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TMI Blog2013 (9) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... ts dealers constituted the price of the goods sold by the assessee and such interest income is derived from the manufacturing activities carried on by the assessee and are business income eligible for deduct ion u/s 80IC of the Act - Following decision of Commissioner of Income-tax versus Vidyut Corporation [2010 (4) TMI 229 - BOMBAY HIGH COURT] - Decided in favour of assessee. Other income shown by the assessee i.e. interest income received from bank and dividend income are not derived from the profits and gains of the business and not eligible for deduct ion u/s 80IC of the Act. Profit on sale of fixed asset reflected at Rs. 1.20 Lakhs is book entry under the head “other income” and the same is to be excluded as the said profit is to be considered in the computation of income while al lowing depreciation on assets. - Decided against the assessee. The income from processing fee of Rs. 4.45 lakhs and exchange gain of Rs. 0.11 lakhs are also not derived from the profits and business and consequently not eligible for deduct ion u/s 80IC of the Act. - Decided against the assessee. Depreciation - date of put to use - date of commencement of business - Held that:- The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be treated as business expenditure. 5. The brief facts of the case are that assessee was manufacturing tractors and tractor parts. The company started its Unit- I on 31.10.2000 at Plot No. 104- 105, HPSIDC, Baddi and the assessee claimed deduct ion u/s 80IC of the Act for unit No. I for Assessment Year 2001-02 onward. The Unit No. II at EPIP, Phase II, Baddi was started on 30.3.2002 and the deduct ion u/s 80IC was claimed from Assessment Year 2002-03 onward. During the year under consideration the assessee had claimed deduct ion u/s 80IC of the Act on the ground that it had undertaken substantial expansion of its unital ready in existence for the casting unit. The claim of the assessee that it has increased installed capacity from 6000 numbers of tractors to 12000 number of tractors per annum by investing Rs. 10.54 crores towards purchase of plant and machinery during the year under consideration, was not extracted by the Assessing Officer and the assessee was held not to be eligible for deduct ion u/s 80IC of the Act. The said deduct ion u/s 80IC of the Act was granted by the CIT(A) in view of the additions made to the plant and machinery. The Revenue is not in appeal against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction claimed u/s 80IC of the Act on other income of Rs. 180.13 Lakhs. The revenue is in appeal against the depreciation allowed on the plant and machinery installed during the year, which as per the Assessing Officer was not put to use in Financial Year 2006-07. The second issue raised by the Revenue is against the disallowance of interest on the advances made for the purchase of immovable property. 9. The ld. AR for the assessee pointed out that the assessee was engaged in the manufacture of tractors and tractor parts for the past many years and casting units for the manufacturing of tractor parts was set up during the year under consideration. The ld. AR for the assessee pointed out that the Assessing Officer had denied the deduct ion u/s 80IC of the Act which was granted by the ld. CIT(A), against which the Revenue is not in appeal . The ld. AR for the assessee pointed out that deduct ion u/s 80IC of the Act was denied on other income. Our at tent ion was drawn to the list of other income placed at page 20 of the paper book out of which Rs. 161.88 lakhs was the interest on advances by way of sales to the dealer. The ld. AR for the assessee said that the income was intrinsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned by the assessee during the year under consideration is placed at page 20 of the paper book i e. Schedule 13 of the Balance Sheet was as under: - Other Income Rs. (In Lakhs) Interest Banks 5.89 Others 161.88 Dividend 0.07 Profit on sale of fixed assets 1.20 Rent -- Processing fee (Income) 4.45 Exchange gain 0.11 Miscellaneous 6.53 180.13 Tax deducted at source 0.86 12. The assessee had furnished the explanation in respect of each i tem of other income before the Assessing Officer vide letter dated 23/24.11.2009 placed at page 37-38 of the paper book which is as under: i) Interest from others amounting Rs. 1,67,76,847/ - is on account of interest charged to our Dealers on overdue outstanding amounting, which is part of business income of Sales Turnover over which the interest amount is charged thereon. It was also allowed as part of business income in our previous Assessment Year 2006-07. ii) Profit on sale of assets amounting Rs. 109163/ - is a book profit and is not taxable as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the generation of prof i t (operational profits). It is for this reason that Parliament has confined deduct ion of profits derived from eligible business mentioned in sub-sect ion (3) to (11A) constitutes a stand-alone i tem in the matter of computation of profits. Sect ion 80IB and 80IA are a code by themselves as they contain both substantive as well as procedural provisions. Sect ion 80IB provides for the al lowing of deduct ion in respect of profits and gains derived from the eligible business. The connotation of the words derived from is narrower as compared to that of the words attributable to . By using the expression derived from Parliament intended to cover sources not beyond the first degree. 