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2021 (9) TMI 226 - AT - Income TaxDeduction u/s. 80IA(4)(iii) - interest income received - first contentions raised that interest was actually paid to the assessee company by M/s. Salarpuria Properties Pvt. Ltd. and although this factual position was clearly mentioned by the Assessing Officer, this fact was accepted by the Ld. CIT(A) but while deciding the issue related to the disallowance u/s. 80IA, the same was ignored/overlooked by - HELD THAT:- We accept the contention raised by the Ld. Counsel for the assessee and direct the Assessing Officer to consider only the amount of interest received by the assessee company on bank fixed deposits for making disallowance u/s. 80IA of the Act. Income derived from - As held in the various judicial pronouncements, referred to and relied upon by the Ld. CIT(A) in his impugned order including that of the Hon'ble Supreme Court, the expression "derived from" envisages immediate nexus or first degree connection with the business of the eligible undertaking inasmuch as, the immediate source of such income should be a business of the undertaking in order to be eligible for deduction u/s. 80IA of the Act. In the present case, the immediate source of interest income was the fixed deposits kept by the assessee with the bank and not the business of the eligible undertaking of the assessee company and the same, in our opinion, is not eligible for deduction u/s. 80IA, as rightly held by the authorities below. Only the net interest income after adjustment of interest paid can be considered for disallowance u/s. 80IA - We note that the claim of the assessee for adjustment of interest can be allowed only when there is inexplicable link between the interest income earned by the assessee and the corresponding interest paid. Since the authorities below have not verified this aspect, we restore this issue to the file of the Assessing Officer for the limited purpose of verifying as to whether there is any inexplicable link between the interest paid and the interest earned by the assessee on bank deposits and recompute the disallowance accordingly on such verification, in accordance with law. Ground No. 1 & 2 of the assessee's appeal are thus partly allowed. Addition while computing the book profits u/s. 115JB of the Act on account of adjustment of depreciation - HELD THAT:- Assessee submitted that the direction give by the Ld. CIT(A) to the Assessing Officer on this issue is little confusing inasmuch as, when the depreciation as worked out under the Companies Act is debited by the assessee company to its profit and loss account, the direction should have been given by the Ld. CIT(A) to verify this aspect alone. He has also invited our attention to the profit and loss account of the assessee company listed at page 43 of the paper book and pointed out that the depreciation as worked out under the Companies Act was actually debited by the assessee company to the profit and loss account. We accordingly modify the direction of the Ld. CIT(A) as given in his impugned order and direct the Assessing Officer to verify the claim of the assessee of having debited the depreciation as computed under the Companies Act to the profit and loss account and decide this issue in accordance with Explanation 1 to Section 115JB of the Act. Ground No. 3 of the assessee's appeal is accordingly treated as allowed for statistical purposes.
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