( 1 ) THE assessment year in question is 1984-85. The following question was referred under Section 256 (1) of the Income Tax Act, 1961 to the High court:"whether on the facts and in the circumstances of the case, the appellate Tribunal was right in holding that the interest on deposits with tamil Nadu Electricity Board should be treated as income derived by the industrial undertaking for the purpose of Section 80-HH?"

( 2 ) THE Court followed its earlier decision in CIT v. Pandian Chemicals ltd. and answered the question in favour of the Department and against the assessee.

( 3 ) THE appellant preferred two special leave petitions; the first from the decision in CIT v. Pandian Chemicals Ltd. being SLP (C) No. . . . CC No. 3017 of 2000 and the second being the present appeal. As far as the first matter was concerned, the special leave petition was dismissed on the ground of delay. The question of law was left open. We have therefore to consider whether, on merits, the decision of the High Court in adopting the reasoning given in Pandian Chemicals was correct.

( 4 ) SECTION 80-HH of the 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 appellants industrial undertaking should be treated as income derived from the industrial undertaking within the meaning of Section 80-HH. 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 80-HH.

( 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 where this Court had clearly stated that the expression "derived from" had a narrower connotation than the expression "attributable to": (SCC pp. 654-55, para 8)"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 80-J. In our view, since 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. "

( 6 ) THE word "derived" has been construed as far back as 1948 by the privy Council in CIT v. Raja Bahadur Kamakhaya Narayan Singh when it said: (ITR p. 328)"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 genealogical tree of the interest land indeed appears in the second degree, but the immediate and effective source is rent, which has suffered the accident of non-payment. And rent is not land within the meaning of the definition. "

( 7 ) THIS definition was approved and reiterated in 1955 by a Constitution bench of this Court in the decision of Bacha F. Guzdar v. CIT, ITR at p. 7. It is clear, therefore, that the words "derived from" in Section 80-HH of the income Tax Act, 1961 must be understood as something which has direct or immediate nexus with the appellants 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