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TMI Blog2014 (1) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... correct - the AO is directed to grant deduction u/s.80IB in respect of Unit-II after apportioning the expenses – the order of the CIT(A) upheld – Decided against Revenue. Classification of Interest receipts – Business income OR Income from other sources - Set-off of interest payment against interest receipts – Held that:-The decision in M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT] followed - only the net interest income should be considered for the purpose of computing the deduction under section 80IB and interest payment should be set-off against the interest receipts – thus, the AO is directed to compute the relief to be given – Decided partly in favour of Assessee. - ITA No. 6225/Mum./2011, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption on the profit of Unit II. 3. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in allowing deduction under section 801B of the Act claimed by the assessee for its Unit No.II without appreciating the fact that the new unit and the old unit are an integrated single unit forming part of activities of the assessee." 2. When the case was called for hearing, none appeared on behalf of the assessee. We, however, proceed to dispose off the appeal preferred by the Revenue after hearing the learned Departmental Representative. 3. Facts in brief:- The assessee is a partnership firm engaged in the business of manufacturing of poultry and cattle fields, etc., through its Unit-I and II at Dhabol in Daman. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive and the stand taken by the A.O.. A perusal of the Assessment Order shows that the A.O. relied on the reasoning given in the Assessment Order for A.Y.2003-200.1 and held that Unit-II was only an extension of Unit-I and thereby denied deduction u/s.8CiB Without prejudice to the above, he further held that the indirect expense" were to be apportioned on the basis of turnover as held in the Assessment Order for A.Y.2003-2004. It is seen that the Hon'ble ITAT has dealt with both the above issues in its order dated 25.02.2010 in ITA NO.5928 6826/Mum!2006. The Hon'ble ITAT held as under: "We have heard the rival submissions and perused the relevant material on record. Firstly we shall deal with the ground of the Revenue as to whether Unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificate, we find that the learned CIT( A) has rightly taken note of the fact that the additional place of business was given to the assessee at Building N0.2 Gala 8. in response to question No. 15 about the contents of the letter taken note of by the Assessing Officer, Shri.Kalpesh Shah, the partner of the assessee-firm stated that the certificate was issued by the District Industries at Daman as per Daman (DIC Rules) and the same was only for setting up a new Unit. We further note that in respect of Gala 6 and 7 i.e Unit-I, the licence was issued to the assessee in 1997 whereas in respect of Unit-II a new licence was issued in respect of Gala 8 on 11.09.2002. These facts amply indicate that view point of the Assessing Officer about Unit-II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods manufactured in both the units. Coming to the last item being Administrative expenses which included rent, traveling and telephone expenses etc. In our considered opinion, again the contention of the Id. AR is not acceptable for apportioning such expenses on the basis of number of units manufactured. There is no connection of such expenses with the quantity of goods manufactured. !n our view such expenses need to be apportioned on the basis of value of turnover in both the order accordingly". 3.7 From the above, it could be seen that the Hon'ble Tribunal directed that the selling expenses and the administrative expenses are to be bifurcated on The basis of turnover whereas the financial expenses is to be apportioned on the basis of v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 343 ITR 89 (SC). 9. Insofar as the assessee's ground that interest should be treated "Business Income", we do not find any merit in such a ground in view of the decision of the Hon'ble Supreme Court in Liberty India v/s CIT, 317 ITR 218 (SC). However, we agree with the second ground of appeal of the assessee that only the net interest income should be considered for the purpose of computing the deduction under section 80IB and interest payment should be set-off against the interest receipts. Accordingly, we direct the Assessing Officer to apply the principles of the Hon'ble Supreme Court in ACG Associated Capsules Pvt. Ltd. (supra) and compute the relief accordingly. 10. In the result, the cross objection preferred by the assessee is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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