16. The Hon'ble Supreme Court further held as under: Only to the extent of profits derived from such industrial undertaking after the specified date. Apart from eligibility, sub-sect ion (1) purports to restrict the quantum of deduct ion to a specified percentage of the profits. This is the importance of the words derived from an industrial undertaking as against profits attributable to an industrial undertaking. DEPB/Duty drawback are incentives which f low fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court in Liberty India V. CIT (supra) in respect of interest received on the delayed payments of prices of goods held by the assessee held the same to be part of sale price and derived from under taking and eligible for deduct ion u/s 80IB of the Act. The Bombay Hon'ble High Court held as under: Held, that what was received by the assessee from the purchaser was a component of interest towards delayed payment of the price of the goods sold, supplied and delivered by the assessee. There could be no dispute about the position that the price realized by the assessee from the sale of goods manufactured by the industrial undertaking constituted a component of the profits and gains derived from the eligible business. The purchaser, on account of the delay in payment of the sale price also paid interest to the assessee. This formed a component of the sale price and was paid towards the lag which had occurred in the payment of the price of the goods sold by the assessee. On these facts, therefore, the payment of interest on account of the delay in payment of the sale price of the goods supplied the undertaking partook of the same nature and character as the sale consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is to be excluded as the said profit is to be considered in the computation of income while al lowing depreciation on assets. 27. The income from processing fee of Rs. 4.45 lakhs and exchange gain of Rs. 0.11 lakhs are also not derived from the profits and business and consequently not eligible for deduct ion u/s 80IC of the Act . 28. The assessee has failed to furnish the bifurcation of miscellaneous income at Rs. 6.53 lakhs and in the absence of the details, we uphold the order of authorities below in denying the deduct ion u/s 80IC of the Act on the same. The Assessing Officer is directed to recompute the deduct ion u/s 80IC of the Act in line with our directions in paras given above. Ground Nos. 1 and 2 raised by the assessee are partly allowed. 29. Ground No. 1 raised by the Revenue in ITA No. 702/Chd/2010 is against the allowance of depreciation on plant and machinery. The ld. DR for the revenue pointed out that the presumption by the Assessing Officer was of nonuser of the said machinery by the assessee during year under consideration and consequently the denial of depreciation on the said asset. The ld. DR for the revenue placed reliance on Dineshkumar Gul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... butable to the advances made for the purchase of immovable property. The Assessing Officer was of the view that the advance made for the purchase of immovable property was not related to the business and in view of the assessee paying interest on borrowed funds, interest relatable to such advances was to be disallowed in view of the ratio laid down in CIT V. Abhishek Industr ies, {286 ITR 1 (PH)}. The plea of the assessee before the ld. CIT(A) was that the Regd Office of the company was situated at SCO 859, NAC Manimajra, Chandigarh and the said property was purchased by the assessee for the aforesaid purposes. The ld. CIT(A) in view of the facts of the case where the amount of Rs. 46,40,000/ - was utilized for the purpose of purchase of office of the assesseecompany, held the said payment to be for commercial expediency and in view of the rat io laid down by S.A. Builders V. CIT, 288 ITR 1 (S.C) deleted the disallowance of interest of Rs. 5,56,800/ -. The ld. DR for the revenue has not controverted the findings of the ld. CIT(A) in this regard. Consequently we are in agreement with the order of the ld. CIT(A) that where the amount has been invested by the assessee for the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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