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2007] 292 ITR 175 [2007] 165 TAXMAN 191 (ORI.) HIGH COURT OF ORISSA Tata Sponge Iron Ltd. v. Commissioner of Income-tax B.P. DAS AND I. MAHANTY, JJ. IT APPEAL NO. 33 OF 2004 APRIL 10, 2007 Section 80HH of the Income-tax Act, 1961 - Deductions - Profits and gains from hotels or industrial undertakings, etc., in backward areas - Assessment year 1996-97 - Assessee-company, engaged in business of manufacture and sale of sponge iron, claimed deduction under section 80HH in respect of interest earned from deposit made in bank and inter-corporate deposits and also in respect of interest earned from customers for delayed payment and for bill discounting - Whether since interest earned by assessee from its customers for delayed payment and for bill discounting did bear a direct and immediate nexus with industrial undertaking of assessee, same would be income derived from assessee's industrial undertaking and, as such, entitled to relief under section 80HH - Held, yes - Whether interest earned by assessee from deposit made in bank and inter-corporate deposits, though attributable to business of assessee, was a step removed from assessee's industrial undertaking and, therefore, same would not qualify for relief under section 80HH - Held, yes Section 80HH of the Income-tax Act, 1961 - Deductions - Profits and gains from hotels or industrial undertakings, etc., in backward areas - Assessment year 1996-97 - Assessee-company claimed deduction under section 80HH in respect of interest earned from deposit made in bank and inter-corporate deposits and also in respect of interest earned from customers for delayed payment and for bill discounting - Assessing Officer as well as Tribunal disallowed assessee's claim and rejected its contention that since it had paid interest on borrowed funds and had earned interest, after setting off interest expenditure from interest income, only net amount of interest, if any, may be denied exemption and not total interest income earned - Assessee's case was that interest earned and interest paid on borrowed capital, had been shown separately in profit and loss account only to conform to requirements of Schedule VI, Part II, section 3(v) and…

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