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TMI Blog2016 (7) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest income. We found the assessee could not substantiate the direct nexus with the industrial undertaking and we rely on decision of Supreme Court in the case of Pandian Chemicals Ltd vs. CIT [2003 (4) TMI 3 - SUPREME Court] wherein held that interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking itself and was not profits or gains derived by the undertaking for the purpose of the special deduction under section 80HH - Decided against assessee - I.T.A. No.1193/Mds/2015 - - - Dated:- 29-4-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 4,20,59,087/- which includes interest income of ₹ 2,52,04,544/- and the assessee has treated interest income as business profits for claiming deduction u/s.80IAB of the Act. The ld. Assessing Officer on perusal of the provisions of Sec. 80IAB found that interest income does not form part of business profits of an undertaking. The ld. Authorised Representative explained that it inadvertently claimed and as per the form No.10CCB issued by Auditor restricted the claim to ₹ 1,68,54,543/-. The Assessing Officer considered the explanations and the records and treated balance Rs. .2,52,04,544/- as income from other sources and passed order u/s.143(3) of the Act dated 30.12.2011 and raised demand. Aggrieved by the order, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nks in the form of Fixed Deposits and earned interest. The AO has treated this interest as income from other sources as it was not derived from the activity of development of SEZ which is eligible for 80IAB deduction. No doubt the interest income was derived in the course of business and it certainly becomes an earning of the appellant, but as the activity of the undertaking which is eligible for deduction is different from the activity of taking deposits and earning into the banks will not fit into business activity of the appellant company so as to avail deduction u/s 80IAB. In other words, when the undertaking is entitled for deduction u/s 80IAB, for the purpose of working of 80lAB the interest earned from the bank should be reduced. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The nature of transaction of funds are only in connection with lease rentals and they are incidental to the business activities and therefore takes the characteristic of profit of business undertaking and eligible for deduction u/s.80IAB of the Act. The ld. Authorised Representative further supported his arguments with judicial decisions and financial statement of the assessee company for the said assessment year and prayed for allowing deduction of interest income as business profit of undertaking. 6. Contra, ld. Departmental Representative relied on the orders of lower authorities and opposed to the grounds and filed judicial decisions supporting the grounds of the lower authorities and prayed for dismissal of appeal. 7. We heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CB and upheld the order of the Assessing Officer. Now question arises whether after agreeing the addition on technical grounds, can assessee can claim further deduction, on legal aspect interest on FDR as income derived from industrial undertaking, the ld. Authorised Representative relied on judicial decisions and Tribunal decision to support the case. On perusal of the financial statements of the assessee company at page 35 of the paper book the main source of income being lease income and assessee offered interest income referred at schedule 10 of page 41 of paper book. Further, similar interest income for the assessment year 2007-2008 was obtained. The ld. Authorised Representative could not support with explanation whether assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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