TMI Blog2015 (10) TMI 938X X X X Extracts X X X X X X X X Extracts X X X X ..... FDRs continues to be utilized for the same purposes in the assessment year under consideration. Even this issue was raised for the assessment year 2006-07, however, the AO had allowed the deduction after concluding that there was nexus between the interest earned and interest paid. In the assessment year 2008-09 i.e. subject matter of the present appeal, the assessee has earned interest of ₹ 16,97,627/- and has paid the interest of ₹ 26,10,761/-. Thus there was no net interest received by the assessee. In view of the above said discussion and in view of the fact that there is no change in the circumstances for the AY 2008-09 vis-a-vis preceding years i.e. 2006-07 & 2007-08, we therefore, extend the benefit which has been ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of law and facts, may kindly be deleted in full. 2. Brief facts of the case are that the assessee is engaged in the business of trading and manufacturing of Aluminum and Copper Strips. During the A.Y. 2008-09 the assessee has filed its return declaring total income of ₹ 3,00,38,160/- on 30.09.2008 along with Audit Report in Form No. 3CB 3 CD. The case of the assessee was selected for scrutiny accordingly notices under section 143(2)/142(1) were issued from time to time. Lastly the case was fixed for hearing on 25.10.2010. The assessee produced books of accounts, bills and vouchers etc. which were test checked. 3. During the year under consideration the assessee has declared gross profit @ 4.48% on turnover of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FDRs of ₹ 172,30,000/- were made from the CC account. Further it was submitted, the paid up capital along with reserves were already stood utilized for the purpose of assets as the company is very old. The assessee was required to purchase the raw material against the L.C (Letter of Credit) or against the advance payment to the suppliers of raw material. For the purposes of issuing the L/C, as per the norms, the assessee is required to place the FDRs of suitable amount/margin money as security with the issuing banker. It was submitted that, the FDRs were deposited with the bank as a business exigencies and on account of the compulsion. The ld. A/R has further submitted that the assessee is not having any surplus money and in fact i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. A/R that for making FDR in the bank for the purpose of over draft facility the assessee borrowed funds from the private parties. The assessee had incurred expenditure on account of loans taken from various parties more then the interest earned on FDRs. There is a direct nexus between earning and expenditure of income. Therefore, netting of interest has to be allowed first. These submissions of the assessee has not been considered by the AO while denying deduction under section 80IB. There is also no dispute that netting of interest has to be allowed if there is inextricable link as held by the Special Bench of the Tribunal in case of Lal Sons., 89 IOTD 25 (SB). Accordingly, we set aside this issue to the file of AO to allow netting of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the claim of deduction by the AO. 9. The ld. A/R of the assessee has submitted that there is no change in business activities of the assessee and the interest accrued from the FDRs, was continued to be less than the interest paid to the banks for availing the Cash Credit Limit and letter of credit. In fact, it was also pointed out from the paper book that thee is a clear cut nexus between the interest received and the interest paid. 10. On the other hand, the ld. D/R supported the order of ld. CIT (A). 11. We have heard rival contentions and perused the material on record. The AO denied the claim of deduction u/s 80IB taking the view that income earned by way of interest from FDRs cannot be treated as income from industrial under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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