Law:

Section:

I. Section 80HH of the Income-tax Act, 1961 - Deductions - Profits and gains from hotels or industrial undertakings etc., in backward areas - Assessment year 1979-80 - Whether income from sale of scrap not being relatable to industrial activities of assessee-company, could not be allowed for deduction under section 80HH - Held, yes II. Section 80HH of the Income-tax Act, 1961 - Deductions - Profits and gains from hotels or industrial undertakings etc. in backward areas - Assessment year 1979-80 - Assessee had imported raw material which was lost in transist - In respect of said loss, assessee received from insurance company amount in excess of value of goods - Assessee's claim for having that amount regarded as amount derived from industrial undertaking was rejected by authorities below - Whether source of receipt not being industry, it could not be said that income was derived from industrial undertaking for purpose of deduction under section 80HH - Held, yes FACTS-I For the assessment year 1979-80, the assessee-company claimed deduction under section 80HH on income from sale of scrap. The Tribunal disallowed the claim of the assessee on ground that income from sale of scrap was not relatable to the industrial activities of the assessee. On reference : HELD-I This Court in a case concerning the same assessee in Pandian Chemicals Ltd. v. CIT [2002] 254 ITR 562, had held, inter alia, that scrap not being a necessary by product in the process of manufacturer, the income from the sale of scrap could not be regarded as income derived from the industrial undertaking. Therefore, the Tribunal was right in law in holding that the income from the sale of scrap was not relatable to the industrial activities of the assessee for the purpose of section 80HH. FACTS-II The assessee had imported 200 metric tones of potassium chloride from Canada. While the goods were in transit, the same were lost. In respect of that loss, the assessee 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 assessee's claim for…

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