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TMI Blog2013 (10) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... st income as well as interest expenditure which is connected with the same and rework the deduction u/s 80IA as may be necessary. It goes to show that to the extent the assessee is eligible to establish the nexus of interest expenditure with interest income by showing that the interest expenditure was incurred for earning interest income, netting has to be allowed and only such net interest income has to be excluded from business profits for the purpose of computation of deduction allowable u/s 80IA - Revenue could not bring on record any contrary facts to the above observation – Decided against the Revenue. Disallowance u/s 40(a)(ia) of the Income Tax Act - Rebate given is in the nature of discount or interest – Held that:- Entire sales of the Assessee is to GUVNL and the payments received by the Assessee from it are towards sales from the customer. Nothing has been brought on record by the Revenue to demonstrate that the rebate given is not in the nature of discount but is in the nature of interest - Rebate is in the nature of discount no TDS u/s 194A is deductible on the same, as has been held by the Commissioner(A) – Decided against the Revenue. - I.T. A. No. 1031/AHD/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the earlier year and therefore the disallowance was rightly made by the A.O. 3. The Ld.CIT(A) has erred in law and on facts in giving relief out of the addition of Rs. 47,62,75,000/- made by the A.O. on account of disallowance of deduction u/s.801A of the Act by directing the A.O. to exclude only the net interest from the eligible income instead of the gross interest income excluded by the A.O. 3.1. In doing so, the Ld.CIT(A) has erred in law and on facts in not appreciating that the netting of interest is not an allowable procedure as the loans had been taken for the purpose of business while the interest income had been earned on investments of the assessee. 4. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 10,64,06,649/- made by the A.O. on account of disallowance u/s.40(a)(ia) of the Act, without properly appreciating the facts of the case and the material brought on record by the Assessing Officer. 4.1 In doing so, the Ld. CIT(A) has erred in law and on facts in not appreciating that if the delayed payment charges are treated as interest in nature, by the same corollary, the rebate for early payment payment should also be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 30/03/2012. He also placed on records the aforesaid order. He therefore urged that the matter be decided in favour of assessee. 6. We have heard the rival submissions and perused the material on record. It is an admitted position by both the parties before us that the facts in the present ground are identical to that of AY 2005-06. In AY 2005-06, we find that the issue has been decided in favour of Assessee by the co-ordinate Bench of Tribunal in ITA NO 2839/ahd/2008 order dated 30.3.2012 by holding as under: 2.3.4 We have considered the rival submission, perused the material on record and have gone through the orders of authorities below. We find that it is noted by the Ld. CIT(A) in his order that even as per final decision taken in the month of March 2007, the amount of DPC charges could be calculated up to March 2005 at Rs.226.39 crores out of which waiver is allowed as per the agreement to the extent of Rs.90.56 crores and hence, the net receivable amount of DPC charge up to 31.03.2005 was only Rs.135.83 crores and the amount already accounted for as income up to March 2004 was more than this amount i.e. Rs.217.83 crores and, therefore, there is no further amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order dated 30.3.2012 had restored the issue to the file of AO with necessary directions. He therefore submitted that since the fact in the present ground are identical to that of AY 2005-06, similar directions may be given in the present case also. The Ld.D.R. did not seriously object to the submission of the AR. 11. We have heard the rival submissions and perused the material on record. We find that on identical issue, the Co-ordinate Bench of Tribunal for AY 2005-06 vide order dated 30.3.2012 has decided the issue as under: 2.4.4 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that it was the submission by the assessee before the A.O. that in the year ended 31.03.2003, the assessee company had spent major amount and the benefit of which was expected to be derived for next five years and, therefore, in the books of account, the same expenditure was debited to miscellaneous expenses and l/5th of the same i.e. Rs.116.64 lacs is written off every year. There is nothing on record in this regard as to whether in the assessment year 2003-04, full deduction was allowed or only l/5th deduction w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of K.S.Subbiah Pillai