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2013 (1) TMI 459 - AT - Income TaxDeduction u/s 80IB(11) - Gross profit earned on trading of potatoes Held that - As decided in assessee s own case Section 80IB(11) provides for deduction in respect of the cases of Industrial Undertaking deriving profit from business of setting up and operating cold chain facility for agricultural produce. However, in the above provisions, no such deduction is permissible in respect of potato trading. Therefore, no deduction could be allowed on the profits earned on potato trading claimed by the assessee. In favour of revenue Interest on Loan - Loan has been separately taken for own stock of potato, therefore, the interest pertaining to business of trading in potato and business of Cold Storage are required to be separately considered for both activities of business Held that - Following the decision in assessee s own case that If deduction u/s. 80IB(11) is not allowable on potato trading u/s. 80IB, then the interest paid on CC limit for potato trading may be allowed as deduction. We are of the view that the matter requires reconsideration at the level of the A.O. The assessee is able to prove prima facie that bank has granted cash credit limit for trading activities of potatoes, on which the assessee paid interest. If any interest is paid by the assessee in respect of capital borrowed for the purpose of business, the interest paid thereon shall be allowable as deduction. Remand back to AO Deduction u/s 80IB(11) on interest income Held that - Where deduction u/s 80IB(11) has not been allowed in respect of profit on trading of potato. Therefore, there is no question of allowing deduction u/s 80IB(11) on interest income. In favour of revenue Disallowance u/s 40(a)(ia) TDS not deducted on payment made to contractors u/s 194C - payment to each of the contractor was more than Rs.50,000 Held that - The payments were made to different labourers as the CIT(A) has rightly held that no evidence is furnished in support of the contention. Following the decision in case of Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) that because without prejudice to the grounds as mentioned above section 40a(ia) is applicable only in the cases where the amount is payable on the last day of previous year. alternate submission of the assessee that on identical set of facts the issue has been sent back to the file of A.O. Remand back to AO
Issues Involved:
1. Deduction under section 80IB(11) on gross profit from trading of potatoes. 2. Alternate submission regarding interest and rent set off related to potato trading. 3. Deduction under section 80IB(11) on interest received from cultivators. 4. Advances to cultivators and their connection to the main business activity. 5. Alternate submission on net interest received and paid. 6. Addition of Rs.5,73,766/- under section 40a(ia) read with section 194C. 7. Applicability of TDS provisions on the payment of Rs.5,73,766/-. 8. Legal position regarding section 40a(ia) applicability only on amounts payable at the end of the previous year. Detailed Analysis: 1. Deduction under section 80IB(11) on Gross Profit from Trading of Potatoes: The appellant claimed a deduction under section 80IB(11) on the gross profit earned from trading potatoes. The Tribunal referenced a previous decision in the appellant's own case (ITA No.68/Agr/2011 for A.Y. 2007-08) where it was held that no deduction is permissible under section 80IB(11) for potato trading profits. The Tribunal confirmed that the facts of the current case were identical to the previous case and upheld the CIT(A)'s order denying the deduction. 2. Alternate Submission Regarding Interest and Rent Set Off: The appellant argued that interest paid on a loan taken for their own stock of potatoes and rent should be set off from the gross profit from potato trading. The Tribunal again referred to the previous decision in ITA No.68/Agr/2011, noting that the issue requires reconsideration by the AO. The Tribunal directed the AO to re-examine the matter, considering the bank's certification that the cash credit limit was sanctioned for trading activities of potatoes. 3. Deduction under section 80IB(11) on Interest Received from Cultivators: The appellant sought a deduction under section 80IB(11) on interest received from advances given to cultivators. The Tribunal, referencing the discussion on the first ground, confirmed that no deduction under section 80IB(11) could be allowed on interest income since the primary deduction on potato trading was not permissible. Thus, the Tribunal upheld the CIT(A)'s order on this issue. 4. Advances to Cultivators and Their Connection to Main Business Activity: The appellant contended that advances given to cultivators were in the ordinary course of business to ensure that potatoes would be stored in their cold storage, making the interest received part of the main business activity. The Tribunal, consistent with its earlier findings, denied the deduction under section 80IB(11) for interest income derived from advances to cultivators. 5. Alternate Submission on Net Interest Received and Paid: The appellant alternatively argued that the interest paid on a separate loan taken for advances to farmers should be considered, and only the net interest should be subject to deduction under section 80IB(11). The Tribunal found this issue identical to the second ground and directed the AO to reconsider it, following the directions given for the second ground. 6. Addition of Rs.5,73,766/- under Section 40a(ia) Read with Section 194C: The AO disallowed Rs.5,73,766/- under section 40a(ia) as the appellant failed to deduct tax at source on payments made to contractors. The appellant argued that payments were made directly to individual laborers, not contractors, and the vouchers were prepared in the names of intermediaries. The Tribunal, not finding evidence to support the appellant's main contention, referred to a similar case (ITA No.434/Agr/2011) and directed the AO to verify the facts and reconsider the issue in light of the Special Bench's decision. 7. Applicability of TDS Provisions on the Payment of Rs.5,73,766/-: The appellant argued that TDS provisions should not apply as payments were made to individual laborers. The Tribunal found no evidence supporting this claim and upheld the AO's and CIT(A)'s findings. However, it directed the AO to reconsider the matter following the procedure outlined in the similar case mentioned above. 8. Legal Position Regarding Section 40a(ia) Applicability Only on Amounts Payable at the End of the Previous Year: The appellant contended that section 40a(ia) applies only to amounts payable at the end of the previous year and not to amounts already paid. The Tribunal, referencing the Special Bench decision and the similar case (ITA No.434/Agr/2011), directed the AO to verify the facts and decide the issue accordingly. Conclusion: The appeal was partly allowed for statistical purposes, with several issues being sent back to the AO for reconsideration and verification in light of previous Tribunal decisions and relevant legal provisions.
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