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TMI Blog2019 (6) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... inabove. CIT(A) in A.Y. 2010-11 has decided the issue in favour of the assessee by following the decision of CIT vs. Koshika Telecom Ltd. [ 2006 (2) TMI 140 - DELHI HIGH COURT] wherein it has been held that interest flowing from deposits made by the assessee which are in extricably linked to the business of the assessee can not be treated as income from other sources. In the case of CIT vs. Jaypee Dsc Ventures Ltd. [ 2011 (3) TMI 309 - DELHI HIGH COURT] it has been held that where the money is deposited into bank not as surplus money but out of business exigencies and necessities, then the interest acquires the character of business receipts. In the case of CIT vs. Indo Swiss Jewels Ltd. [ 2005 (9) TMI 47 - BOMBAY HIGH COURT] the interest e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction u/s 80.1B of Income Tax Act. 2. The Learned Commissioner of Income Tax (Appeals) also erred in ignoring the Commissioner of Income Tax (Appeal) order for Assessment Year 2010-11 which was on similar grounds and the appeal was allowed in favour of the assessee company. 3. The Learned Commissioner of Income Tax (Appeals) erred in charging Interest u/sec.234B and 234C of the I.T Act, 1961 and having regard to the fact and the circumstances of the case and in law the appellant denies its liability for payment of any interest under the various provisions of the Act." 3. The issue in the 1st ground of appeal is against the order of Ld. CIT(A) upholding order of AO by treating the interest income on LC, FD and bank guarantee, intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 167 ITR 368 (Raj), Godavari Sugar Mills Ltd. vs. CIT 191 ITR 359 (Bom) and South India Shipping Corporation Ltd. vs. CIT (1999) 240 ITR 24 (Madras). The AO further relied on the case of Kinfra Export Promotion Industrial Ports Ltd. vs. DCIT (2013) 59 SOT 57 (URO Kochin) wherein it has been held that if interest income is not derived from eligible undertaking it is not eligible for deduction. According to the AO, there is no direct nexus between the interest income with the business activity and same could not be considered as profit and gain from eligible undertaking and hence deduction was denied by framing assessment under section 143(3) dated 13.02.2015. 5. In the appellate proceedings, the appeal of the assessee on this ground was di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of Section 80HH. It is, therefore, settled law now that incidental business receipts which have no nexus with the manufacturing activity of the industrial undertaking will not be eligible for deduction u/s section 80IB, The interest income earned had no direct or immediate nexus with the manufacturing activity of the appellant. It is, at best an incidental business receipt and will not be eligible for the purpose of claiming deduction u/s 801B. The disallowance made by the Assessing Officer is upheld. The appellant's ground of appeal is dismissed." 6. The Ld. A.R. vehemently submitted before us that the fixed deposits were required for obtaining letter of credit and other credit facilities, hence the interest income is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der to avail the credit facilities from State Bank of India for the purpose of manufacturing activity of the assessee. 7. The Ld. D.R., on the other hand, relied heavily on the orders of lower authorities by submitting that the interest income has rightly been treated as income from other sources by the AO and rightly confirmed by the Ld. CIT(A) as there is no direct nexus between the business of the assessee and the interest income for the purpose of allowing deduction under section 80IB of the Act. The ld DR argued that the word used is income derived from the manufacturing activity whereas in the present case the interest income has no such direct nexus and therefore the order of Ld. CIT(A) deserved to be upheld on this issue. 8. After ..... X X X X Extracts X X X X X X X X Extracts X X X X
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