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2013 (11) TMI 724 - AT - Income TaxDeduction u/s 80IB of the Income tax act - Assessee is engaged in the business of manufacturing aluminum foil for flexible packaging materials - The unit is located in Daman which began its manufacturing activities prior to 31-3-2004 thereby being eligible for deduction under section 80IB of the Act - Manufacturing activities had commenced before 31.3.2004 - Deduction claimed under section 80IB was denied by the AO on the ground that the assessee commenced production after 31.3.2004 – Held that:- The Assessing Officer has not been able to establish that there was no production and no sales/job work claimed to have been made before March 2004 by the appellant. The job work carried out in the months of February 2004 and March, 2004 is duly shown in Sales Tax returns filed by the Firm. The Sales Tax authorities have completed the assessment also. In the appellant's case, It was further seen that the goods produced at the factory in the months of February 2004 and March 2004 were sold to various pharma companies by M/s. Flex Art Goa after paying the excise duty and all these sales are recorded in the Excise records and excise returns have been filed by M/s. Flex Art Goa. It is also a fact that Ess Dee Aluminium was having factory license prior to commencement of this business. The partnership Firm has permanent registration as 831 and registration with Sales Tax Authorities. In summary, what is required to be fulfilled for eligible deduction u/s.80-IB is not in dispute – Decided in favor of Assessee. Incomes not eligible for deduction u/s 80IB of the Income Tax Act - Assessee claimed deduction under section 80IB without excluding the interest income - Assessee contended that he has also incurred interest expenses, and therefore, only net interest, if any, ought to be excluded for computing the business income derived from eligible industrial undertaking, and therefore, not eligible for deduction under section 80IB of the Act – Held that:- Interest on FDRs cannot be held as income derived from industrial undertaking in view of the decision of the Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. Vs Commissioner of Income-tax, [2003 (4) TMI 3 - SUPREME Court] - The only contention by the assessee before us is netting of interest income with the interest expenditure of the assessee - When deposit in FDRs is made with the borrowed funds, then, only net income can be said to be the interest income derived from FDRs - In the instant case, the AO has categorically recorded that the assessee has brought no material before him to show that borrowed funds were utilized for making the FDRs - Assessee could not bring any material to show that there was any nexus between the interest expenditure and the interest income earned on FDRs. by the assessee – Decided against the Assessee. Debts written back are eligible for deduction under section 80IB of the Act - Assessee has written off sundry credit balance, and added the same to the income of the current year. The assessee has claimed deduction under section on the same income – Held that:- Sundry credit balance written back are the amounts payable to the creditors for purchases made by the assessee for raw-material used in the production of the goods for the eligible undertaking of the assessee - Thus, in the year of purchases, the income from the eligible undertaking of the assessee is reduced, on account of the purchases debited in the profit & loss account, and the corresponding credit, as payable to the sundry creditors. Therefore, in the year of writing back of these liabilities, as not payable, and credited the same amount in the profit & loss account, the character of the receipt remains to be profit to the eligible undertaking, and hence, eligible for deduction under section 80IB of the Act – Reliance has been placed on the decision of the Hon'ble jurisdictional High Court in the case of CIT Vs. Prathan Developers, [2013 (8) TMI 112 - GUJARAT HIGH COURT] – Decided in favor of Assessee.
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