COMMISSIONER OF INCOME TAX Vs. PANDIAN CHEMICALS LIMITED

JUDGEMENT

(1.) THIS reference arises out of an assessment for the assessment year 1979-80, under section 256(1) of the Income-tax Act, 1961, hereinafter referred to as "the Act", and the following questions of law have been referred for our opinion :

(2.) THE assessee is a private limited company engaged in the manufacture and sale of potassium chlorate used in the manufacture of matches. For the assessment year 1979-80, the assessee made a claim of depreciation on factory roads, on the ground that the roads should also be treated as a part of the buildings. THE Income-tax Officer rejected the claim and in the first appeal, the Commissioner of Income-tax (Appeals) allowed the claim of the assessee. THE Appellate Tribunal, on the appeal by the Revenue, following a decision of this court in CIT v. Lucas TVS Ltd. (No. 2) [1977] 110 ITR 346 maintained the order of the Commissioner (Appeals) and as against that part of the order of the Appellate Tribunal, the first question of law has been referred to us.

(3.) THE third question pertains to the interpretation of section 80HH of the Act. THE question relates to the eligibility of the assessee to claim deduction under section 80HH of the Act in relation to the interest on the deposit made with the Tamil Nadu Electricity Board. Mr. C. V. Rajan, learned counsel for the Revenue, submitted that section 80HH uses the expression, "derived from" and in considering the question whether the assessee would be entitled to claim deduction under section 80HH of the Act, it must be only with reference to the profits and gains derived from the industrial undertaking, the assessee would be entitled to the relief. According to learned counsel for the Revenue, the interest income is derived from the deposit and is not derived from the industrial undertaking and, therefore, the assessee is not entitled to claim deduction on interest on the deposit held in Tamil Nadu Electricity Board as the interest cannot be characterised as profits and gains from the industrial undertaking set up in backward areas. Mr. C. V. Rajan, is support of his contention, relied upon the following decisions.