ORDER
O.K. Narayanan, A.M.
1. This appeal is filed by the assessee. The relevant assessment year is 1997-98. The appeal is directed against the order of the CIT(A)-XXXIX, Mumbai, which is dated the 14th March, 2001, and arises out of the assessment completed under Section 143(3) of the IT Act, 1961.
2. The assessee-company is carrying on the business of perfumery at Silvassa. The assessee is an eligible unit to claim 100 per cent deduction of its profit under Section 80-IA for the reason that it is situated in the notified area.
3. In computing its taxable income, the assessee has claimed full deduction of its profit from taxation. The profit of the assessee has been worked out after taking into consideration a sum of Rs. 32,64,044 as part of assessee’s business income. This amount, in fact, represented the interest received by the assessee during the previous year from various fixed deposits made with banks. The AO held that this interest income, therefore, would not come under the head “business income”. He, therefore, excluded the above sum of Rs. 32,64,044 from the computation of business profit and brought the same under the head “income from other sources”. The result is that the assessee was deprived of the benefit under Section 80-IA to the said extent. The first appeal has been dismissed. Therefore, the second appeal before us.
4. This is the only issue raised in this appeal. The ground raised by the assessee is that the lower authorities have erred in treating the said amount in the nature of bank interest as “income from other sources”. It is the contention of the assessee that the interest amount, in fact, formed part of the assessee’s business income and it cannot be treated as “income from other sources”.
5. Shri S.M. Jain, the learned chartered accountant appearing for the assessee, contended that the AO was carried away by the impression that the income what is to be given exemption under Section 80-IA, in fact, related to profits and gains derived from an industrial undertaking, as is found in Section 80HH. The learned chartered accountant submitted that the word of the provisions contained in Section 80-IA, as it stood for the relevant asst. yr. 1997-98, provides for exemption for any profits and gains derived from “any business of an industrial undertaking”. The learned chartered accountant submitted that the provisions of Section 80-IA have been amended subsequently by the Finance Act, 2001, w.e.f. 1st April, 2002, whereby the expression “business of any industrial undertaking” has been changed over to the expression “profits and gains derived by an undertaking”. The learned chartered accountant submitted that there is substantial meaningful difference between the two expressions. As far as the assessee is concerned, it is seen that the income is derived from “business of an industrial undertaking”. The assessee has made bank deposits out of its own business funds. Therefore, the interest income needs to be construed as “income from a business of assessee’s industrial undertaking”. In other words, the learned chartered accountant pointed out that the scope and extent of the provisions contained in Section 80-IA are much wider than those contained in Sections. 80HH and 80-IA amended subsequently.
6. The learned chartered accountant further submitted that the Hon’ble Supreme Court has held in the case of CIT v. Govinda Choudhary and Sons that an income can be assessed as “income from other sources” only when it does not fall under any other heads of income. It is the case of the chartered accountant that in the present case, the reasons indicate the nexus between the deposits made by the assessee and the business carried on by it and, therefore, the interest arising out of the said deposits cannot be dissociated from the business itself.
7. The learned chartered accountant thereafter relied on the decision of Hon’ble Madras High Court in CIT v. South India Shipping Corporation Ltd. , wherein the Court has held that the interest and other receipts from foreign brokers were in the nature of assessee’s business.
8. Another case relied on by the learned chartered accountant is the decision of Hon’ble Bombay High Court in the case of CIT v. Punit Commercial Ltd. . In the said case, the Court was examining the contention raised by an assessee who was a 100 per cent exporter entitled for 100 per cent exemption under Section 80HHC. The Court held that the assessee is a 100 per cent exporter and, therefore, its entire business income was deemed to be profit derived from export of goods. Therefore, the Court held that the interest income would only fall under “business income”. The learned chartered accountant submitted that the above decisions squarely applied to the case brought out by the assessee.
9. He also relied on the decision of Hon’ble Bombay High Court–Nagpur Bench in CIT v. Nagpur Engineering Co. Ltd. .
10. Shri Bharat Bhusan, the learned Departmental Representative appearing for the Revenue, contended that the Hon’ble Supreme Court has decided the issue in Pandian Chemicals Ltd. v. CIT , wherein it is held that the interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking itself and was not profits or gains derived by the undertaking. The learned Departmental Representative submitted that in Sections. 80HH and 80-IA, the profits need be “derived from the industrial undertaking of an assessee” and for the purpose of such deriving, the income must materially have been generated from the activities carried on by the undertaking itself. The learned Departmental Representative further stated that the Supreme Court in the said case has not only considered the question of “profits and gains derived from an industrial undertaking”, but also “profits and gains derived from any business of an industrial undertaking”. As the Supreme Court has considered business of undertaking, as such, the distinction sought to be made by the learned chartered accountant does hot seem to exist.
11. We considered the matter in detail. The Revenue has relied on the decision of the Hon’ble Supreme Court in the case of Pandian Chemicals Ltd: (supra). The learned Departmental Representative has further stated that the Supreme Court has considered therein the question of deriving income from “business of industrial undertaking”. It is true that the expression printed in the headnotes of the decision (supra) reads “not ‘derived from’ business of undertaking”. But if we go through the body of the judgment, the Hon’ble Court has not mentioned the expression “business of undertaking” anywhere in the judgment. The expression used throughout in the judgment is “an industrial undertaking”. The addition of the term “business” found in the headnote of the report is, therefore, either a mistake of editing or a mistake of printing. Therefore, as far as the impugned asst. yr. 1997-98 is concerned, the distinction pointed out by the learned chartered accountant very much exists. It is to be seen that provisions of Section 80-IA have been amended subsequently for the purpose of deleting the expression “business”. This is a point in support of the contention advanced by the learned chartered accountant.
12. Now coming to the merit of the case, we have to appreciate the fact that the assessee is otherwise a 100 per cent exempted unit under the provisions of Section 80-IA. The Hon’ble Bombay High Court has considered exactly a similar case in the context of Section 80HHC in the case of CIT v. Punit Commercial Ltd. (supra). The Court has made therein a distinction between a 100 per cent exempted unit and partially exempted unit. The Court has made it very clear that in the case of a 100 per cent exempted unit, its entire income need to be treated as nothing but its business income. We are of the considered view that the present case is squarely covered by the above decision of the Hon’ble Bombay High Court.
13. Therefore, in the facts and circumstances of the case, we direct the AO to treat the interest on fixed deposits amounting to Rs. 32,64,044 as forming part of assessee’s business income.
14. In the result, this appeal is allowed.