U.B.S. Bedi, J.M. - (1.) THIS is assessee's appeal directed against the order 'passed by the learned CIT(A)-III, Pune, dt. 17th Feb., 1995, relevant to asst. yr. 1991-92, wherein in all five grounds have been raised. Ground Nos. 1 and 2 have not been pressed as per written communication, dt. 27th July, 2001, filed on behalf of the assessee. Therefore, the same are dismissed. Ground Nos. 4 and 5 being general in nature, call for no adjudication. Therefore, the only ground survives is ground No. 3 which reads as under : "The disallowance under Section 80-I of the IT Act, 1961, at Rs. 11,818 only being 20 per cent of Rs. 59,087 i.e., income on interest on deposit with bank--it is submitted with respect that the facts and the issue involved in the Ground No. 3 are duly covered as per ratio decided in case of Dy. CIT v. Jagdish Electronics (P) Ltd. (1998) 66 ITD 542 (Pune) followed in case of Finolex Pipes Ltd. v. Dy. CIT (2000) 68 TTJ (Pune) 422. As such a due relief may please be granted in this behalf."
(2.) In terms of notice of hearing sent to the assessee, the assessee filed written submissions and while seeking leave for dispensing with personal hearing, assessee requested for consideration of the written submissions while disposing of the appeal. The relevant facts are that the AO excluded the amount of interest of Rs. 59,087 on fixed deposits for calculation of deduction under Section 80-I even though the same is assessed under the head 'income from business' which was claimed that this was incorrectly done and additional deduction under Section 80-I of Rs. 11,818 being 20 per cent of the amount of Rs. 59,087 be allowed. It was explained in appeal proceedings that the assessee-firm had availed financial facility of cash credit from bank of India, At the instance of the bank, for availing such financial facility of cash credit, the assessee had to maintain fixed deposits with the bank which had been offered as security for cash credit facility. The interest income of such fixed deposits have been excluded by the AO from the income taken into consideration for deduction under Section 80-I. It was held that this income is considered as 'Income from business' as it is earned and accrued in the ordinary course of business and relates to the business. In the alternative, it was submitted that such income could have been considered as independently earned by the partners, whereby the deduction under Section 80-I could have been availed of by them. It was argued that the said income is considered as income related to the business of the assessee and not as income from other source, and therefore, it is unjust to consider the said income as not related to industrial undertaking, The assessee has also relied on the decisions CIT v. Motilal Hitabhai Spg. & Wvg. Co. Ltd. (1978) 113 ITR 173 (Guj) and Snam Progetti S.P.A. v. Addl. CIT (1981) 132 ITR 70 (Del) to press its claims.
(3.) THE learned CIT(A) while considering and rejecting the plea of the assessee has concluded in para 6.2 of her order as under : "THE appellant's arguments have been considered. It was pointed out to the appellant that the deduction under Section 80-I relates to profits and gains derived from an industrial undertaking. THE word 'derived' is of vital significance and it has been interpreted in the Supreme Court's decision in Cambay Electric Supply Industrial Co. Ltd. v. CIT (1978) 113 ITR 84 (SC) wherein in connection with the computation of deduction allowable under Section 80E, the words used were 'the profits attributable to the priority industry' and it was held that the legislature deliberately used this expression since it had a wider import than the expression 'derived from'. THE latter expression was more' restrictive and confined to the industrial activities itself. In view of this decision of Supreme Court, the application of the decision of Gujarat High Court cited by the appellant's representative is not correct as Gujarat High Court had not taken into consideration the decision of Supreme Court referred above. In the circumstances, the computation of deduction under Section 80-I by excluding the interest on the fixed deposits from the computation of profits of industrial undertaking was correctly made by the AO and the appeal on this point is dismissed.";