Judgment : F.M. Ibrahim Kalifulla, J. 1. In these appeals the substantial question of law raised by the revenue is : “Whether in the facts and circumstances of the case, the Tribunal was right in holding that the miscellaneous accounts viz., scrap sales, freight charges, insurance claim, refund from customs department, interest, rectification charges etc., should be treated as income derived out of business for computation of deduction u/s.80HH?" 2. The various miscellaneous income falling under different items, the total sum on this head was Rs.28,16,818/-, but we are only concerned with the following items viz., (a) Interest borrowed on delayed payment of bills for sales of Vacuum Cleaners drawn on M/s.Eureka Forbes limited : Rs.6,57,344/- .(b) Scrap Sales : Rs.16,04,663/- .(c) Transport and Forwarding expenses recovered : Rs.1,51,156/- .(d) Insurance Claim received towards imported components damaged in transit : Rs.70,629/-. .(e) Amount received from Collector of Customs towards excess duty paid and charged to expenditure in respect of import from M/s.Electrolux : 15,753/-. .(f) Rectification charges in respect of Vacuum Cleaner Unit recovered from Leo Tech.: Rs.9,000/- 3. In respect to the income received by way of interest on delayed payment on bills for sales of Vacuum Cleaners, the issue is directly covered by the decision reported in (2006) 286 ITR 201 (Mad) (Commissioner of Income Tax Vs. Indo Matsushita Carbon Co. Ltd.,). While applying Section 80HH of the Income Tax Act, 1961, the test is whether such income was derived by an Industrial Undertaking. In other words, if the earnings of such income had a close nexus to the main activities of the industrial undertaking and not relatable to it, it can be safely brought within the set of expression "derived by industrial undertaking". In that context, a Division Bench of this High Court in the above referred to reported decision held as under in paragraph 5 : “5. It is settled law that there can be no doubt that the interest earned on the belated payment would, however, be directly relatable to the business of the assessee of forgings. In that context, a Division Bench of this High Court in the above referred to reported decision held as under in paragraph 5 : “5. It is settled law that there can be no doubt that the interest earned on the belated payment would, however, be directly relatable to the business of the assessee of forgings. If the purchasers of the forgings did not make the payments for the forgings and then agree to pay the interest on the delayed payments, the said interest would have direct nexus with the business of forgings……..…….The interest being directly relatable only to the amounts receivable by the assessee during the course of its business on account of the sale of forgings, this interest would have to be included as the profits and gains derived from the business of the assessee-vide : CIT V. Madras Motors Ltd./M.M.Forgings Ltd. (2002) 257 (ITR) 60 (Mad).” 4. Therefore when the business of the assessee, in the case on hand, is manufacture of Vacuum Cleaners and the purchasers of such Vacuum Cleaners paid interest on delayed payment of bills for sales, it would squarely fall within the above referred to ratio laid down and consequently the deletion was rightly rejected by the Tribunal. 5. As far as the scrap sales are concerned, on behalf of the appellant reliance was placed upon (2004) 270 ITR 448 (Pandian Chemicals Ltd., Vs. Commissioner of Income Tax). The learned standing counsel for the Income Tax Department contended that the sales of scrap was not relatable to the industrial activities of the assessee for the purpose of Section 80HH of the Income Tax Act and therefore the said item of income should be deleted. 6. Mr. R. Venkatanarayanan, learned counsel appearing for the assessee however contended that the sale of scraps had every nexus to the manufacturing activities of the assessee and therefore the rejection permitted under Section 80HH was justified. 7. The learned Standing Counsel for the Department relied upon the decision reported in (2004) 270 ITR 448 (Pandian Chemicals Ltd., Vs. Commissioner of Income Tax) to contend that the scraps sold not being a by-product in the process of manufacturing, the income from the sales on scarp cannot be regarded as income derived from industrial undertakings. 8. 7. The learned Standing Counsel for the Department relied upon the decision reported in (2004) 270 ITR 448 (Pandian Chemicals Ltd., Vs. Commissioner of Income Tax) to contend that the scraps sold not being a by-product in the process of manufacturing, the income from the sales on scarp cannot be regarded as income derived from industrial undertakings. 8. When we consider the respective submissions, we find that if the contention of the learned counsel for the assessee were to be accepted, there should be materials to show that such scrap sold by it were the by-products in the process of its manufacturing activity. If really it is a by-product in the process of manufacture, such scrap sold would have definitely suffered excise duty. Therefore, in the interest of justice, we are of the view that the assessee can be permitted to place before the Tribunal such materials in support of its stand that the scrap sold by it were the by-products of its main manufacturing activities of Vacuum Cleaners and that it had suffered Excise Duty in the course of its sale. For that purpose, while setting aside that part of the income allowed under Section 80HH to the tune of Rs.16,04,663/-, we direct the Tribunal to hold an enquiry afresh permitting the assessee to produce such materials in support of its stand and pass orders based on the evidence that may be placed. It is also open to the appellant to let in rebuttable evidence in support of its stand. 