2012 (4) TMI 802 - AT - Income Tax

Summary

Issues Involved:
1. Addition u/s 40(a)(ia) and eligibility for deduction u/s 80IC.
2. Treatment of interest income from FDRs as income from other sources.
3. Treatment of excise duty refund for deduction u/s 80IC.
4. Treatment of transport subsidy as income from other sources and eligibility for deduction u/s 80IC.

Summary:

1. Addition u/s 40(a)(ia) and eligibility for deduction u/s 80IC:
The assessee raised additional grounds concerning the partial confirmation of addition by CIT(A) u/s 40(a)(ia) and its eligibility for deduction u/s 80IC. The Tribunal observed that TDS was deducted and paid before the due date of filing the return u/s 139(1). The Tribunal relied on the Hon'ble Calcutta High Court's decision in CIT Vs. Virgin Creations, which held that the amendment by Finance Act, 2010 in section 40(a)(ia) is remedial and curative, thus applicable retrospectively. Consequently, the Tribunal allowed the assessee's claim, stating that the disallowance made by the A.O. and confirmed by CIT(A) is not sustainable.

2. Treatment of interest income from FDRs as income from other sources:
The assessee contested the CIT(A)'s decision to treat interest income from FDRs as income from other sources, thereby denying deduction u/s 80IC. The Tribunal upheld the CIT(A)'s decision, referencing the Hon'ble Supreme Court's ruling in Pandian Chemicals Ltd. Vs. CIT, which clarified that interest income cannot be treated as derived from industrial undertaking or business enterprises. Thus, this ground of appeal was dismissed.

3. Treatment of excise duty refund for deduction u/s 80IC:
The assessee challenged the exclusion of excise duty refund from business income for deduction u/s 80IC. The Tribunal found that the issue was covered in favor of the assessee by the Hon'ble Guwahati High Court's decision in CIT Vs. Meghalaya Steels Ltd., which held that excise duty refund has a direct nexus with the manufacturing activity and is eligible for deduction u/s 80IC. Therefore, this ground of the assessee's appeal was allowed.

4. Treatment of transport subsidy as income from other sources and eligibility for deduction u/s 80IC:
The assessee argued that transport subsidy should be considered as business income eligible for deduction u/s 80IC. However, the Tribunal referred to the Hon'ble Guwahati High Court's decision in Meghalaya Steels Ltd., which held that transport subsidy cannot be said to be derived from the industrial undertaking and is not eligible for deduction u/s 80IC. Consequently, this ground of the assessee's appeal was dismissed.

Conclusion:
The appeal of the assessee was partly allowed, with the Tribunal allowing the claim regarding the addition u/s 40(a)(ia) and excise duty refund, while dismissing the claims concerning interest income from FDRs and transport subsidy.