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TMI Blog2014 (1) TMI 1782X X X X Extracts X X X X X X X X Extracts X X X X ..... :- Both the parties stated that the said claim of the assessee needs to be considered in favour of the assessee in view of the binding judgment of the Hon‟ble Apex Court in the case of ACG Associated Capsules P. Ltd vs. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] wheren held Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Accordingly, we direct the AO to apply the said judgment on considering the facts of the present case after reasonable opportunity of being heard to the assessee as per the principles of the natural justice. - I.T.A. No.8418/M/2010, I.T.A. No.6312/M/2011, C.O. No.138/M/2012 (Arising out of I.T.A. No.8418/M/2010 & I.T.A. No.6005/M/2011 - - - Dated:- 31-1-2014 - SHRI D. KARUNAKARA RAO, AM AND Dr. S.T.M. PAVALAN, JM Assessee by : Shri Nitesh Joshi Mr. Damodar Kabra Revenue by : Shri A.C. Tejpal, CIT-DR O R D E R PER D. KARUNAKARA RAO, AM: There are four appeals under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of deduction u/s 80IA of the Act. 4. On the other hand, Ld DR relied on the orders of the Revenue Authorities. 5. We have heard both the parties and perused the orders of the revenue authorities as well as the orders of the Tribunal filed before us. On perusal of the said order of the Tribunal dated 20.11.2009 (supra), we find para 9 is relevant in this regard and the same is reproduced here under: 9. We have considered the rival submissions made by both the sides, perused the orders of the AO and the CIT (A) and paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. The only dispute in the instant case is as to whether the activity of the assessee company amounts to manufacture or production of an article or thing so as to enable the assessee the benefit of deduction u/s 80IB of the Act. We find the ITAT vide consolidated order dated 29.12.2006 for the AYs 1995-1996 to 1998-1999 has held that the activity of the assessee is a manufacturing activity and consequently eligible for deduction u/s 80IA of the Act. Accordingly, the appeal filed by the Revenue has been dismissed. Similarly, we find the ITAT in the cross app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of their case, the interest income is assessable as profits gains of business derived from the industrial undertaking and consequently qualify for deduction u/s 80IB of the Act. 2. Without prejudice to the ground of Cross Objection No.1, it is submitted that the CIT (A) erred in disregarding the ratio of the decision of the Bombay High Court on identical facts in favour of the assessee and consequently upholding the AO‟s action in denying deduction u/s 80IB of the Act in respect of interest income of ₹ 1,08,44,725/. 3. Without prejudice to the grounds of Cross Objection Nos. 1 2, it is submitted that the CIT (A) failed to appreciate that there is no interest income after netting off of interest expenses of ₹ 1,08,44,725/- so as to be assessed either as income from other sources‟ or business income‟. 4. Without prejudice to the ground of Cross Objection No.3, it is submitted that the respondents are entitled for deduction u/s 80IB of the Act in respect of the following interest receipts. i) From customers for delayed payments Rs.70,92,221/- ii) From fixed de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are of the considered opinion that the matter should be remanded to the files of the AO for fresh adjudication in the light of the said decisions (supra). Therefore, we direct the AO to examine the issues i.e., (i) whether the interest received from customers for delayed payments would qualify for deduction under section 80IB of the Act or not and (ii) whether the interest received from loans and advances to staff would qualify for deduction u/s 80IB of the Act in the light of the above cited decisions and in accordance with law in force. AO shall provide a reasonable opportunity of being heard to the assessee in the set aside proceedings. We order accordingly. 14. Regarding the issue of interest received from fixed deposits kept as margin money for bank guarantees, Ld Counsel for the assessee mentioned that the temporary deployment of funds should be assessed as business income‟ and not as income from other sources‟ as treated by the Assessing Officer. In this regard, Ld Counsel relied on the following decisions. i) CIT vs. Vidyut Steel Ltd. 219 ITR 30 (AP) ii) CIT vs. Koshika Telecom Ltd 287 ITR 479 (Del) iii) CIT vs. Karnal Cooperative Sugar Mills Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substance, ground no.3 is treated as allowed in favour of the assessee. 18. In the result, Cross Objection of the assessee is partly allowed for statistical purposes. ITA No.6312/M/2011 (AY 2008-2009) (By Revenue) 19. This appeal filed by the Revenue on 13.9.2011 is against the order of the CIT (A)-23, Mumbai dated 27.6.2011 for the assessment year 2008-2009. 20. In this appeal, Revenue raised the following grounds which read as under: 1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in not appreciating the fact that converting Unit-1 from stand along independent unit to that of job work unit and shifting its clientele to the so called new units 2 3, thereby reducing its profits by 90% is nothing but a plot of Tax Avoidance to continue to claim 100% deduction u/s 80IB (earlier 80IA) in the hands of Units 2 3). 2. On the facts and in the circumstances of the case and in law, the Ld CIT (A) centralization, unified single control of administration maintenance of accounts, location, power connection, purchase bills and sale bills, single bank account, single industrial license etc. Units 2 3 are not separate new units bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the asessee has fulfilled the conditions prescribed u/s 80IB of the Act, therefore, we do not find any infirmity in the order of the CIT (A) and accordingly uphold the same. The grounds raised by the Revenue are accordingly dismissed. 24. From the above, it is evident that the issues raised in the present appeal are exactly similar to that of the grounds adjudicated by the Tribunal vide its order dated 20.11.2009 (supra). Further, Ld DR has not produced any contrary material to take a different view to that of the view taken by the Tribunal. Therefore, considering the above settled position of the issue as well as following the principle of consistency, we are of the opinion that the grounds raised by the Revenue should be decided in favour of the assessee. Accordingly, the Revenue‟s grounds are dismissed. 25. In the result, appeal of the Revenue is dismissed. ITA No.6005/M/2011 (AY 2008-2009) (By Assessee) 26. This appeal filed by the assessee on 29.8.2011 is against the order of the CIT (A)-23, Mumbai dated 27.6.2011 for the assessment year 2008-2009. 27. In this appeal, assessee raised the following gourds which read as under: 1. The Ld CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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