Co 260 ITR 304, excluded the total other income of Rs 47,62,75,000 for the purpose of deduction u/s 80IA. 14. Aggrieved by the order of AO, Assessee carried the matter before CIT(A). CIT(A) following the order of his predecessor and of Tribunal in Assessee's own case decided in favour of Assessee by holding as under: 8.4 I have considered the facts and submissions of the Id. A.R carefully. It is noticed that the facts of the case are discussed in detail in the appellate order for the A.Ys 2003-04 and 2004-05. The facts of the case under reference are similar to that of earlier years. My Ld. Predecessor while deciding the issue in favour of the appellant in A.Y 2005-06 held as under. "10.2 I have considered the observation of the Assessing Officer in the assessment order and the submissions of the appellant. Insofar as the deduction with reference to interest is concerned, the following extract from the appellate order for assessment year 2004-05 dated 26-2-2007 in the case of the appellant is directly on the issue. The Assessing Officer, therefore, is directed to follow the same: "4. Ground Nos. 4.1. and 4.2 are similar to ground Nos. 3.1 3.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction u/s 80IA and not the net interest. The Id. A.R on the other hand, relied on the order of the Delhi High court in the case of CIT v. Shri Ram Honda Power Equip 289 ITR 475. We have carefully considered the rival submissions and perused the material on record. In our opinion, the finding of the CIT(A) is duly covered by the decision of the Delhi High court in the case of CIT v. Shri Ram Honda Power Equip 289 ITR 475. In view of the decision of the Delhi High court, we are of the view no interference is called for in the order of the CIT(A) and accordingly confirm the order of the CIT(A) directing the AO to exclude only the net interest from the income while computing the deduction u/s 801A of the Act. thus, this ground stands dismissed." 8.6 In view of the above, so far as exclusion of the amount of interest from the income eligible for deduction u/s 80IA is concerned, the A.O is directed to exclude only net interest from the eligible income keeping in view the findings of Hon'ble ITAT in the appellants case as referred to above and the decision of Hon'ble Delhi High court in the case of CIT v/s Shri Ram Honda Power Equipments 289 ITR 475. 8.7 As regards the misce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d paid Rs 10,64,06,649/- to GUVNL as "rebate" for early payment charges for power supplied to it. He was of the view that the rebate was in the nature of interest and therefore the Assessee should have deducted TDS u/s 194A. Since the Assessee had not deducted TDS u/s 194A, the entire expenditure was disallowed u/s 40(a)(ia). Aggrieved by the order of AO, Assessee carried the matter before CIT(A). CIT(A) decided the issue in favour of Assessee by holding as under: 9.5 I have considered the facts and submission of the Ld. A.R carefully. The rebate allowed by the appellant to its customers for early payment cannot be equated with interest as defined in section 2(28A) of the Act. Even it is a common knowledge that for earning an interest a deposit is required to be made with the concerned person and that deposit is called principal amount which is considered for earning the interest. Here, in this case there is no deposit of principal by the recipient of discount with the appellant therefore, there is no question of allowing interest the payments under reference made by the appellant is discount only and the same cannot be termed as interest as wrongly held by the A.O. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in payment of operational expenses over the amount booked in the books of accounts. With respect to sale of scrap, it was submitted that it was earned on the sale of scrap generated from operations. The submission of the Assessee was not found acceptable to the AO as he was of the view that the aforesaid incomes cannot be considered to be "derived from" eligible undertaking and therefore cannot be considered to be income derived from such undertaking. He accordingly excluded the foreign exchange fluctuation and income from sale of scrap while computing the eligible profits for deduction u/s 80IA. The matter was carried before CIT(A). CIT(A) confirmed the action of AO by relying on the decision of Apex Court in the case of Sterling foods vs CIT 237 ITR 579 and Hindustan Lever Ltd vs CIT 239 ITR 297. Aggrieved by the order of CIT(A), Assessee is now in appeal before us. 27. Before us, the Ld.A.R. retierated the submissions made before AO and CIT(A). He further submitted that the issue is covered in its favour by the Madras Tribunal decision in the case of ACIT Vs P.S.Apparels (2006) 101 TTJ 29 (Mad), DCIT vs Harjivandas Juthabhai Zaveri (2002) 258 ITR 785 (Guj) and DCIT vs Core He ..... X X X X Extracts X X X X X X X X Extracts X X X X
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