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TMI Blog2012 (7) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... at Learned CIT(Appeals) has erred in confirming the disallowance of deduction under sec. 80-IC of the Income-tax Act, 1961 on an amount of Rs.48,41,738 which is an interest income earned by the assessee. The revenue in its appeal has pleaded that the Learned CIT(Appeals) has erred in deleting a sum of Rs.50,000 from alleged total interest income on the ground that administrative expenses paid for earning gross interest income should be allowed as a deduction to the assessee and thereafter net interest income has to be disallowed from the eligible profit for computing deduction under sec. 80-IC of the Act. 2. Since both the grounds taken by the respective parties are interconnected to each other, therefore, we proceed to dispose of both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erived from the business of the undertaking or enterprises. At the most, such income can be said to be attributable to the business of the undertaking or enterprise. Reliance is also placed upon the judgment of Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. vs. CIT 262 ITR 278 (Supreme Court) where it was held that interest earned by industrial undertaking on deposit with electricity board does not qualify for earlier u/s. 80-HH as it is not derived from the industrial undertaking. Accordingly, the claim for deduction u/s. 80-IC on this amount of Rs.48,41,738 is disallowed and added back to the total income declared". 4. On appeal, Learned CIT(Appeals), in principle, concur with the Assessing Officer, but observed that assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on borrowed funds should be taken into account despite the fact that only profits and gains from an industrial undertaking which manufactures articles was only allowable as per the said section?" 6. He pointed out that the Hon'ble High Court after putting reliance upon the judgment of the Hon'ble Delhi High Court in the case of Shri Ram Honda Power Equip (supra) as well as upon the decision of CIT Vs. Gokuldas Exports rendered by the Hon'ble Karnataka High Court in ITA No.25/23 has decided this issue in favour of the assessee and observed that only net interest expenses is to be excluded. 7. Learned DR on the other hand relied upon the order of the Assessing Officer and submitted that assessee failed to give any flow chart indicating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision, it is the net interest income which has to be excluded. The details are not on the record. Learned first appellate authority on an ad hoc basis allocated 50,000 rupees towards administrative expenses for earning interest income. This allocation is also impugned by the revenue in its appeal. Faced with this difficulty, we deem it appropriate to remit the issue to the file of the Assessing Officer for a limited purposes. The assessee shall submit exact details demonstrating the expenses who have direct nexus with earning of interest income. Learned Assessing Officer shall determine such expenses and thereafter worked out the exact amount of interest income which is to be excluded from the computation required to be made for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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