TMI Blog2020 (6) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirm the stand of Ld. CIT(A) in the impugned order. Interest on fixed deposits since the accrual / source of interest would be traced to investment made by the assessee with the Banks in the shape of FDRs notwithstanding the motive which led to make those investments. The assessee s only source of income may be the earnings from eligible business but the accrual of interest could not be said to have any nexus with the eligible business rather the same would be traced to investments made by the assessee with the Bank. The words derived from would not cover sources of income beyond first degree. Therefore, the action of Ld. CIT(A) in bringing to tax the same, is upheld. Consequently, ground No. II stands dismissed. Depreciation on Terminal Rights - HELD THAT:- This issue is covered in assessee s favor by the cited decision of the Tribunal for AY 2010-11 [ 2018 (3) TMI 1865 - ITAT MUMBAI] wherein it was held that since prescribed rate of depreciation as per Rule is 25%, the assessee would be entitled for the same. Facts are parimateria the same in this year. Therefore, taking the same view, we direct Ld. AO to allow depreciation at prescribed rate of 25%. Order being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the Income tax Rule is 25%. 2. We have carefully heard the rival submissions, perused relevant material on record including judicial pronouncements as cited before us. Our adjudication to the grounds of appeal would be as given in succeeding paragraphs. It is admitted position before us that Ground-3 of the appeal is covered by the decision of this Tribunal in assessee s own case for AY 2010 -11, ITA No.3594/Mum/2016 order dated 16/03/2018 (which has been authored by one of us). A copy of the order has been placed on record. 3. Facts on record would reveal that assessee being resident corporate assessee stated to be engaged asport terminal operator was assessed for year under consideration u/s. 143(3) on 29/02/2016 wherein the income of the assessee was determined at ₹ 244.03 Lacs under normal provisions after certain additions / disallowances / adjustments as against returned income of ₹ 8.59 Lacs e-filed by the assessee on 30/11/2012. TheBook Profit u/s.115JB were determined at ₹ 2499.16 Lacs after sole adjustment of provision for slow-moving stock. 4.1 For determination of issues, the interpretation of the provisions of Sec. 80-IA shall fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government of india or from section 75 of the Customs Act, 1962. Hence, according to the Department, in the present cases, the first degree source is the incentive scheme/provisions of the Customs Act. In this connection, Department places heavy reliance on the judgment of this Court inSterling Food's case (supra ). Therefore, in the present cases, in which we are required to examine the eligible business of an industrial undertaking, we need to trace the source of the profits to manufacture. (see CIT v.Kirloskar Oil Engines Ltd. [1986] 157 ITR 762(Bom.). 15. Continuing our analysis of sections 80-IA/80-IB it may be mentioned that subsection (13) of section 80-IB provides for applicability of the provisions of sub-section (5) and sub-sections (7) to (12) of section 80-IA, so far as may be, applicable to the eligible business under section 80-IB. Therefore, at the outset, we stated that one needs to read sections 80-I, 80-IA and 80-IB as having a common Scheme. On perusal of subsection( 5) of section 80-IA, it is noticed that it provides for manner of computation of profits of an eligible business. Accordingly, such profits are to be computed as if such eligible business is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid decision of Hon ble Delhi High Court in CIT V/s Eltek SGS (P) Ltd. (supra), refused to admit the substantial question of law raised by the revenue. This decision of CIT V/s Jagdishprasad M. Joshi (supra) has subsequently been followed by Hon ble Court in Tema Exchangers Manufacturers Pvt. Ltd. V/s ACIT (ITA No. 415 of 2004 dated 18/07/2018) while dismissing revenue s appeal. 4.5 The decision of Hon ble Bombay High Court in CIT V/s Punit Commercial Ltd. (116 Taxman 191 08/08/2000) has been rendered in the context of Sec.80HHC which altogether employ different expression and provide for deduction of profits derived from export of goods or merchandise. 4.6 We find that the decision of Hon ble Delhi High Court in CIT V/s Eltek SGS (P) Ltd. (169 Taxman 283 19/02/2008) was rendered prior to the decision of Hon ble Apex Court in Liberty India V/s CIT (317 ITR 218 31/08/2009). The revenue preferred special leave petition against the aforesaid decision of Hon ble Delhi High Court which was admitted as civil appeal no. 2817 of 2010 (Arising out of SLP (C) No. 851/2009) which was disposed-off on 26/03/2010. The Hon ble Apex Court, following the ratio of Liberty India V/s CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AO to net-off the same against interest expenditure for the purpose of computing profits and gains derived from the undertaking. 5. Keeping in mind the above settled legal position, our adjudication to the issue would be as follows: - Ground-1: Denial of Deduction u/s 80-IA on Income Tax Refund for ₹ 235.18 Lacs 5.1 During assessment proceedings, it transpired that the assessee earned interest of ₹ 235.18 Lacs on Income Tax refund. The assessee treated the interest income as income derived from the undertaking and accordingly claimed deduction u/s 80-IA against the same. Since this amount was not derived from profits and gains of business, the same was not considered for deduction u/s 80-IA by Ld. AO and brought to tax as Income from Other Sources. 