JUDGMENT
R.V. Easwar, Vice President
1. The following question has been referred to me Under Section 255(4) of the Income-tax Act:
“Whether in the facts and circumstances of the case and in law, the interest received by the assessee from the buyers on delayed payment and the transport subsidy received from the Government under Restructuring Transport Subsidy Scheme was the income derived from industrial undertaking so as to be eligible for deduction Under Section 80-IA of the Act.?”
2. I have heard the rival submission and considered the facts brought out clearly in the order of the Ld. Members, who differed. So far as the interest received by the assessee on delayed payment is concerned, I hold that this arises directly out of the industrial undertaking and has, therefore, to be held eligible for the deduction Under Section 80-IA. I rely on the following authorities in support of my decision.
1. CIT v. Flender Macneill Gears Ltd., 150 ITR 83 (Cal.)
2. CIT v. Madras Motors Ltd./M.M. Forgings Ltd., 257 ITR 60 (Mad.)
3. CIT v. Govinda Choudhury and Sons, 203 ITR 881 (SC)
4. CIT v. Visakhapatnam Port Trust, 144 ITR 146 (AP)
5. Order of the Third Member, Pune in the case of Kirloskar Electro Dyeing Ltd. v. DCIT 87 ITD 264 (TM).
3. So far as the transport subsidy is concerned, a perusal of the orders of the Ld. Member shows (para 7 of the Ld.AM’s order) that the receipt cannot be considered as income derived from the industrial undertaking. The transport subsidy is given by the Govt. in recoupment of the transport expenditure incurred by the assessee and at best it can only be said that a part of the expenditure has been reimbursed. It cannot be considered as income in the first instance. Certainly, it cannot be considered as income derived from the industrial undertaking. The immediate source of the income is the transport subsidy scheme and not the industrial undertaking. The judgment of the Supreme Court in the case of CIT v. Sterling Foods, 237 ITR 579 and Hindustan Lever Ltd. v. CIT, 239 ITR 297 clearly show that these transport subsidy cannot be stated to be derived from the industrial undertaking since the immediate source thereof is the transport scheme. A similar view has also been taken by the Delhi Bench of the Tribunal in the case of National Thermal Power Corporation Ltd. v. Addl. CIT (91 ITD 101). In the light of the judgments of the Supreme Court cited above. I am unable to give effect to the decision of the Chandigarh Bench of the Tribunal in ITO v. Kiran Enterprises (2005) 92 TTJ 104.
3. In the result, I hold that the interest received by the assessee from buyers on delayed payment is eligible for the deduction Under Section 80-IA, but the transport subsidy received by the assessee is not eligible for the deduction. I answer the question, referred to me accordingly. The matter will now come before the regular Bench for being disposed of in conformity with my decision.