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Recomputation of deduction under section 80-IB of the Income-tax Act, 1961. Analysis: The appeal pertains to the assessment year 2003-04 against the order passed under section 143(3) of the Income-tax Act, 1961. The primary issue raised is the recomputation of deduction under section 80-IB of the Act. The dispute revolves around the exclusion of interest, royalty, and lease rent from the profits eligible for deduction under section 80-IB. While the grounds of appeal mentioned disallowance on account of insurance, it was clarified that the actual dispute is related to the exclusion of interest, royalty, and lease rent. The assessee argued for the netting of interest to be excluded from the profits, citing a previous Tribunal order. The Revenue relied on a Supreme Court judgment to support the Commissioner of Income-tax (Appeals) decision. The Tribunal considered the claim of the assessee regarding the exclusion of interest income while computing the deduction under section 80-IB. Referring to a previous case of the same assessee, the Tribunal acknowledged the nexus between interest earned and interest expended. It was established that if a connection exists between the two, netting-off of interest income against interest expenditure should be allowed. The Tribunal remitted the matter back to the Assessing Officer for verification of this nexus and directed to exclude only the balance net interest income from the profits eligible for deduction under section 80-IB. Following the precedent set in the earlier assessment year, the Tribunal remitted the issue back to the Assessing Officer to recompute the deduction under section 80-IB in accordance with the directions provided. Additionally, the Tribunal confirmed that receipts from royalty and lease rent, akin to interest, should also be excluded from the profits eligible for deduction under section 80-IB. Consequently, the grounds of appeal raised by the assessee were partly allowed, leading to a partial allowance of the appeal. In conclusion, the Tribunal partially allowed the appeal of the assessee concerning the recomputation of deduction under section 80-IB for the assessment year 2003-04. The decision was pronounced in open court on August 10, 2010.
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