2005 (12) TMI 514 - AT - Income Tax

Summary

Issues:
1. Allowance of interest income on fixed deposits for deduction under section 80-IA.
2. Confirmation of allowance of depreciation on fixed assets at Silvassa Unit.

Analysis:

Issue 1: Allowance of interest income on fixed deposits for deduction under section 80-IA
In the first appeal by the Revenue, the main contention was regarding the allowance of interest income on fixed deposits for computing the deduction under section 80-IA of the Income-tax Act, 1961. The Tribunal referred to a previous decision and held that interest income from fixed deposits cannot be considered as derived from an industrial undertaking for the purpose of deduction under section 80-IA. The Tribunal relied on the decision of the Hon'ble Supreme Court and a Co-ordinate Bench decision to support its conclusion. Ultimately, the Tribunal set aside the order of the CIT(A) and restored that of the Assessing Officer, denying the allowance of interest income for deduction under section 80-IA.

Issue 2: Confirmation of allowance of depreciation on fixed assets at Silvassa Unit
In the second appeal by the assessee, the issue revolved around the confirmation of allowance of depreciation amounting to Rs. 85,81,644 in respect of fixed assets installed at the Silvassa Unit. The assessee argued that the depreciation should not be thrust upon them as they had calculated the net income from the Silvassa unit for exemption under section 80-IA without considering the eligible depreciation. The CIT(A) upheld the allowance of depreciation, emphasizing the importance of depreciation in determining true profits and the wear and tear of assets. The Tribunal agreed with the CIT(A) and dismissed the assessee's appeal, stating that depreciation is a necessary charge on profits and cannot be disowned as part of tax planning. Therefore, the allowance of depreciation on fixed assets at the Silvassa Unit was confirmed.

In conclusion, the Tribunal allowed the Revenue's appeal regarding the interest income on fixed deposits and dismissed the assessee's appeal concerning the allowance of depreciation on fixed assets at the Silvassa Unit.