2018 (6) TMI 55 - AT - Income Tax

Benefit of deduction u/s 80IC - proof of income derived from business - income earned by way of interest - interest received from Bank on FDRs pledged as security deposit/performance guarantee with the Government Department in lieu of tender of contracts. - Held that - As relying on case of Conventional Fastners vs. CIT, Dehradun 2017 (12) TMI 129 - UTTARAKHAND HIGH COURT as held in the case of assessee held that interest income had nothing to do with the carrying on assessee s business of manufacture and sale of electric meters, same would not be entitled to benefit of deduction under section 80IC - Decided against assessee

Summary

Issues:
- Challenge to disallowance of deduction under section 80IC of the I.T. Act, 1961
- Condonation of delay in filing the appeal
- Interpretation of direct nexus with industrial undertaking for income derived
- Application of previous judgments on similar issues

Analysis:
- The appeal was filed against the Ld. CIT(A)'s order disallowing the deduction under section 80IC of the I.T. Act. The assessee claimed the deduction for interest income earned from FDRs pledged as security deposit/performance guarantee. The A.O. disallowed the deduction stating that the interest income did not directly derive from the manufacturing activities of the assessee. The Ld. CIT(A) upheld the disallowance, emphasizing the need for a direct nexus between the industrial undertaking and the income earned. The appeal challenging the disallowance was dismissed. The delay in filing the appeal was condoned due to the sufficient cause explained by the assessee.

- The assessee contended that the interest income had a direct link to securing orders for its business, thus qualifying for the deduction under section 80IC. However, the Ld. D.R. argued that previous judgments had denied the deduction in earlier years, and the issue was covered against the assessee. The Tribunal and the Hon'ble Uttarakhand High Court had confirmed the denial of deduction, stating that the interest income did not relate to the manufacturing and sale of electric meters, the primary business of the assessee. Despite the assessee's reliance on a Supreme Court decision, the Tribunal held that the interest income did not qualify for the deduction under section 80IC. The appeal of the assessee was dismissed based on the previous judgments and the lack of a direct nexus between the interest income and the industrial undertaking.

- The Tribunal considered the consistent denial of the deduction under section 80IC in previous and subsequent years for similar claims by the assessee. The judgments of the Tribunal and the Hon'ble Uttarakhand High Court confirmed that the interest income from FDRs did not have a direct link to the primary business activities of the assessee, leading to the dismissal of the appeal. Despite the assessee's arguments and reliance on a Supreme Court decision, the Tribunal upheld the denial of the deduction, stating that the interest income did not qualify under section 80IC. The issue was deemed to be covered against the assessee, and no interference was warranted. The appeal of the assessee was consequently dismissed.