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TMI Blog1995 (5) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... unal was right in holding that the sum of Rs. 3,32,848 representing the interest from London brokers, other interest and miscellaneous receipts should be treated as income derived from shipping business eligible for relief under section 80J of the Income-tax Act, 1961 ? " The relevant facts of the case are as follows : The reference application relates to the assessment year 1972-73. The assessee, South India Shipping Corporation Limited, is a public limited company carrying on shipping business and it is a resident shipping company. In computing the relief under section 80J for the assessment year 1972-73, the Income-tax Officer did not treat as profits derived from the shipping business an income of Rs. 3,32,848 included under the head, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the other hand, learned counsel for the assessee-company, Mr. P. P. S. Janarthana Raja, contended that there is no error of law in the order passed by the Income-tax Appellate Tribunal. In this connection, it is useful to refer to section 80J of the Act which reads as follows : " 80J. Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases.--(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship 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 of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In CIT v. Govinda Choudhury and Sons [1993] 203 ITR 881, the Supreme Court, with reference to the following question whether, on the facts and in the circumstances of the case, the sum of Rs. 2,77,692 awarded to the assessee as interest was rightly held to be a revenue receipt, has observed as follows (at page 884) : " The sum of Rs. 2,77,692 was received by the assessee as interest on the amounts which were determined to be payable by the assessee in respect of certain contracts executed by the assessee and in regard to the payments under which there was a dispute between the two parties. The assessee is a contractor. His business is to enter into contracts. In the course of the execution of these contracts, he has also to face disputes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra J.), upon the facts of the case observed that the sale of replenishment licences was an act wholly unconnected with the business in the goods which were either required to be exported or imported for the purpose of the assessee-company. In the absence of any immediate and direct nexus between the sale of the licences and the assessee's business activity, the assessee is not entitled to the benefit under section 80J of the Act. In a recent Division Bench ruling of this court, in CIT v. Tamil Nadu Dairy Development Corporation Ltd. [1995] 216 ITR 535 (Tax Cases Nos. 66 and 67 of 1982, dated March 23, 1995) to which both of us were members, with reference to short-term deposits made by the Tamil Nadu Dairy Development Corporation out of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipts of the assessee-company should be treated as income derived from the activity of shipping business and should be treated as business income. In the instant case, the assessees, a public limited company, whose principal business is shipping and the aforesaid interest amounts are derived from the foreign business activity of the shipping company and there is a nexus between the shipping business of the assessee-company and accrued interest on the London brokers' business activity. Further, the London brokers of the assessee-company are merely carrying on the shipping business of the assessee-company in a foreign country which is incidental to the principal business of shipping of the assessee-company. Accordingly, the income derived b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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