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TMI Blog2017 (11) TMI 1293X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer and directing to re-compute the income. The grounds of the appeal are accordingly dismissed. - ITA No. 3030/Del/2014 - - - Dated:- 21-11-2017 - SH. BHAVNESH SAINI, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER For The Appellant : Sh. R.S. Singhvi, CA For The Respondent : Sh. Vijay Verma, CIT (DR) ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 30/03/2014 passed the Commissioner of income tax, Delhi X (in short the CIT ) under section 263 of the Income-tax Act, 1961 (in short the Act ) setting aside the order of the Assessing Officer for assessment year 2009-10. The grounds raised by the assessee in the appeal are as under: 1. That having regard to facts circumstances of the case, Ld. CIT has erred in law and on facts in passing the impugned order u/s 263 which is barred by limitation, illegal, without jurisdiction and contrary to law and facts and deserves to be quashed. 2. That having regard to facts circumstances of the case, Ld. CIT has erred in law and on facts in assuming jurisdiction u/s 263 and has further erred in holding as under: - That there is no direct ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder framed was erroneous so far as to prejudicial to the interest of Revenue. Accordingly, he issued notice under section 263 of the Act on 05/08/2013 allowing opportunity of being heard in person or through Authorised Representative on 20/08/2013. The CIT has noted in the impugned order that the assessee was given due adjournment as asked for and in compliance Sh. Anil Aggarwal CA attended and filed written submission dated 20/08/2013 and a copy of order of the Tribunal in the case of M/s Arvind Footwear Private Limited versus DCIT Kanpur. 2.2 Before the CIT, the assessee claimed that said other income was interest earned on fixed deposits with the bank. The said fixed deposits were made by the bank to issue bank guarantee for compliance by the assessee of the interim order of the Hon ble High Court of Madras, wherein the assessee was directed to furnish bank guarantee in favour of District Forest officer, Salem and District Forest officer, Satyamangalam for ₹ 80,28,960/- and ₹ 10,85,942/- respectively for difference of sales tax at the rate of 12% and concessional sales tax at the rate of 4% against form C, till the disposal of the petition of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has a direct or immediate nexus with the industrial undertaking; but the interest paid by the buyer for not paying the sale proceeds within the credit period allowed is not arising out of the manufacturing activity. The immediate and effective source of interest is the sale proceeds which remained unpaid for a stipulated credit period and not the industrial undertaking. ( v) In the case of Liberty India Vs CIT (SC) 317 ITR 218 it has been held that the By using the expression 'derived from', Parliament intended to cover sources not beyond the first degree. - DEPB/Duty drawback are incentives which flow from the schemes framed by Central Govt, or Customs Act and hence they belongs to the category of ancillary profits of such undertaking and are not derived from the industrial undertaking. Further, they cannot be reduced from the cost of purchase of manufacture of goods and they should be treated as separate items of revenue or income and accounted accordingly. ( vi) In the case of Indian Additives Ltd. Vs DCIT (Mad) 67 DIR 389 it has been held that the Deduction u/s 80IB is not available in respect of service income, interest on deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 522/-, which being higher than the interest income, there was no case of any income on account of the interest and consequential denial of deduction under section 80IB of the Act. 4.3 He further submitted that even otherwise, during the original assessment and the rectification order under section 154 of the Act dated 17/04/2013, the claim of deduction on interest income was duly examined and the proposed action by the CIT under section 263 is merely on the basis of change of opinion and there is no legal justification for invoking provision of section 263 of the Act as it is not a case of lack of enquiry. In support of his contention, he relied on the decision of the Hon ble Delhi High Court in the case of Commissioner of Income Tax Vs. Sunil Kumar Sharma, 335 ITR 83(DEL) and CIT Vs. Sunbeam Auto Ltd. (2011) 332 ITR 167(Delhi). 4.4 The Ld. CIT(DR), on the other hand, submitted that in the original assessment, no inquiry was carried out by the Assessing Officer on the issue of allowability of deduction under section 80IB of the Act on the other income including interest earned on fixed deposits. He referred to the assessment order and submitted that it is a one-page orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejoinder, the Ld. counsel submitted that deduction under section 80IB of the Act on such other income including the interest income has been allowed in preceding years and therefore, in view of the Rule of Consistency, such deduction has been rightly allowed by the Assessing Officer. In support, he placed reliance on the decision of the Hon ble Supreme Court in the case of CIT Vs. Excel Industries