High Court Of Madras
Pandian Chemicals Ltd. vs. CIT
Section 80HH
Asst. Year 1979-80
R. Jayasimha Babu & S.R. Singharavelu, JJ.
Tax case No. 272 of 2000
5th November, 2003
Counsel Appeared :
P.P.S. Janardhana Raja, for the Assessee : T. Ravikumar, for the Revenue
JUDGMENT
R. Jayasimha Babu, J. :
The assessment year is 1979-80. The questions referred are, as to whether the Tribunal was right in law in holding that the income from the sale of scrap is not relatable to the industrial activities of the assessee for the purpose of s. 80HH of the IT Act, 1961, and, as to whether it was right in not granting relief under s. 80HH of the Act in respect of the amount received from the insurance company for the loss in transit of the raw materials imported by the assessee.
2. This Court, in a case concerning the same assessee in Pandian Chemicals Ltd. vs. CIT (2002) 176 CTR (Mad)517 : (2002) 254 ITR 562 (Mad), has held, inter alia, that scrap not being a necessary by-product in the process of manufacture, the income from the sale of scrap cannot be regarded as income derived from the industrial undertaking. The Court therein referred to an earlier decision of this Court also concerning this assessee in the case of CIT vs. Pandian Chemicals Ltd. (1998) 147 CTR (Mad) 5 : (1998) 233 ITR 497 (Mad). That decision has since been affirmed in appeal by the Supreme Court in the case of Pandian Chemicals Ltd. vs. CIT (2003) 183 CTR (SC) 99 : (2003) 262 ITR 278 (SC). The first question is, therefore, required to be, and is, answered against the assessee.
As regards the second question, the facts are that the assessee had imported 200 metric tonnes of potassium chloride from Canada. While the goods were in transit, the same were lost. In respect of that loss, the assessee has made a claim against the insurance company and received from the insurer the amount in excess of the value of the goods and the expenditure that had been incurred by the assessee in connection with that transportation, the excess amount being Rs. 41,450. The assessee’s claim for having that amount regarded as an amount derived from the industrial undertaking was rejected uniformly by the authorities, as also by the Tribunal. We see no error in the same.
The source of this receipt was not the industrial undertaking, but the insurer who paid the amount to the assessee on account of the fact that the raw material which it had imported had been covered by insurance. The assessee is not engaged in the business of manufacturing or selling raw materials. The source of this receipt not being the industry, it cannot be said that the income was derived from this industrial undertaking. The Supreme Court in the case of Pandian Chemicals Ltd. (supra), held that the interest derived by the industrial undertaking of the assessee on deposits made with the electricity board for securing supply of electricity for running the industrial undertaking cannot be said to flow directly from the industrial undertaking itself, and was not derived by the undertaking for the purpose of the special deduction under s. 80HH of the Act. The principle of that decision applies to the facts of this case as well.
The second question is also, answered against the assessee and in favour of the Revenue.
[Citation : 270 ITR 448]
