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TMI Blog2016 (3) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Therefore, our findings and conclusions for the assessment year 2007-08 will hold good for the assessment year 2008-09 and 2010-11. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s. 80IB(7)(a) of the I.T. Act. With regard to the exclusion of other income for the purpose of calculating deduction u/s. 80IB(7)(a), the CIT(A) confirmed the assessment order. 7. Aggrieved by the CIT(A)'s order, the assessee is in appeal before us. The assessee has filed three sets of paper books for each of the assessment years, inter alia, containing computation statements, balance sheet and various judicial pronouncements. The Ld. Counsel for the assessee reiterated the submissions made before the first appellate authority. 8. The Ld. DR on the other hand submitted that the income is enumerated as 'other income' does not have direct nexus with the running of the hotel. It was submitted that in view of the judgment of the Apex Court in the case of CIT vs. Sterling Foods reported in 104 Taxman 204, the assessee is not entitled to the benefit of 80IB(7)(a) of the Act in respect of various receipts mentioned as "other income". 9. We have heard the rival contentions and perused the material on record. The following issues arise for our consideration, namely:- i) Whether the CIT(A) is justified in disallowing the entire amount of other income derived fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion of interest income on FD from SIB amounting to ₹ 2,37,410/- for the purpose of denial of deduction u/s. 80IB(7)(a) of the Act, according to us, is misconceived because the assessee company itself had offered the same to tax. This is evident from the computation of total income for the relevant assessment year which is enclosed as Annexure A to the paper book filed for the assessment year 2007-08. When the assessee itself has added back the amount to the P&L a/c, the CIT(A) is not justified in including the same under the head "other income" for the purpose of denying deduction u/s. 80IB(7)(a) of the Act. It is ordered accordingly. Therefore Ground No. 2 is allowed. 9.3 With regard to the other receipts whether it is entitled to deduction u/s. 80IB, necessarily, we have to examine the meaning of the word "derived from" contained in section 80IB of the Act. Section 80-IB of the Act provides for deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. As per the provisions of section 80-IB of the Act, deduction is available to profits and gains "derived from" the spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iculars Amount Space Rental and Concessions Xxx Commissions Xxx Cancellation Penalties Xxx Guest Laundry and Dry Cleaning Xxx 9.7 The other income earned by the assessee and the grouping under the key revenue generation category can be summarized in the below table Sl. No. Other income received by the Company Key revenue generation category as per the ICAI guidelines and Uniform system of accounting 1. Rent received from Heritage Shop Rent received Space Rentals, Arcade revenue, Housekeeping bills 2. for space and amenities given to M/s. Kumarakom Water Transport Pvt. Ltd. 3. Revenue from staff mess used by the Guest drivers Food and Beverages 4. Revenue from telephone used by staff Communications revenue(both telephone and internet) 5. Income from club cultural programs/DJ/etc. Club use revenue 6. Income from sale of used packing materials, recovery of material damage from staff etc. Disposal of empties/sale of scrap Thus it can be seen from the above that, rent received by the assessee of ₹ 180,000/- from Heritage Shop which represents rental income from Curio Shop and of ₹ 120,000/- for the space and amenities given to Kumarakom Water ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d no direct link or nexus with the industrial undertaking cannot at all be expected to commend acceptance, especially, on the facts and in the circumstances of the case. In this view of the matter, we are of the view that profits and gains from the sale of scrap materials are eligible for deduction in an amount equal to 20 per cent u/s. 80HH, in as much as such gains or profits are derived from the industrial undertaking and includible in the gross total income of the assessee and the question relatable to the profit on the sale of scrap is, thus, answered in favour of the assessee." The Delhi High Court in the case of CIT vs. Sadhu Forging Ltd. (11 taxmann,.com 322) has held that, 'Keeping in view the activities of the assessee in giving heat treatment for which it had earned labour charges and job-work charges, it can thus be said that the appellant had done a process on the raw material which was nothing but a part and parcel of the manufacturing process of the industrial undertaking. These receipts cannot be said to be independent income of the manufacturing activities of the undertakings of the assessee and thus could not be excluded from the profits and gains derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -08. 9.12 The details of the 'other income' for the assessment years 2008-09 and 2010-11 are as follows:- AY 2008-09 Sl. No. Particulars Nature of income amount (INR) 1. Interest income Interest on Fixed Deposit from SIB 89,915 2. Revenue from Staff Mess Revenue from staff mess used by the Guest drivers 2,121 5. Revenue from Staff Telephone Revenue from telephone used by staff 65,340 6. Miscellaneous Income Income from club cultural programme/DJ/etc. 774,657 7. Other Miscellaneous Income Income from sale of used packing materials, recovery of material damage from staff etc 254,795 8. Refund Interest received on income tax Refund 86,363 Total 1,273,191 AY 2010-11 Sl. No. Particulars Nature of income amount (INR) 1. Interest income Interest on Fixed Deposit from SIB(Kumarakom) 198,198 2. Rent received from M/s. Kumarakom Water Transport Pvt. Ltd. Rent on space and amenities given to M/s. Kumarakom Water Transport Pvt. Ltd. 120,000 3. Revenue from Staff Mess Revenue from staff mess used by the Guest drivers 88,825 4. Other Miscellaneous Income Income from sale of used packing materials, recovery of material damage from staff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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