June 2010
Industrial undertaking : Deduction u/s.80IB of Income-tax Act, 1961 : A.Y. 2000-01 : Interest on delayed payment of sale price is part of sale price : It is derived from the industrial undertaking : Is eligible for deduction u/s.80IB.
By K. B. Bhujle | Advocate
New Page 1
Unreported
18 Industrial undertaking : Deduction u/s.80IB of Income-tax
Act, 1961 : A.Y. 2000-01 : Interest on delayed payment of sale price is part of
sale price : It is derived from the industrial undertaking : Is eligible for
deduction u/s.80IB.
[CIT v. Vidyut Corporation (Bom.), ITA(L) No. 2865 of
2009, dated 21-4-2010]
The assessee was engaged in manufacturing electrical fittings
and appliances and was eligible for the deduction u/s.80IB of the Income-tax
Act, 1961. The assessee sells its manufactured products mainly to M/s. Bajaj
Electricals Ltd. Payment is normally made on delivery of goods. In case of delay
the assessee also receives interest for delayed payment. For the A.Y. 2000-01
the Assessing Officer disallowed the claim for deduction u/s.80IB in respect of
interest for delayed payment. The Commissioner and the Tribunal allowed the
assessee’s claim.
On appeal by the Revenue, the Bombay High Court upheld the
decision of the Tribunal and held as under :
“(i) What is received by the assessee from the purchaser is
a component of interest towards delayed payment of the price of the goods
sold, supplied and delivered by the assessee. There can be no dispute about
the position that the price realised by the assessee from the sale of goods
manufactured by the industrial undertaking constitutes a component of the
profits and gains derived from the eligible business. The purchaser, on
account of delay in payment of the sale price also pays to the assessee
interest. This forms a component of the sale price and is paid towards the lag
which has occurred in the payment of the price of the goods sold by the
assessee.
(ii) On these facts, therefore, the payment of interest on
account of the delay in payment of the sale price of the goods supplied by the
undertaking partakes the same nature and character as the sale consideration.
The delayed payment charges consequently satisfy, together with the sale
price, the first degree test which has been laid down by the Supreme Court in
Liberty India v. CIT, 317 ITR 218.”
