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M/s Airen Metals Pvt Ltd Versus The ACIT, Jaipur

Disallowance of the deduction claimed u/s 80IB on interest received on FDR - "Income from other sources" or "income from business and profession" - 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 undertaking, thus he treated the interest income as Income from Other sources - Held that:- Almost all the FDRs were issued in favour of the assessee by the Bank prior to the assessment year 2008-09 as .....

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resent 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 extended to the assessee by the AO for the A.Y. 2006-07 for the present assessment year .....

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re bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be deleted. 2) The ld. CIT (A) erred in law as well as on the facts of the case in confirming the disallowance of the deduction claimed u/s 80IB on interest received on FDR amounting to ₹ 16,97,627/- by treating the said income under the head "Income from other sources" instead of "income from business and profession", which is contrary to the provision o .....

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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, bill .....

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notice to the assessee asking to show cause as to why this amount should not be added to the total income of the assessee. 4. Being aggrieved, the assessee carried the matter before ld. CIT (A) who had dismissed the appeal of the assessee by observing as under:- " I have considered the facts of the case and the submissions made. I am unable to agree with the contention of the A/R on the ground that interest received from bank on account of FDR s was not a business income of the appellant. .....

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d that all the interest income earned on the FDRs is a business income. It was submitted by the ld. A/R that the investment in the subjected 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 materi .....

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the assessee is also paying the interest on the utilization of cash credit limit and for issuance of Letter of Credit in favour of the suppliers. The interest paid by the assessee on the utilization of the L/C and CC Limit , has been claimed by the assessee as a business expenditure. It was submitted by the ld. A/R that these arguments of the assessee were not considered by the AO and therefore, the AO made the disallowance of deduction u/s 80IB of ₹ 16,97,627/-. 5. Lastly, the ld. A/R of .....

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derived from industrial undertaking. Therefore, deduction under section 80IB etc. is not allowable. However, we find that netting of interest i.e. interest expenditure and interest income has to be taken into consideration while arriving at the conclusion that whether interest earned is income from other sources or is liable to be set off against each other. It was submitted by ld. A/R that for making FDR in the bank for the purpose of over draft facility the assessee borrowed funds from the pr .....

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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 interest if there is a direct nexus and then consider the interest income for the purpose of disallowing deduction under section 80IB if interest income exceeds from the interest expenditure. We order accordingly." 7. It was also contended by the ld. A/R of the assessee that after passing of the order by this Tribunal, the ld. AO has allowed the deduction vide o .....

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had paid interest of ₹ 2,01,780/-. Therefore, the company had borne excess interest of ₹ 84,957.91 Looking to the submissions given by the assessee and the directions of the Hon ble ITAT the interest income being in the negative after netting in the case of the assessee, therefore deduction u/s 80IB is computed after considering the interest income.". 8. The ld. Counsel for the assessee has further pointed out the assessment order for the A.Y. 2009-10 whereby the AO has allowed .....

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