1. By this petition, the petitioner mentions that there is a rectifiable error in the order of the Tribunal dated 9.10.2001 in IA No. 378/Hyd/97 for the assessment year 1993-94 (81 ITD 106). This is the second petition filed for rectification of the said order. The first petition, viz., Misc. Petn. No. 60/Hyd/02, has been rejected by my order dated 4.9.2002.
2. It is stated in the present petition that the view taken by the Tribunal holding that the assessee is entitled for exemption in respect of certain interest incomes is erroneous. The interest incomes in question are said to be the following-Excise & Customs Department Rs. 6,484(b) Interest on deposit with APSEB Rs. 3,190 It is mentioned that the SLP filed by the assessee against the decision of the Hon'ble Madras High Court in the case of Pandian Chemicals holding that the assessee is not eligible for exemption in respect of interest on deposit with State Electricity Board, has been dismissed by the APEX Court, vide order dated 12.01.2001 in SLP (Civil) No. 8014 of 2000, reported in 248 ITR 243 (Statutes). It is stated that the Tribunal considered this decision of the Madras High Court, but did not follow it, and now that the SLP filed against the said decision has been dismissed, there is an rectifiable error in the order of the Tribunal, as the law has become final.
3. When the matter was posted for hearing on 6.6.2003, nobody was present on behalf of the assessee. There was not even an adjournment petition. So, the notice was sent through Regd. Post and the case was posted for hearing on 20.6.2003. Still no body was present on behalf of the assessee on 20.6.2003. There was no even an adjournment petition.
In the circumstances, I proceed to dispose of the petition ex-parte -qua the assessee- after hearing the learned Departmental Representative.
4. The learned Departmental Representative reiterated the contentions of the petition, which have been stated hereinabove, and pleaded for rectification of the order dated 9.10.2001.
5. I find that the present petition requires to be allowed. As already mentioned, the first petition has been rejected by my order dated 4.9.2002 in Misc. Petn. No. 60/Hyd/02. However, at that point of time, I did not have the benefit of the decision of the Apex Court in Pandian Chemicals Ltd. (2003)--129 Taxman 539, I find that the Apex Court has decided the issue in favour of the Revenue, vide its judgment dated 24th April, 2003 in Civil Appeal No. 3220 of 2000. In that decision, the Hon'ble Supreme Court observed as under- "4. Section 80HH of Income-tax Act grants deduction in respect of profits and gains "derived from" an industrial undertaking. The contention of the appellant before us is that interest earned on the deposit made with the Electricity Board for the supply of electricity to the appellant's industrial undertaking should be treated as income derived from the industrial undertaking within the meaning of Section 80HH. It is submitted that without the supply of electricity the industrial undertaking could not run and since electricity was an essential requirement of the industrial undertaking, the industrial undertaking could not survive without it. It is further pointed out that for the purpose of getting this essential input, the statutory requirement was that the deposit must be made as a precondition for the supply of electricity.
Consequently, according to the appellant, the interest on the deposit should be treated as income derived from the industrial undertaking within the meaning of Section 80HH. 5. The High Court rejected the submission of the appellant by relying upon the decision of this Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT (1978) - 113 ITR 84, where this court had clearly stated that the expression "derived from" had a narrower connotation than he expression "attributable to".
".....In this connection, it may be pointed out that whenever the Legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General, it has used the expression 'derived from', as, for instance in Section 80J. In our view, sine the expression of wider import, namely, 'attributable to', has been used, the Legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity." (p.93) 6. The word "derived" has been construed as far back in 1948 by the Privy Council in CIT v. Raja Bahadur Kamakhaya Narayan Singh (1948) 16 ITR 325 when it said: "The word 'derived' is not a term of art. Its use in the definition indeed demands an enquiry into the genealogy of the product. But the enquiry should stop as soon as the effective source is discovered.
In the geneological tree of the interest lend indeed appears in the second degree, but the immediate and affective source is rent, which has suffered the accident of non-payment. And rent is not land within the meaning of the definition." (p.328).
This definition was approved and reiterated in 1955 by a Constitution Bench in this Court in the decision of Mrs. Bacha F. Guzdar v. CIT (1955) 27 ITR 1. It is clear, therefore, that the word 'derived from' is Section 80HH of the Income-tax Act, 1961 must be understood as something which has direct or immediate nexus with the appellant's industrial undertaking. Although electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking. The derivation of profits on the deposit made with the Electricity Board cannot be said to flow directly from the industrial undertaking itself." 7. In the light of the above remarks of the Apex Court I find that there is a rectifiable error in my order dated 9.10.2001. I accordingly amend it and hold that the interest in question, i.e. interest on deposit towards bank guarantee money in favour of Central Excise & Customs Department of Rs. 6,484; and interest on deposit with APSEB of Rs. 3,190, aggregating to Rs. 9,674, are derived from the industrial undertaking, and as such, are not eligible for the benefit of exemption under Section 10B of the Income-tax Act. Consequently, orders of the Revenue authorities impugned in ITA No. 378/Hyd/97 are upheld, and the appeal of the assessee is dismissed.
8. In the result, Miscellaneous Petition is allowed and the order dated 9.10.2001 is rectified.