5.2 Before Ld. CIT(A), it was pleaded that refund arose to the assessee due to excess TDS made by the customers against payment to be made to the assessee and therefore, the TDS was part and parcel of the business receipts. It was submitted that had the customers not deducted the excess amount of TDS, the assessee would have received the surplus funds which could have been used for business purposes / repayme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaking to make it eligible for deduction u/s 80IA of the Act or not?. From the facts of the case it is noticed that the appellant had claimed deduction u/s 80IA of the Act in respect of income of ₹ 2,35,18,687/- received from I T refund and ₹ 8,67,66,538/- interest received against deposit / surplus fund parked with the bank. In my considered view the interest income derived /generated from surplus fund, parked with the bank, cannot be considered as income derived from the industrial undertaking, as there was no direct nexus between income earned and the industrial undertaking, The interest income cannot be considered to be derived from the activity merely be reason of the fact that the activity may be resulting in earning the said income in indirect, incidental or remote manner. In my view the commercial connection is irrelevant and it is also not sufficient even if such income is assessable as business income. 8,9 As regard the appellant's claim that he had parked certain surplus funds with the bank to cover up the future liability, if at all arose in view of the court's order is also not tenable as the interest income derived from such deposits itself c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assesse, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business far ten consecutive assessment years. 8.10 The above provision of section clearly speaks about the fact that income which has been derived from the industrial undertaking is only eligible for deduction u/s 80IA of the Act. The interest income derived from the bank against parking of surplus fund cannot be considered to be derived from industrial undertaking, as the appellant has not carried out any activities to earn such interest income. Accordingly, in my considered view, the same cannot be linked as income derived from the Industrial undertaking. In the case of Rajkumar Impex Pvt Ltd Vs DCIT 15 DTK 118, it is held that the interest received on margin money deposits for opening letter of credit is not entitled for deduction u/s 80IA of the Act. Likewise in the case of Sudhir Engineering Co Vs ACIT, 2007, 108 TTJ 933, it is held that the interest earned on Vikas cash certificates cannot be considered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hensive License Agreement dated 10/08/2004 with Jawaharlal Nehru Port Trust (JNPT) to build as well as operate a container terminal at JNPT on Build, Operate and Transfer (BOT) basis. The business activities of the company have stated to have commenced from 14/03/2006 and it is eligible to claim deduction u/s 80-IA from AY 2006-07 onwards. However, AY 2012-13 is the first year where there are taxable profits and therefore, it has claimed deduction for the first-time u/s 80-IA. Admittedly, it fulfils the conditions laid down in Sec.80-IA to claim deduction therein. 7. The Ld. Sr. Counsel has submitted that tariff charged by the assessee from its customers was governed by the Tariff Authority for Major Ports (TAMP). TAMP notified a reduction in tariff with effect from 23/02/2012 which was challenged by the assessee before Hon ble Bombay High Court. The Hon ble Court, vide interim decision dated 02/07/2012, directed the assessee to set aside the differential tariff amount in its bank account. The fixed deposits were placed to comply with the aforesaid interim order of the court and therefore, the FDR would have direct nexus with assessee s business activities and therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stments made by the assessee with the Bank. The words derived from would not cover sources of income beyond first degree. Therefore, the action of Ld. CIT(A) in bringing to tax the same, is upheld. Consequently, ground No. II stands dismissed. Gr.3 Depreciation on Terminal Rights ₹ 76.12 Lacs. 10. Upon perusal of financial statements, it transpired that assessee entered into 30 years license agreement with an authority i.e. Jawaharlal Nehru Port Trust (JNPT). The assessee paid sum of ₹ 15 crores as upfront fee and ₹ 25.97 crores as stamp duty for registration of agreement. These amounts were disclosed as terminal rights and have been amortized over a period of 10 years effective from AY 2006-07. However, the depreciation, while computing taxable income, was claimed @25% of written down value of these assets. The Ld. AO, forming a belief that since the asset acquired by the assessee would generate income for the whole of contract period, the same should be amortized over 30 years. Accordingly, Ld. AO reworked depreciation in the aforesaid manner and disallowed depreciation to the extent of ₹ 76.12 Lacs. The same, upon confirmation by learned first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try and the draft order could not reach Hon ble Judicial Member for approval despite lapse of considerable period of time. The situation created by pandemic covid-19 could be termed as unprecedented and beyond the control of any human being. The situation, thus created by this pandemic, could never be termed as ordinary circumstances and would warrant exclusion of lockdown period for the purpose of aforesaid rule governing the pronouncement of the order. The draft order was subsequently been received at the first available opportunity and approved by the bench and accordingly, the same is being pronounced now. 12.3 Faced with similar facts and circumstances, the co-ordinate bench of this Tribunal comprising-off of Hon ble President and Hon ble Vice President, in its recent decision titled as DCIT V/s JSW Limited (ITA Nos. 6264 6103/Mum/2018) order dated 14/05/2020 held as under: - 7. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of heari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any extraordinary circumstances. 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon ble Supreme Court of India, in an unprecedented order in the history of India and vide ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed while calculating the time for disposal of matters made timebound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly . The extraordinary steps taken suo motu by Hon ble jurisdictional High Court and Hon ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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