2010 (6) TMI 904 - AT - Income Tax

Summary

Issues involved:
The judgment addresses the following issues:
1. Reduction in claim u/s 10B of I. T. Act for interest received on loans to employees and scrap sales.
2. Disallowance benefit u/s 80IB of the I. T. Act for interests received on loans to employees and duty drawback.
3. Chargeability of interest u/s 234A, 234B & 234C.

Issue 1: Reduction in claim u/s 10B of I. T. Act for interest received on loans to employees and scrap sales:
The appellant contested the reduction in claim u/s 10B, arguing that interest income and scrap sale proceeds should not be excluded from business profit. The Tribunal agreed that no exclusion was required for scrap sale proceeds as per Section 10B, directing the AO to calculate the deduction based on export turnover to total turnover without excluding scrap sale proceeds. However, the Tribunal disagreed with the appellant regarding interest income, stating that a direct nexus between interest received and interest payment was not established. Interest income was deemed assessable as income from other sources, and the AO was correct in excluding it from the profit of the business.

Issue 2: Disallowance benefit u/s 80IB for interests received on loans to employees and duty drawback:
The AO had reduced the deduction claimed u/s 80IB by excluding interest income and duty drawback. The Tribunal noted that the duty drawback issue was settled against the appellant by a previous judgment. Regarding interest income on loans to employees, the Tribunal held that such income must be excluded from business profit for the purpose of granting deduction u/s 80IB, as it does not qualify as part of the profit and gains derived from the eligible business. Therefore, both aspects were decided against the appellant, and the appeal on this ground was rejected.

Issue 3: Chargeability of interest u/s 234A, 234B & 234C:
Both parties agreed that the issue of interest chargeability was consequential, requiring no separate adjudication.

In conclusion, the Tribunal partly allowed the appeal of the assessee concerning the reduction in claim u/s 10B but rejected the appeal regarding the disallowance benefit u/s 80IB. The interest chargeability issue was deemed consequential, and the decision was pronounced on 18th June 2010.