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TMI Blog2016 (5) TMI 1099X X X X Extracts X X X X X X X X Extracts X X X X ..... is decided in favour of the assessee. The assessee is eligible to claim deduction u/s. 80IB(10) in respect of income from sale of scrap. - Decided in favour of assessee - ITA No. 1888/PN/2014 - - - Dated:- 22-4-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Krishna V. Gujarathi For The Revenue : Shri Hemant Kumar C. Leuva ORDER PER VIKAS AWASTHY, JM : This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-II, Pune dated 28-05-2014 for the assessment year 2010-11. The impugned order has been challenged by the assessee on the following two grounds: 1) On the facts and in the circumstances of the case and in law, the honourable CIT (Appeals)-II, Pune erred in confirming the addition of Gross Interest received ₹ 23,24,436/- under the head Income from Other Sources without appreciating the facts of the case that the Interest received ₹ 23,24,436/- on loans and advances is to be net off against interest paid on borrowed funds from banks as the assessee has utilized borrowed funds for advancing such loans on interest. The appellant hereby prays that the addition may p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Appeals). 3. Shri Krishna V. Gujarathi appearing on behalf of the assessee submitted that the assessee had taken term loan of ₹ 10,00,00,000/- from PNB Housing Finance. The loan amount was not fully utilized for the project and was lying idle with the assessee. The assessee advanced the same to the other concerns. The assessee is not having any other source of income from where advances can be given. A close perusal of the transactions would show that they are back to back transactions. To substantiate its claim, the assessee filed a summary of the loan disbursed and the loans advanced by the assessee. The ld. AR submitted that the loans advanced on various dates are either on the same date or just after the date of loan disbursed by the PNB Housing Finance to the assessee. The ld. AR further submitted that the case of the assessee is squarely covered by the decision of Co-ordinate Bench of Tribunal in the case of ITO Vs. M/s. Brahma Associates in ITA No. 133/PN/2014 for the assessment year 2003-04 decided on 30-11- 2015. 4. In respect of second ground raised in the appeal, the ld. AR submitted that the Commissioner of Income Tax (Appeals) has erred in confirming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsed to the assessee and the amounts advanced to other concerns to show that the loan amounts received and advanced are back to back transactions and have direct nexus. 7. The Co-ordinate Bench of Tribunal in the case of ITO Vs. M/s. Brahma Associates (supra) has dealt with the issue wherein under similar circumstances the assessee had given advances to associate concerns from the loan availed from Rupee Co-operative Bank Ltd. The relevant extract of the order of Tribunal is reproduced here-in-below: 11. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. The only dispute that has to be decided in the impugned appeal is regarding allowability of the interest income of ₹ 71,75,503/- from the interest expenditure on the basis of nexus between the interest expenditure and the interest income. From the details furnished by the assessee we find the assessee had shown interest income of ₹ 1,09,94,741/- and interest expenditure of ₹ 1,10,01,275/- for the financial year ending on 31- 03-2003. The AO in the assessment order held that the assessee could establish s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B Housing Finance and advanced by the assessee to show the nexus between two. These details were not furnished by the assessee before the authorities below. In our considered opinion this issue needs a revisit to the file of Assessing Officer for verification of the loans received and same amount being advanced to other concerns. If the assessee is successful in establishing the link between the loan amount received by the assessee and the loan advanced, the assessee shall be entitled to the benefit of netting off of interest amount. Accordingly, the first ground of appeal of the assessee is allowed for the statistical purpose. 9. The second ground raised in the appeal is with respect to disallowance of claim of deduction u/s. 80IB(10) on income arising from sale of scrap. The contention of the assessee is that the said income is directly relatable to the income from housing project on which the assessee is entitled to claim deduction u/s. 80IB(10). In the case of Preetam Enterprises Vs. Jt. Commissioner of Income Tax (supra) similar issue had come up for adjudication before the Tribunal. The Tribunal decided the issue in favour of the assessee by holding as under: 6.1 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d., 241 ITR 803, Wheels (I) Ltd. 141 ITR 745. The observation of the courts were that a deduction can be claimed only in respect of profits derived from an industrial undertaking. An industrial undertaking itself must be the source of that profit. Observation has also been made that it is wrong to say that the scrap has no direct nexus with industrial undertaking manufacturing such products. In the other case, Wheels (I) Ltd. (supra) the court was of the view that the sale of scrap was nothing but a byproduct of the industry. The generation of scrap if happens during the manufacturing activity then eligible for deduction. An another decision of respected co ordinate bench Mumbai has also been quoted namely Asian Investments 90 TTJ 65. Thus considering the factual aspect as also the legal aspect a view can be taken in favour of the assessee especially under the circumstances when it is demonstrated before the authorities below that the generation of the scrap in this case had a direct link and close nexus with the manufacturing activity of the assessee. Once it is established that during the manufacturing activity scrap was generated as a byproduct hence, following the view pronounc ..... 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