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2016 (5) TMI 1099 - ITAT PUNE

2016 (5) TMI 1099 - ITAT PUNE - TMI - Addition of interest received under the head “Income from other sources” - Entitlement to claim benefit of netting off of interest - Held that:- The assessee in the present case has furnished the details of term loan disbursed to the assessee by PNB Housing Finance and advanced by the assessee to show the nexus between two. These details were not furnished by the assessee before the authorities below. In our considered opinion this issue needs a revisit to t .....

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from sale of scrap - Held that:- Allowability of deduction u/s 80-IB in respect of income from machining charges and sale of scrap is decided in favour of the assessee. The assessee is eligible to claim deduction u/s. 80IB(10) in respect of income from sale of scrap. - Decided in favour of assessee - ITA No. 1888/PN/2014 - Dated:- 22-4-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Krishna V. Gujarathi For The Revenue : Shri Hemant Kumar C. Leuva ORDER PER VIKAS AW .....

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preciating the facts of the case that the Interest received ₹ 23,24,436/- on loans and advances is to be net off against interest paid on borrowed funds from banks as the assessee has utilized borrowed funds for advancing such loans on interest. The appellant hereby prays that the addition may please be deleted. 2) On the facts and in the circumstances of the case and in law, the honourable CIT (Appeals)-II, Pune erred in confirming the disallowing of the claim of deduction u/s. 80IB(10) o .....

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nd is engaged in the business of construction of building and development of real estate. The assessee filed its return of income for the assessment year 2010-11 on 14-10-2010 declaring total income of ₹ 31,520/-. The case of the assessee was selected for scrutiny and accordingly notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) was issued to the assessee on 30-08-2011. During the course of scrutiny assessment proceedings, the Assessing Officer observed t .....

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ncome from sale of scrap ₹ 1,17,295/-. Aggrieved by the assessment order dated 25-03-2013, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) partly accepted the claim of assessee in respect of netting off of interest received and interest paid and restricted the addition to ₹ 23,24,436/-. However, the Commissioner of Income Tax (Appeals) rejected the contentions of the assessee with respect to disallowance of cl .....

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r concerns. The assessee is not having any other source of income from where advances can be given. A close perusal of the transactions would show that they are back to back transactions. To substantiate its claim, the assessee filed a summary of the loan disbursed and the loans advanced by the assessee. The ld. AR submitted that the loans advanced on various dates are either on the same date or just after the date of loan disbursed by the PNB Housing Finance to the assessee. The ld. AR further .....

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below have failed to appreciate the fact that the said income is directly relatable to the housing project constructed by the assessee and the assessee is entitled to claim deduction u/s. 80IB(10) on the said project. The ld. AR in support of his submissions placed reliance on the decision of Pune Bench of the Tribunal in the case of Preetam Enterprises Vs. Jt. Commissioner of Income Tax in ITA Nos. 544, 545 and 613/PN/2009 for the assessment years 2004-05, 2005-06 and 2006-07 decided on 29-04- .....

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r not furnishing such details in the first instance before the Assessing Officer and thereafter during the first appellate proceedings. The ld. DR prayed for dismissing the appeal of the assessee. 6. We have heard the submissions made by the representatives of rival sides and have examined the orders of the authorities below. We have also considered the decision on which the ld. AR of the assessee has placed reliance. The first ground raised in the appeal relates to the addition of interest rece .....

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ssessee is not the income of the assessee taxable under the head Income from other sources . The assessee is entitled to claim benefit of netting off of interest. In support of his submissions, the ld. AR of the assessee has placed on record the details of term loan disbursed to the assessee and the amounts advanced to other concerns to show that the loan amounts received and advanced are back to back transactions and have direct nexus. 7. The Co-ordinate Bench of Tribunal in the case of ITO Vs. .....

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is regarding allowability of the interest income of ₹ 71,75,503/- from the interest expenditure on the basis of nexus between the interest expenditure and the interest income. From the details furnished by the assessee we find the assessee had shown interest income of ₹ 1,09,94,741/- and interest expenditure of ₹ 1,10,01,275/- for the financial year ending on 31- 03-2003. The AO in the assessment order held that the assessee could establish such nexus only to the extent of R.38 .....

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essee on the ground that the AO has not examined the entire details furnished by the assessee and has been guided by the heading of the expenses such as Advertisement/Miscellaneous Expenses and concluded that interest expenditure includes number of other expenses whereas interest received includes certain miscellaneous expenses written off as nolonger payable. We find the Ld.CIT(A) has given a finding on the basis of the details filed by the assessee that the assessee has received interest amoun .....

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scellaneous expenditure in the ledger account contains the entire details of expenditure which includes the interest expenditure and also the receipt of interest and dividend for F.Y. 2001- 02 wherein the journal entries 447 and 448 are also mentioned could not be controverted by the Ld. Departmental Representative. The submission of the Ld. Counsel for the assessee before us that the loan obtained from the bank and given to the various concerns are back to back transactions could not be controv .....

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ies below. In our considered opinion this issue needs a revisit to the file of Assessing Officer for verification of the loans received and same amount being advanced to other concerns. If the assessee is successful in establishing the link between the loan amount received by the assessee and the loan advanced, the assessee shall be entitled to the benefit of netting off of interest amount. Accordingly, the first ground of appeal of the assessee is allowed for the statistical purpose. 9. The sec .....

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of the assessee by holding as under: 6.1 The issue involved in this appeal is in respect of claim of sec. 80-IB in respect of income from machining charges (job work) and scrap sale. The issue of claim of deduction u/s 80- IA on income from machining and scrap sale is covered by the decision of B Bench of the Tribunal in the case of Ramchandra Enterprises in ITA No. 1066, 1067/PN/2008 and 353/PN/2009 wherein the issue has been decided as under: 5. The ld. CIT(A) has appreciated this submissions .....

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sales. In this regard the submission of the assessee was that the scrap is generated during manufacturing activity hence, the vehement submission was that the generation of scrap was incidental to the manufacturing activity. Hence the argument was that the income earned on sale of scrap was income from business of an eligible industrial undertaking hence entitled for 80IB deduction. A relevant portion of the submission pertaining to sale of scrap is reproduced below:- 3.1 Income from Sale of Sc .....

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T (90 TTJ 65). In this case issue involved was deduction u/s 80HH in respect of receipts from sale of scrap. Following the decision of Hon. Madras High Court in the case of Fenner (India) Ltd. Vs. CIT (241 ITR 803) the Hon. ITAT held that profit from sale of the scrap material was eligible for deduction u/s. 80HH. 6. On the basis of the above facts we have examined few precedents namely Fenner (India) Ltd., 241 ITR 803, Wheels (I) Ltd. 141 ITR 745. The observation of the courts were that a deduc .....

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