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TMI Blog2017 (4) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... and business of the assessee - Held that:- The interest income and the interest expenses had a direct nexus and therefore netting of interest income against the interest expenses had to be allowed. Since the interest expenses was much more than the interest income no interest income can be excluded from the profits on which deduction u/s 80IB(5) of the Act ought to be allowed. - IT(SS) A No.125 to 128/Kol/2016 - - - Dated:- 5-4-2017 - Hon'ble Sri N.V.Vasudevan, JM Hon'ble Sri M.Bala Ganesh, AM For the Appellant: Shri.G.Mallikarjuna CIT DR For the Respondent: Shri D.S.Damle, FCA ORDER Per Bench: These are appeals filed by the Revenue against 4 orders all dated 27.9.2016 of CIT(A)-20, Kolkata, relating to AY 2008-09, 2010-11 to 2012-13. Since common issues are involved in these appeals, we deem it convenient to pass a consolidated order. 2. The grounds of appeal raised by the revenue in all these appeals are identical. For the purpose of reference, we reproduce the grounds raised by the revenue in IT(SS)A.No.25/Kol/2016 for AY 2008-09 which reads as follows: (i) That the Ld. CIT(A) has erred in accepting that the term 'manufacture& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed was entitled to deduction u/s.80IB(5) of the Act. 5. It was the plea of the Assessee that the process of producing poultry feed involved mechanical, chemical electrical processes for which the Assessee used sophisticated Plant Machinery. In the course of production of poultry feed raw- materials which exceeded 30 in number, lost individual identity and the emerging product was distinct and separate in shape, character and end-use. The raw- materials consumed in production of poultry feed could be individually used for different purposes, but the end product at the end of integrated production process was known to trade by its distinct commercial name as 'poultry feed'. It could only be consumed by only one class of consumer i.e. poultry none else. It was the claim of the Assessee the end product was known as poultry feed in the trade, commerce and industry and was considered as separate and distinct from various materials consumed in the process of its production. The Assessee also pleaded that poultry feed manufacturing industry was notified by the Central Government to be eligible for claiming deduction for a consecutive period of 10 years u/s 801B(4) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn to the trade, industry and commerce by its own name having its own application use and has a market of its own. Applying the criteria as laid down in these judicial decisions we find that in physical appearance, colour and shape the. Poultry feed vastly differs from the input materials. The poultry feed is manufactured in a scientific and systematic manner with the use and assistance of sophisticated plant and machinery acquired at a substantial cost. Poultry feed is recognised not only by trade and commerce but also by the statutory authorities under Central Excise, Sales Tax etc as independent products Applying the ratio laid down in judicial decisions discussed in the order of CTT(A) we have no hesitation in holding that the assessee is engaged in manufacture or production of an article, contemplated in Sec 801B (2) (iii) . 16. We also find on the identical facts the Bangalore Bench of ITAT in the case of Komrala Feeds --Vs- DCIT 74 ITD 65 held that activity of producing poultry feed amounts to manufacture and therefore eligible for deduction u/s 80 I. Sec 80I and Sec 80IB are parameteria because conditions for part of deduction are same and therefore the said decision is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion that the assessee satisfies the conditions of Sec 80-IB(2) (iii) of the Act and is therefore eligible for deduction u/s 80IB We therefore uphold the order of CIT (A) directing A 0 to allow deduction u/s 80 IB to the assessee. 10. In Assessee s own case this Tribunal in ITA No.748/Kol/2018 for AY 2005-06 by order dated 7.8.2008 allowed similar claim of the Assessee. From perusal of the said decisions of this Tribunal, it is apparent that this Tribunal has categorically held in the case that the assessee is engaged in manufacturing of poultry feeds and that the assessee is engaged in the manufacture or production of an article. 11. The learned DR however submitted that in the decisions rendered by the Tribunal, the decision rendered by the Hyderabad Bench of ITAT in the case of Venkateswara Feeds -vs- ACIT 22 Taxmann.com 234 (Hyd.) was not properly considered and therefore the decision rendered in Assessee s own case requires reconsideration. In this regard it was submitted that the Tribunal in the case of Venkateswar Feeds (supra) found that various feed ingredients such as maize, rice bran, de-oiled soya etc., along with certain feed premixes are mixed in different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yderabad Bench of ITAT in the case of Venkateswara Feeds (supra) and therefore the decision requires reconsideration. 13. The learned counsel for the Assessee while relying on the order of the CIT(A) and decision of the Tribunal in Assessee s own case in AY 2005-06 also submitted that in the case of Amrit Feeds (supra), the Hon ble ITAT had considered and distinguished the decision rendered in the case of Venkateswara Feeds (supra) by ITAT Hyderabad Bench. 14. We have given a careful consideration to the rival submissions. In the case of Amrit Feeds (supra), the Tribunal considered the decision rendered in the case of Venkateswara Feeds (supra) and held that the assessee in that case had claimed deduction under section 80IB on the activity of merely converting poultry mash feed into pellet feed and therefore that Bench has held that there was no change in the basic component or new or different article came into existence. As such, conversion was processing activity not manufacturing. The Tribunal held that the case of the assessee Amrit Feeds (supra) was entirely different. The assessee's eligible undertaking itself was independently carrying out the complete activity i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturing unit at Bankura, West Bengal. The said unit is eligible for deduction u/s 80IB of the Act. The Assessee pointed out that it had obtained credit limits and arranged loan financing for the business of manufacture sale of poultry feed. The assessee paid interest on the loans/credit facilities, which amounted to ₹ 28,35,310/- for the relevant year. Further in order to obtain packing facilities and/or other working capital limits, the assessee was required to provide encashable fixed deposits as margin/security and for that purpose funds were invested in Fixed Deposits and those deposits yielded interest income in question. It was submitted that in the given circumstances the fixed deposits maintained by the assessee was inextricably linked with the business of the assessee. The aforesaid interest earned from the fixed deposits went on to effectively reduce the overall cost of borrowing of the assessee. In view of the above the Assessee submitted that the interest expense as well as interest income both have a proximate relationship with the business of the assessee. The interest income earned has direct co-relation with the business funds of the assessee and accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the AR along with different case laws on this issue. I have considered the Hon'ble Supreme Court's decision in the Pandian Chemical's case (supra) and I have also considered the decision of the Supreme Court in the case of ACG Associated Capsules (P) Ltd vs CIT 343 ITR 89. I think even though the said decision was rendered in the context of provisions of section 80HHC, yet in my opinion the principle laid 'down in that decision has equal application in the assessee's case as well. I further find that on similar facts the ITAT , Kolkata in the case of DCIT vs BMW Industries Limited (ITA No.2115/Kol/2007) dated 29tlt February 2008 had similarly held that for the purpose of computation of deduction u/s 80IB the interest income was liable to be netted off against interest expenses and only the net interest expenditure was required to be allowed in arriving at qualifying profits of the eligible undertaking u/s 80lB of the Act. I also find that the principle of netting off of interest income against interest expense has been upheld by jurisdictional Calcutta High Court in the case of Warren Tea Ltd. (374 ITR 6) for the purposes of interpreting computing bus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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