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TMI Blog2010 (10) TMI 1239X X X X Extracts X X X X X X X X Extracts X X X X ..... that benefit cannot be denied only because the manufacturing process does not take place in the premises of the assessee. 3. On the facts and in the circumstances of the case, the CIT(A) erred in not accepting the assessee s plea that it was not at all a fit case for levy of interest u/s 234A, 234B and 234C of the I.T. Act. At any rate, interest u/s 234B was certainly not leviable. 4. The appellant craves leave to add, alter, amend and / or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal. ITA No.83/Ahd/2008[Revenue] 1. The Ld. CIT(A) erred in law and on the facts of the case in directing the AO not to exclude profit on contract work of Rs.6,90,693/- and interest income of Rs.14,09,265/- from the computation of deduction u/s 80IB. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the AO. 3. It is, therefore, prayed that the order of the Ld. CIT(A) may be cancelled and that of the AO may be restored to the above effect. 2 At the outset, the learned AR on behalf of the assessee sought permission to withdraw the appeal filed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, there was no question of empty barrels or scrap. Instead of manufacturing, if the assessee was doing the trading activities, dealing in raw material and if the assessee had sold the material on retail basis and earned amount by sale of bardans then obviously section 80IA would not apply. It was also made clear that amount received towards job work and sale of empty ash bardans, empty barrels and plastic wastes qualified for deduction u/s 801. Following the said judgment of High court, it was to be held that in the instance case, that the income from Job work and sale of scrap was, eligible for deduction u/s 80I. Respectfully following the aforesaid jurisdictional decision, the A.O is directed to allow deduction u/s 80IB on profit from contract activity for Rs.6,90,693. With regard to claim of the appellant for deduction u/s 80IB on interest income, it is observed that while passing the order u/s 143(3) of the Act, the Assessing Officer has considered both, interest income and interest expenditure as income from business profession. It is not the case of the Assessing-Officer that interest income is income from other sources which is covered u/s 56 of the Act. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is liable to be regarded as manufacturing activity irrespective of the fact whether the products manufactured therein are for its own business or for others on job work basis. Evidently, sec. 80IB of the Act does not distinguish between the activity involving manufacturing on own account or for others. Hon ble jurisdictional High Court in CIT vs. J.B. Kharwar Sons, 163 ITR 394 (Guj) while holding this view, allowed the claim for deduction u/s 80J of the Act. Hon ble Delhi High Court in CIT v. Northern Aromatics Ltd. [2005] 196 CTR (Delhi) 479, following their earlier decision in Nulook (P) Ltd. vs. CIT, 157 ITR 253 (Del) held that the manufacturing activity, which resulted in receipt of such charges, not done by the assessee for itself but for others, is entitled to deduction u/s 80IA of the Act. Similar view were taken by the Hon ble Punjab Haryana High Court in CIT vs. Impel Forge Allied Industries Ltd.,183 Taxman 38. In the light of the view taken in these decisions, we have no hesitation in upholding the findings of the learned CIT(A) in allowing the deduction u/s 80IB of the Act on the income from job work receipts. Therefore, ground no. 1 in respect deduction u/s 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for bill purchase and discounting, we find that neither the AO nor the ld. CIT(A) recorded any specific findings on the nature of this interest nor the ld. AR referred us to any material that the said amount has any nexus with the expenditure of Rs.60,46,408/- as contended before the ld. CIT(A). In these circumstances, especially when the ld. CIT(A) has not passed a speaking order on the claim for deduction u/s 80IB on the said amount ,we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the issue to his file for deciding the matter afresh in accordance with law in the light of our aforesaid observations, after allowing sufficient opportunity to both the parties. Needless to say that while redeciding the appeal, the learned CIT(A) shall pass a speaking order, keeping in mind, inter alia, the mandate of provisions of sec. 250(6) of the Act., bringing out clearly the nature of amount of interest and nexus of any expenditure incurred in earning the said income. 7.3 As regards claim for deduction u/s 80IB on the interest on FDRs, interest on from the recurring account or other interest, the ld. AR on behalf of the assessee did not make any submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e repeated affirmation by the Hon'ble Supreme Court in the various cases, we are of the opinion that interest earned from the bank, does not have an immediate nexus with the business of the industrial undertaking and therefore, can not be said to be derived from the business of the industrial undertaking . 7.31 In the case of Ahmedabad manufacturing and Calico Printing Co. Ltd. vs.CIT,137 ITR 616(Guj),Hon ble jurisdictional High Court held We are in full agreement with the view taken by the Bombay High Court and to some extent with the view taken by the Kerala High Court. Profits and gains can be said to have been derived from an activity carried on by a person only if the said activity is an immediate and effective source of the said profit or gain. There must be a direct nexus between the activity and the earning of the profits and gains. In other words, what we have to consider is the proximate source and not the source to which the profit or gain may in a remote indirect way be referable. The view to this effect of the Privy Council in CIT v. Kamakhya Narayan Singh [1948] 16 ITR 325 was approved by the Supreme Court in Mrs. Bacha F. Guzdar v. CIT [1955] 27 ITR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, profits and gains of industrial undertaking , The fact that the Legislature has used the expression profits and gains derived from the business of industrial undertaking has some significance and it connotes that the immediate and effective source of income eligible for grant of relief under section 80IB of the Act must be the industrial undertaking itself and not any other source. The mandate of law is that unless the source of the profit is the undertaking, the assessee is not eligible to claim deduction under section 80IB of the Act. Mere commercial connection between the income and the industrial undertaking would not be sufficient. The derivation of the income must be directly connected with the business in the sense that the income is generated by the business. It would not be sufficient if it is generated by the exploitation of a business asset. 7.34 Hon ble jurisdictional High Court in the case of CIT Vs.Gaskets and Radiators Distributors, 296 ITR 440(Guj) in the context of deduction u/s 80HHC of the Act in respect of income on account of interest on fixed deposits held Identical question came to be considered by the hon'ble Supreme Court in Pandian Chemi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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