2019 (10) TMI 1549 - AT - Income Tax

Eligibility for deduction u/s 80-IB - Manufacturing activity - activity of converting raw material into final product - converting poultry mash feed into pellet feed - whether change in the basic component or new or different article came into existence? - HELD THAT - We find the Co-ordinate Bench of this Tribunal considering the order for A.Y. 2010-11 2017 (4) TMI 1612 - ITAT KOLKATA in assessee s own case, wherein, it was held that the business of the assessee is eligible for deduction u/s 80-IB assessee's eligible undertaking itself was carrying out the complete activity i.e. from grinding till the pelletization. The raw materials once consumed could not be reconverted into the same position, Its utility gets changed, The prime raw materials such as, maize, soya oil, rice bran etc. can no more be regarded to be the rice bran, soya oil, maize. Decided against revenue. Addition on account of netting off the interest income - HELD THAT - We find the issue is covered by the consolidated order of this Tribunal in assessee s own case for Assessment Years 2008-09, 2011-12 2012-13 2018 (1) TMI 1709 - ITAT KOLKATA to hold that only net interest income after adjusting the interest expenditure is liable to be excluded while computing the profit eligible for deduction under section 80IB. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and upholding the same, we dismiss the appeal of the Revenue. Disallowance u/s 14A r.w.r. 8D(2) - Assessee argued assessee made investment in group companies which were for strategic business purposes and the said investments did not yield any exempt income during the year and without considering the same, the Assessing Officer disallowed the expenditure u/s 14A r.w.r 8D(2) - HELD THAT - We find that no dividend was earned in the investments made in shares of the group associate companies in all cases but however the said issue is covered in favour of the Revenue by the decision Maxopp Investments Ltd. 2018 (3) TMI 805 - SUPREME COURT The ld. AR submits that the assessee has no objection in remanding the matter to the file of Assessing Officer for his fresh examination in terms of the judgment of Hon ble Supreme Court in the case of Maxopp Investments Ltd. (supra). We deem it proper to remand the matter to the file of Assessing Officer for his verification in the facts and circumstances of the case in terms of judgment of Hon ble Supreme Court in the case of Maxopp Investments Ltd. (supra) and pass orders accordingly. Thus Ground Nos.7 8 raised by the Revenue are allowed for statistical purposes.

Summary

Issues:
1. Deletion of addition made on account of section 80-IB of the Income Tax Act.
2. Deletion of addition made on account of netting off the interest income.
3. Disallowance made under section 14A r.w.r. 8D(2) of the Rules.

Issue 1: Deletion of addition made on account of section 80-IB of the Income Tax Act.
The appeal by the Revenue challenged the CIT(A)'s order deleting the addition made under section 80-IB for the Assessment Year 2013-14. The Tribunal referred to a previous order in the assessee's own case for earlier years, where it was held that the business was eligible for deduction under section 80-IB. The Tribunal upheld the CIT(A)'s order based on the previous decision, stating that the issue and material facts were similar to the previous year. Therefore, the Tribunal dismissed Ground Nos. 1 to 4 raised by the Revenue, upholding the order of the CIT(A) in favor of the assessee.

Issue 2: Deletion of addition made on account of netting off the interest income.
Ground Nos. 5 & 6 raised by the Revenue challenged the CIT(A)'s decision to delete the addition made on account of netting off the interest income. The Tribunal found that the issue was covered by a previous decision in the assessee's own case for Assessment Years 2008-09, 2011-12 & 2012-13. The Tribunal analyzed different cases cited by both parties and concluded that the netting off of interest income against interest expenditure was permissible, following the principle upheld by the Calcutta High Court. Therefore, the Tribunal dismissed Ground Nos. 5 & 6 raised by the Revenue, upholding the CIT(A)'s decision.

Issue 3: Disallowance made under section 14A r.w.r. 8D(2) of the Rules.
Ground Nos. 7 & 8 related to the disallowance made under section 14A r.w.r. 8D(2) of the Rules. The Tribunal considered the arguments presented by both parties regarding investments made in group companies for strategic business purposes. The CIT(A) had deleted the disallowance based on previous judicial authorities and the specific circumstances of the case. However, the Tribunal noted that no dividend was earned on the investments in group associate companies. Citing a decision of the Supreme Court, the Tribunal decided to remand the matter back to the Assessing Officer for further examination in line with the Supreme Court's judgment. As a result, Ground Nos. 7 & 8 raised by the Revenue were allowed for statistical purposes.