TMI Blog2010 (10) TMI 1201X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 58,449/- The ld. CIT(A) erred in confirming the disallowance without appreciating, that the premises had been exclusively for commercial use. There the claim of the appellant may be allowed; 3. Levy of penal interest Appellant, on merits, denies its liability to penal interest 3. The first grounds of appeal regarding exclusion of the income from interest, refund of custom duty, rent and foreign exchange fluctuation for the purpose of deduction under section 80IB. The assessee claimed deduction u/s 80IB to the extent of ₹ 29,02,642/-. The AO noticed from the record that the claim of deduction of ₹ 29,02,642 was denied for the assessment year 2002-03 which was also confirmed by the CIT(A). Thus, the AO denied deduction under section 80IB to the assessee. Further, the AO was of the view that even if at all it is considered at the appellate stage that the assessee is eligible for deduction under section 80IB in that case the interest income, refund of custom duty, rent receipt and foreign rate difference are not eligible for deduction u/s 80IB because they do not form the part of the manufacturing activity of the assessee. 4. On appeal, though the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd reduction in the purchase price, therefore, the same has direct nexus to the cost of the material and eligible for deduction under section 80IB. He has riled upon the decision of the Apex Court in the case of ONGC V/s CIT reported in 322 ITR 180(SC). 9. On the other hand, the learned DR has submitted that the interest income earned on the fixed deposits has no direct nexus with the business activities of the assessee. He has further contended that the interest was earned on the fixed deposits, therefore, even the fixed deposits required for getting cash credit facilities, the income has no nexus with the undertaking of the assessee. He has relied upon the decision of the Honourable Supreme Court in the case of Liberty India V/s CIT reported in 317 ITR 218(SC). Similarly, the rent received by the assessee is only regarding the let out of the premises to the other concerned. Therefore, the rent has no direct nexus with the business activities of the assessee s undertaking, and accordingly, not entitled for the deduction u/s 80IB. As regards, the refund of customs duty and foreign exchange fluctuation, he has relied upon the orders of the lower authorities. 10. We have cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt and it was not a case of fixed deposits. Moreover, the decision in the case of Liberty India V/s CIT (supra) was not considered by the Tribunal in the said decision. Similarly, in the case of Swiss Jewels Ltd V/s CIT (supra), the interest earned was out of current account, therefore, it was held eligible for deduction under section 80IB. Whereas in the case of Liberty India V/s CIT (supra), the Hon. Supreme Court has held that the duty draw back DEPB benefit, rebates etc., cannot be credited against the cost of manufacture of the goods debited in the profit and loss account for purposes of section 80IA/80-IB as such remissions (credits) would constitute independent source of income beyond the first degree nexus between the profit and the industrial undertaking. We are of the view that the interest income earned from the fixed deposits made by the assessee though for availing the banking facilities for the business purposes but the same constitutes the independent source beyond the first degree nexus between the profit and industrial undertaking. Accordingly, we hold that the interest income is not entitled for deduction under section 80IB. As regards refund of customs duty is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under section 80IB. 14. As regards, foreign rate fluctuations gains, it is undisputed fact that the foreign rate fluctuation gain was earned by the assessee on the import of the marbles. When the purchase price of the marbles was reduced due to the application of rate fluctuation then it has a direct nexus with the business activity of the assessee undertaking and is eligible for deduction under section 80IB. In the case of ONGC V/s CIT (supra), the Hon. Supreme Court has held as under : 13. We are of the opinion that the ratio of the said decision with which we are in respectful agreement, squarely applied to the facts at hand, and therefore, the loss claimed by the assessee on account of fluctuation in the rate of foreign exchange as on the date of balance sheet is allowable as expenditure under section 37(1) of the Act 15. In view of the decision in the case of ONGC V/s CIT (supra) of the Hon. Supreme Court, we decide this issue in favour of the assessee and against the revenue. Accordingly, the assessee is entitled for deduction under section 80IB in respect of foreign exchange rate fluctuation. 16. The next ground regarding, the deprecation on resi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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