9. As far as the Transport and Forwarding expenses are concerned, it is quite common that such expenses incurred by way of transporting and forwarding charges are recovered from the dealers of the manufacturer. Therefore, such expenses having been incurred as part of its business activities, the manufacture and sale of Vacuum Cleaners, it can be safely held that the said expenses recovered from the dealers were incurred in the process of manufacture and consequently would be squarely covered by the provisions contained under Section 80 HH of the Act. We are therefore convinced that the deduction allowed by the Tribunal on that score cannot be found fault with. 10. As far as the insurance claim received towards damages of imported components in transit is concerned, the same is also covered by the Division Bench decision of this Court reported in (2004) 270 ITR 448 (Pandian Chemicals Ltd., Vs. We are therefore convinced that the deduction allowed by the Tribunal on that score cannot be found fault with. 10. As far as the insurance claim received towards damages of imported components in transit is concerned, the same is also covered by the Division Bench decision of this Court reported in (2004) 270 ITR 448 (Pandian Chemicals Ltd., Vs. Commissioner of Income Tax), the Division Bench has held as under in Pg.450 : “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. (2003) 262 ITR 278, 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 Section 80HH of the Act. The principle of that decision applies to the facts of this case as well.” In the light of the above said categorical ruling of this Court, the deduction allowed on that head by the Tribunal cannot be allowed and to that extent the order of the Tribunal is set aside. .11. As far as the item of income viz., amount received from Collector of customs towards excess duty paid and charged to expenditure in respect of import from M/s.Electrolux is concerned, the same is covered by the decision reported in (2003) 261 ITR 737 (Commissioner of Income Tax Vs. Viswanathan and Co.). Here again, the Division Bench dealt with the income which was the duty drawback which was received by the assessee by way of cash concession drawback and import entitlement which was received under the scheme framed by the Government of India. Viswanathan and Co.). Here again, the Division Bench dealt with the income which was the duty drawback which was received by the assessee by way of cash concession drawback and import entitlement which was received under the scheme framed by the Government of India. The Division Bench dealt with the said claim and held that considering the import of Section 80HHC and held as under at page 740: .“In the present case, we are not concerned with Section 80HHC, but with Section 80HH. Learned counsel submits that that should not make any difference as the words employed in the two sections are the same, viz., “derived from”. He also invited our attention to the decision of the apex court in the case of Goodyear India Ltd. Vs. State of Haryana (1991) 188 ITR 402. That decision is an authority for only that which it actually decided, but not for what logically appeared to follow therefrom. The circular issued by the Central Board of Direct Taxes, relied upon by the assessee, does not constitute any estoppel nor does it prevent the Revenue from contending that the scope of the term “derived from” in section 80HH is narrower than the term “attributable to” and that the benefits accruing to the assessee under the schemes formulated by the Government to reward the location of the industry in a backward area or for having effected exports are benefits which accrued to the assessee under the relevant schemes of the Government, which constitute the immediate source for those benefits and, therefore, such benefits are not to be regarded as having been derived from the industrial undertaking.” 12. Here again in the case on hand, we are concerned with the application of Section 80HH vis-a-vis the deduction claimed under the head receipt of excise duty paid by the assessee. Having regard to the law laid down in the above referred to decisions and following the same we hold that the deduction allowed under the said head is not permissible and to that extent the order of the Tribunal is set aside. .13. Having regard to the law laid down in the above referred to decisions and following the same we hold that the deduction allowed under the said head is not permissible and to that extent the order of the Tribunal is set aside. .13. As far as the rectification charges in respect of Vacuum Cleaner units recovered from M/s.Leo Tech is concerned, we are of the view that the said charges was mostly connected with the activities of the assessee viz., the manufacturing of Vacuum Cleaners and consequently the income earned by way of rectification charges in respect of Vacuum Cleaner units recovered from its purchasers is covered by the expression "Income derived from industrial undertakings". Consequently, the deduction permitted by the Tribunal cannot be faulted. 14. In the result, while we uphold the order of the Tribunal in so far as they relate to (a) Interest borrowed on delayed payment of bills, (b) Transport and Forwarding expenses and (c) Rectification charges, we set aside the order of the Tribunal in so far as it relates to (i) Scrap sales, (ii) Insurance claim and (iii) Amount received from Collector of customs towards excess duty. In so far as the income earned from scrap sales alone is concerned, while setting aside the order of the Tribunal, the matter is remitted back to the Tribunal for deciding the said question afresh after permitting the assessee and the Department to let in necessary evidence in support of their respective stand. In the result the appeals stand partly allowed.