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2017 (3) TMI 1467 - AT - Income TaxDisallowance of deduction under section 80IB(11A) - Discount amount - Held that:- Discount is an item by which the assessee has reduced its cost of purchase, i.e. cost of material has been saved which has resulted a little higher profit. Thus, this discount has a direct nexus with activities of the assessee and it is treated as business profit. Accordingly, we allow the claim of the assessee and direct the AO to consider sum as eligible for grant of deduction under section 80IB(11A) of the Act. Interest received from PGVCL - Held that:- Assessee conceded that in view of the judgment in the case of CIT Vs. Nirma Ltd.(2014 (10) TMI 388 - GUJARAT HIGH COURT ) only net interest income is to be excluded for grant of deduction under section 80IB. We remit this aspect to the AO. He shall exclude net interest income from PGVCL for admissibility of deduction under section 80IB. Interest subsidy received from Govt. of Gujarat - Held that:- Thus issue is squarely covered in favour of the assessee by the decision of the Hon’ble Supreme Court in the case of ACG Associated Capsules P.Ltd. vs. CIT (2012 (2) TMI 101 - SUPREME COURT OF INDIA). The AO himself has not treated the interest income as income from other sources. He treated it as a business income, but did not grant deduction under section 80IB(11) of the Act. Since this interest income has direct nexus with the activities of the assessee, it only goes to reduce the expenditure incurred on the loans availed from the bank. The assessee could reduce the net interest expenditure. In other words, if bank has charged 12% and it got subsidy of 5%, then it had charged the rate of 7% on the profit & loss account, then it would have enhanced its profit to this extent, and therefore, this interest subsidy is to be considered as eligible for grant of deduction under section 80IB(11) of the Act. Eligible profit to claim deduction under section 80IB(11) - interest payable to the partners on their capital contribution and remuneration reduction - Held that:- Direct the AO not to reduce interest payable to the partners on their capital contribution and remuneration from the eligible profits for grant of deduction under section 80IB because, it is the discretion of the assessee to pay interest and remuneration to partners or not.
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