TMI Blog2013 (5) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 10B - Exclusion of interest received on margin money - Held that:- Applying the case of ACG Associated Capsules P. Ltd [2012 (2) TMI 101 - SUPREME COURT OF INDIA] to this case AO directed that interest income has to be set off against interest expenditure. If the interest expenditure is less or the interest income is more then the difference of excess interest received by the assessee is to be reduced while calculating the deduction under Section 10B. Sale of bardana and waste material generated during course of production of industrial undertaking has a direct and immediate nexus with industrial undertaking and, therefore, deduction under Section 80IB on the amount of sale of bardana and waste material generated during course of prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood India Pvt. Ltd. and Rs.70,00,000/- to Shri Narayan Das J.. Pagrani. The AO observed that the assessee has borrowed funds and out of borrowed funds the assessee has made advances of Rs.75,00,000/-. Accordingly, he disallowed a sum of Rs.6 lakhs at the rate of 8%. 3.2 In appeal, learned CIT(A) restricted the disallowance to Rs.47,869/- by observing that the AO has not worked out the disallowance properly as proportionate disallowance has to be made. Accordingly, he restricted the addition to Rs.47,869/-. 3.3 After considering the submissions and perusing the material on record, we found that the assessee deserves to succeed on this issue in part. It is seen that a sum of Rs.5 lakhs was advanced in earlier year to M/s Kabisco Agro Food ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (1) of Explanation (baa) to section 80HHC for determining the profits of the business. The ratio of the Hon'ble Supreme Court is squarely applicable on the facts of the present case. Therefore, we direct the AO that interest income has to be set off against interest expenditure. If the interest expenditure is less or the interest income is more then the difference of excess interest received by the assessee is to be reduced while calculating the deduction under Section 10B of the Act. We order accordingly. 5. Regarding sale proceeds of Bardana of Rs.13,52,862/-, it is seen that in view of the decision of the Special Bench, the sale proceeds on account of sale of Bardana cannot be reduced while computing deduction under Section 10B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO disallowed the deduction claimed under Section 10A 10B of the Act. In fact the AO disallowed the entire deduction under Section 10B(4) by observing that the assessee had not filed audit report under Form No.56G. However, this report was filed before the CIT(A) and copy of the same was sent to the AO for his objection. As per the order of the CIT(A), the AO vide his remand report dated 17-8-2011, has initially objected to the admission of additional evidence, however, on the basis of merit, the AO has not filed any objection. The AO also raised a fresh ground denying the deduction under Section 10B of the Act because for the reason that the business of the assessee amounted to reconstruction of an existing business. In rejoinder, detai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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