interest earned and interest debited as expenditure are the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, the assessee is entitled to deduction under Section 80-IB of IT Act on interest earned by him on FDRs kept as guarantee with Electricity Department and the Bank for securing bank limits and the referred thereto is bad in law. The other issue with regard to not allowing the netting of interest is an ancillary issue. 9. Mr. Dutt submits that the case of the assessee throughout has been considered under Section 80HH of I.T. Act, which, in fact, has no relevance to the present controversy (Section 80-IB of I.T. Act), inasmuch as, the phraseology used under Section 80-IB for deduction is different from the phraseology used under Section 80HH of the Act. 10. Learned counsel would contend that under Section 80-IB, income derived from 'business of Industrial Undertaking' is eligible for deduction, whereas under Section 80HH of the Act, the deduction could only be given on income derived from 'Industrial Undertaking'. In Section 80HH, expression 'derived from' is used with a view to give restricted meaning to the income of 'Industrial Undertaking' as against in section 80-IB the expression, 'profits and gains derived from any business of Industrial Undertaking' is there and this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sterling Foods' [1999] have been reiterated and the case of the assessee is also decided following the said ratio. He, in this regard, refers to para 23 of Eltek SGS (P.) Ltd.'s case (supra). 17. Mr. Thakur would contend that in the light of decision handed down in case CIT v. Dr. V.P. Gopinathan [2001], the interest paid by the assessee as interest on overdraft facility cannot be set off against the interest received on the FDRs pledged by him with the Bank so as to avail any deduction under the head 'Income from other sources'. So even that plea is not available to the assessee. 18. Mr. Thakur thus, submits that no question of law much less substantial question of law arises in this case for consideration of this Court on any issue, as such, both the appeals merit dismissal. 19. At the very outset, it will be apposite to refer to the relevant findings recorded by CIT(A) in paras 5, 5.1 & 5.2, which are as under: "5. I have perused the facts and carefully considered the submissions. The appellant has relied on the judgment of Hon'ble Supreme Court in the case of Vellore Electric Corpn. (supra). It may be mentioned here that judgment is not relevant, to the present case as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 80-IB the word used are 'profit and gains derived from any business referred to sub section 3 to 11. It is submitted that by insertion of words, "from any business of undertaking" as against the words 'derived from industrial undertaking' a different meaning has been conveyed the legislature. According to the assessee, introduction of the word, "business" has made material difference and, therefore, the judgment in Pandian case is not applicable. In my considered view, there is not: much difference between the language used in the two sections because the words 'profits and gain' are always used in the context of business only and not otherwise. Section 80HH(2)(ii) and (iii) clearly refer to business of industrial undertaking. Further, section 80HH(6) starts as under: "Where any goods held for the purpose of business of the industrial ....." Thus, the distinction based on the word business is without any force as section 80HH as well as section 80-IB refer to the business of industrial undertaking. The artificial distinction sought to he drawn by the assessee is further rendered meaningless when we carefully read the language used in sub-section (3) and (4) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and (11A)] (such business being hereinafter referred, to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section." 22. Section 80HH of the Act reads as follows: "80HH. Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas- (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. 23. No doubt, both the sections apparently make out some difference in language as 80HH requires that the profits and gains should be derived from the Industrial Undertaking whereas Section 80-IB requires that the profit and gains should be derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s laid much stress on para 21 of Eltek SGS (P.) Ltd. (supra), to lend support, we, for facility of reference reproduce the same. It reads : "21. We are of the opinion that it is not necessary for us to go as far as the Gujarat High Court has done in coming to the conclusion that duty drawback is profit or gain derived from an industrial undertaking. It is sufficient if we stick to the language used in section 80-IB of the Act and come to the conclusion that duty drawback is profit or gain derived from the business of an industrial undertaking. The language used in section 80-IB of the Act is not as the expression "attributable to" referred to by the Supreme Court in Sterling Foods (supra) and Cambay Electric (supra) nor is it as narrow as the expression "derived from". The expression "derived from the business of an industrial undertaking" is somewhere in between." 28. In the aforesaid ease, the Assessee had claimed deduction on custom duty drawback of Rs. 42,92.725/ under section 80-IB of the Act. The claim was declined by the AO. Aggrieved thereof, the Assessee filed appeal before CIT(A). The appeal was allowed by CIT(A) holding that Sterling Foods (supra) was not applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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