Ltd. [2013] 358 ITR 295 (SC) 4.10 We have heard the rival submission and perused the relevant material on record. In the grounds raised except ground No. 3 all the grounds are in respect of challenging the jurisdiction under section under 263 of the Act. In ground No. 3 the assessee has raised that the assessee was not provided adequate opportunity of being heard by the CIT. This ground was not pressed specifically by the Ld. counsel before us. However, from the impugned order we find that the assessee was given due adjournment by the CIT and thereafter, Sh. Anil Agrawal, CA attended on behalf of the assessee and filed written submission before the CIT. Thus, the Ld. CIT has allowed the due opportunity of being heard to the assessee and we do not find any violation of natural Just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant is set up at Lane No.3, Phase-I, SIDCO Industrial Complex. Bari Brahmana, Jammu for extraction of Sandal Wood Oil from Sandal Wood by hydro distillation process. The assessee has claimed deduction u/s. 80-IB amounting to ₹ 75,58,250/-. During the year under consideration the assessee has shown turnover of ₹ 17,76,62,378/- on which gross profit of ₹ 75,58,250/- has been shown giving GP Rate of 4 25%% in the current year as against GP of 3.40% on sales of ₹ 5,58,85,479/-in the preceding year, The assessee has filed Auditor Report in Form No. lOCCB and documents in support of its claim of deduction u/s 80-IB. With these remarks, assessment is framed at declared income of Rs. Nil. 6.1 It is evident from the above that nowhere the Assessing Officer has mentioned about making any enquiry in respect of allowability of deduction on interest income. Merely, submitting Audit Report etc. in support of claim of deduction, it cannot be justified that the Assessing Officer carried out inquiry in respect of the claim and particularly in respect of the other income consisting of interest on FDR . 6.2 We have also perused the query letter issued by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer as erroneous because said interest income was not derived from the business of the undertaking eligible for deduction under section 80IB of the Act. He emphasized that the Ld. CIT held the non-allowability of the deduction under section 80IB of the Act on such interest income of FDR in view of the various decisions of Hon ble Apex Court and Hon ble High Courts relied upon by him in the impugned order under section 263 of the Act. According to him, not following the law laid down by the Hon ble Supreme Court is an error of law, which has rendered the assessment order erroneous. He further submitted that the Tribunal in the case of the assessee for assessment year 2010-11 has also given same finding that the deduction under section 80IB of the Act was not allowable on the interest income from FDR, and restored the issue of the netting of interest income only to the Assessing Officer. He further submitted that in assessment year 2010- 11, the Assessing Officer in assessment proceeding consequent to the order of the Tribunal has not examined the issue of netting of interest paid against interest income and simply relied on the submission of the assessee and allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961, must be understood as something which has a direct or immediate nexus with the assessee's industrial undertaking. Although electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking. Held accordingly, 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. 5. The issue whether while excluding the interest from the profits and gains of business for the purpose of computing eligible profit of the industrial undertaking is considered, the same is decided by Hon'ble Jurisdictional High Court in the case of CIT Vs. Shri Ram Honda Power Equip - [2007] 289 ITR 475 (Delhi). Of course, in that case, the question was of computation of eligible profit for the purpose of Section 80HHC. However, the ratio laid down therein would be squarely applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. 7.5 The issue in dispute of the allowability of net interest income has been allowed in favour of the Revenue by the Tribunal, in view of the decision of the Hon ble Supreme Court in the case of Pandian Chemicals Ltd. Vs. CIT (2000) 262 ITR 278 . Thus, law on the issue in dispute was settled and not following of the law settled by the Hon ble Supreme Court by the Assessing Officer has certainly rendered the order of the Assessing Officer as erroneous. 7.6 In view of the clear finding, the reliance placed by the assessee on the decision of the Tribunal in the case of Axind Software Development Services Private Limited (supra) is of no assistance. Further, in the said case of Axind Software Development Services Private Limited (supra), the Tribunal held inadequate Inquiry would not be a ground to set aside the assessment order. We have already dealt the issue of lack of enquiry versus inadequate Inquiry . Further, relying on the Rule of Consistency is of no assistance to the assessee due to the reason that no evidences of stand taken by the Revenue in earlier year have been brought on record before us. Further, in view of the decision of Hon ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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