TMI Blog2012 (11) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... business income. They have also added a cavet as per which, if in a given case, the Assessing Officer has held that interest income is business income and this aspect has not been challenged by the Department, then that question can not to be permitted to be re-opened and then the only question will be if netting should be allowed. Since this aspect is squarely covered in favour of Revenue and against the assessee by the judgment of Hon’ble Delhi High Court, this aspect is decided against the assessee and Ground of netting off of the assessee is rejected because in the present case, AO has treated the interest income as income from other sources. On netting aspect,it is held by Hon’ble Delhi High Court in this very case that to the extent the assessee can establish the nexus between interest payment and interest income by showing that interest expense was incurred for the purpose of earning interest income then to that extent netting should be allowed and only such net interest income should be considered for exclusion to the extent 90% from business profit as per clause (baa) of the Explanation to u/s 80HHC.- Decided in favor of assessee. Processing charges - deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h appeals are cross-appeal filed by the assessee and Revenue directed against the order of Ld. Commissioner of Income-tax (Appeals)-I Baroda dated 28- 09-2007 for the assessment year 2004-05 and for the sake of convenience, both are being disposed off by way of this common order. First we take up the appeal of assessee in ITA No.4497/Ahd/2007. 2. Ground No.1 is regarding disallowance of Rs.3 lakh paid to directors on account of Guarantee Commissions. 3. It was submitted by Ld. AR of the assessee that this issue is squarely covered by the decision of Tribunal rendered in the assessee s own case for AY 2006-07 in ITA No.738/Ahd/2009 dated 05-06-2009. He submitted a copy of the Tribunal order. 4. Ld. DR of the Revenue supported the orders of authorities below. 5. We have considered the rival submissions, perused the materials on record and gone through the Tribunal order cited by Ld. AR of the assessee. We find that in that year also, the issue involved before the Tribunal was same i.e. disallowance of guarantee commissions paid to directors on account of guarantee given by them to the bank. The Tribunal has followed the judgment of Hon ble Rajasthan High Court rendered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of availing of credit facilities from the bank, it does not have a nexus with the export business and therefore, has to necessarily be treated as income from other sources and not business income. They have also added a cavet as per which, if in a given case, the Assessing Officer has held that interest income is business income and this aspect has not been challenged by the Department, then that question can not to be permitted to be re-opened and then the only question will be if netting should be allowed. Since this aspect is squarely covered in favour of Revenue and against the assessee by the judgment of Hon ble Delhi High Court, we decide this aspect against the assessee and Ground No.2 of the assessee is rejected because in the present case, the AO has treated the interest income as income from other sources. 10. On netting aspect i.e. regarding ground No.3, it is held by Hon ble Delhi High Court in this very case that to the extent the assessee can establish the nexus between interest payment and interest income by showing that interest expense was incurred for the purpose of earning interest income then to that extent netting should be allowed and only such net in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80HHC. It was held by Hon ble apex court that such processing charges are hit by clause (baa) of Explanation to Section 80HHC and therefore 90% of the same should be excluded from the business profit and such receipts should also be included in total turnover for the purpose of computing deduction allowable to the assessee u/s.80HHC. By respectfully following this judgment of Hon ble apex court, ground No.4 and 5 of the assessee are rejected. 15. Regarding ground No.6 i.e. regarding the claim for assessee for netting of expense against the receipt of after sales service charges of Rs.8,32,212/-, we feel that the same judgment of Hon ble Delhi High Court rendered in the case of Shri Rama Honda Power Equip (supra) should be followed and to the extent, the assessee can prove direct nexus of any expenses incurred for earning this after sales service charges, netting should be allowed and only such net service charges should be considered for excluding 90% from business profit as per Explanation (baa) to Section 80HHC. Ground No.6 of assessee is allowed for statistical purposes. 16. In the result, appeal of assessee is partly allowed. Now we take up the Revenue s appeal in ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances, the expenditure incurred by the appellant is held to be revenue in nature. The disallowance made is cancelled. The Assessing Officer is directed to withdraw depreciation already allowed while giving effect to this order. 23. In view of this clear finding of Ld. CIT(A) that the expenditure incurred were for repairs and overhauling of assets and hence, is in the nature of current repairs, we do not find any reason to interfere in the order of Ld. CIT(A) of this issue also because Ld. DR of the Revenue could not controvert this finding of Ld. CIT(A). Ground No.2 of Revenue is also rejected. 24. As per ground No.3, the grievance of the Revenue is regarding the order of Ld. CIT(A) as per which, he has held that no exclusion is required from business profit on account of 90% of income from self generated electricity and write back of warranty provision under clause (baa) of the Explanation to Section 80HHC of the Act. 25. On this issue also, Ld. DR of the Revenue supported the assessment order, whereas Ld. AR of the assessee supported the order of Ld. CIT(A). 26. We have considered the rival submissions, perused the materials on record and gone through the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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