TMI Blog2010 (11) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be excluded from the eligible profit and only the net amount of the same, if any, should be taken to the head income from other sources and to recomputed eligible profit u/s 80IA accordingly. (3) The ld. CIT(A) erred in law and on the facts of the case in directing the AO to consider only net interest income for exclusion for the purpose of computation u/s 80IA of the Act, as against the amount of ₹ 2917/-.82 lacs considered by the AO. (4) The ld. CIT(A) erred in law and on the facts of the case in directing the AO to adjust interest expenditure against interest income and net interest income, if any, should be treated as income from other sources, in respect of (i) interest income of ₹ 2,54,45,336/- received by the assessee from GSPL and (ii) interest income of ₹ 19,621/- received by the assessee company on staff loans. (5) The ld. CIT(A) erred in law and on the facts of the case in directing the AO to delete the addition made towards provision for doubtful debts at ₹ 3,76,27,965/- for computing the taxable profits u/s 115JB of the IT Act. (6) On the facts and in the circumstances of the case, the ld. CIT(A) ought to have upheld the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternate ground that interest expenditure should be excluded from the eligible profit and only the net amount of the same, if any, should be taken to the head income from other sources , and to compute eligible profit u/s 80IA accordingly. (3) The ld. CIT(A) erred in law and on the facts of the case in directing the AO to consider only net interest income for exclusion for the purpose of computation u/s 80IA of the Act, as against the amount of ₹ 261.08 lacs considered by the AO. (4) The ld. CIT(A) erred in law and on the facts of the case in directing the AO to include the liabilities written back of ₹ 157.87 lacs and recomputed the income under the head other sources and allow the deduction u/s 80IA accordingly. (5) The ld. CIT(A) erred in law and on the facts of the case in directing the AO to delete the addition made towards provision for doubtful debts for computing the taxable profits u/s 115JB of the IT Act. (6) On the facts and in the circumstances of the case, the ld. CIT(A) ought to have upheld the order of the AO. (7) 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 effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debt account is debited and the customer s account is credited, thus, closing the account of the customer. In the case of Companies, the provision is deducted from Sundry Debtors. As stated above, the Assessing Officer has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. This exercise has not been undertaken by the Assessing Officer. Hence, the matter is remitted to the Assessing Officer for de novo consideration of the above-mentioned aspect only and that too only to the extent of the write off. Since it is not disputed that assessee has written off the debts in the books of account as irrecoverable then no further onus lies on the assessee to show that it has become bad, following the above decision of Hon. Supreme Court, we uphold the order of ld. CIT(A). 9. The second ground relates to claim of deduction under section 80IA in respect of interest expenditure. The ld. CIT(A) following the judgement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and perused the material on record. In our opinion, the finding of the CIT(A) is duly covered by the decision of the Delhi High Court in the case of CIT v Shri Ram Honda Power Equip 289 ITR 475. In view of this decision of the Delhi High Court we are of the view no interference is called for in the order of the CIT(A) and accordingly confirm the order of the CIT(A) directing the AO to exclude only the net interest from the income while computing the deduction u/s 80IA of the Act. Thus, this ground stands dismissed. 10. We have heard the parties and carefully perused the material on record. In our considered view once interest income is held to be assessable under the head income from other sources then it cannot be as such treated as income from business and, therefore, it will not be available for deduction under section 80IA. Similar view was also taken by Hon. Punjab Haryana High Court in (2007) Nahar Ex[prts :td. Vs. CIT 288 ITR 494 (P H). However, once interest income is assessed u/s 56 the expenditures admissible u/s 57(iii) being expenditure incurred wholly and exclusively for the purpose of earning interest income except capital expenditure can be allowed as deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest income under section 80IA would be allowed. But if in case assessee succeeds and it is held that interest income is assessable under the head income from business and assessee succeeds in proving that it is derived from business then issue of net or gross will become important. In our considered view the issue is very hypothetical and cannot be decided for academic purposes. In any case while computing interest income under the head income from other sources any expenditure for earning such interest income would be allowed as deduction. This proposition will also hold good even if head of interest income is changed. Therefore, the ld. AO is directed to consider only that amount of expenditure which is directly relatable to earning interest income. This ground raised by the Revenue is disposed off accordingly. But for record, the ground is treated as rejected. 13. Ground No.4 relates to direction of ld. CIT(A) in considering to deduct expenditure incurred on earning interest income out of interest income for taxing only net interest income under the head income from other sources . While disposing of ground Nos.2 3 we have already held that only that part of expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.491/2008; 209/2009; 229/2010 others pronounced on 30/8/2010 affirming decision in ITO vs. Ekta Promotors (P) Ltd. (2008) 305 ITR 1 (SB) (Del) wherein it is held that section 234D is not retrospective and, therefore, interest under section 234D can be charged with effect from 1..6.2003 only. Following above two judgments we direct accordingly. We restore the matter back to the file of AO for making necessary computation. This ground of the C.O. raised by the assessee is allowed but for statistical purposes. 18. Ground No.6 is general and rather premature and, therefore, is rejected. 19. Ground 1 2 of Additional grounds are disposed of along with grounds raised by the Revenue and we direct the AO to consider to allow actual amount of bad debts while computing profits under section 115JB. This ground of C.O. is allowed but for statistical purposes. 20. As a result, appeal filed by the Revenue is partly allowed and the Cross Objection of assessee is partly allowed for statistical purposes. ITA No.1953/Ahd/2007 Asst. Year 2004-05 (Revenue s appeal) 21. Ground No.1 relates to bad debts. Following our decision in Asst. Year 2003-04 and the judgment of Hon. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and loss account or by reversal of an earlier provision directly connected with the normal business activity can only be part of business income and cannot be taken to head other sources . If this receipt is to be eliminated for 80IA computation then by the same logic it will have to be eliminated from the income computation as well. To this extent, the action of the AO in including the said receipt under other sources , is incorrect. Further the treatment by way of disallowing a provision in earlier year was only tax neutral in view of 80IA deduction and hence the subsequent write back should be either excluded in toto from the computation process or should be considered both under the head business as well as for deduction u/s 80IA where again the treatment should be tax neutral. In any case, eliminating the said write back and taking it to the head other sources is not called for and hence not upheld. The AO will recomputed the income under the head other sources and allow deduction u/s 80IA in the light of the above directions. There is no question of double benefit u/s 80IA as claimed by the AO inasmuch as the income under the head business is increased in the first ..... X X X X Extracts X X X X X X X X Extracts X X X X
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