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2017 (4) TMI 1612 - AT - Income TaxDeduction u/s.80IB(5) - manufacture of a production of an article - profits derived by the Assessee from manufacture and sale of poultry feed - Whether profit derived from the activity of manufacture of poultry feed was entitled to deduction u/s.80IB(5) ? - HELD THAT:- This issue has duly been decided by this Bench in assessee's own case in which, the similar issue has arisen 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. Tribunal considered the decision rendered in the case of Venkateswara Feeds [2012 (6) TMI 683 - ITAT HYDERABAD] 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.e. from mixing, grinding till the pelletisation. The raw materials once consumed could not be reconverted into the same position. Its utility gets changed. The prime raw materials such as, maize, soya oil, rice bran, etc. can no more be regarded to be the rice bran, soya oil, maize. We are of the view that the issue in the Revenue's appeal is squarely covered against the revenue by the decision of the Coordinate Bench of this Tribunal in assessee's own case for the earlier years - grounds of appeal raised by the Revenue in all the appeals on this issue are dismissed. Interest income should be excluded from the profits of the business on which deduction u/s 80IB(5) - 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. We therefore uphold the order of CIT(A) on this issue and dismiss ground nos. (iv) and (vi) raised by the revenue. Disallowance u/s 14A read with rule 8D(2)(ii) and 8D(2)(iii) only on the investment in the shares of Punjab National Bank - HELD THAT:- As rightly held by CIT(A) disallowance under Rule 8D(2)(ii) (indirect interest expenditure) cannot be sustained in the light of the uncontroverted finding of the CIT(A) that assessee had sufficient interest free funds which were more than the value of investments which are likely to yield tax free income. As far as disallowance under Rule 8D(2)(iii) is concerned it is only the investment which yield dividend income that should be considered for the purpose of applying the formula as held by this tribunal in the case of REI Agro Ltd. 2014 (4) TMI 713 - CALCUTTA HIGH COURT] which has since been affirmed by the Jurisdictional Calcutta High Court. In view of the above we find no merits in the ground raised by the revenue. Accordingly we dismiss ground no.(vii) raised by the revenue.
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