TMI Blog2018 (1) TMI 1709X X X X Extracts X X X X X X X X Extracts X X X X ..... SHMIR HIGH COURT] cited by the ld. D.R., it is observed that even though the issue relating to the netting off interest was raised as question no. 3, the same apparently was not decided by the Hon ble Jammu Kashmir High Court specifically by giving any finding or conclusion. On the other hand in the case of CIT vs.- Warren Tea Limited [ 2015 (8) TMI 465 - CALCUTTA HIGH COURT] relied upon by the ld. CIT(Appeals) in his impugned order has upheld the principle of netting off of interest income against interest expenditure and although the said decision of the Hon ble jurisdictional High Court was rendered in the context of computing business income of the term manufacturing unit as per Rule 8, we are of the view that the same analogy can justifiably be applied even in the present case to hold that only net interest income after adjusting the interest expenditure is liable to be excluded while computing the profit eligible for deduction under section 80IB. Business of the assessee as eligible for deduction under section 80IB. Disallowance under section 14A read with Rule 8D only on the investment in shares of Punjab National Bank - I.T. (S.S.) A. Nos. 134, 135 & 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80IB was claimed by the assessee, inter alia, in respect of income, which was comprising of interest income of Rs.5,98,119/- received from Bank deposits. According to the Assessing Officer, the interest income received by the assessee from Bank deposits was not derived from the eligible business and the same, therefore, was not entitled for deduction under section 80IB. For this conclusion, he relied, inter alia, on the decision of the Hon ble Supreme Court in the case of Pandian Chemicals Limited vs.- CIT [262 ITR 278] and disallowed the claim of the assessee for deduction under section 80IB in respect of interest income received from Fixed Deposits. 5. On appeal, the ld. CIT(Appeals) upheld the action of the Assessing Officer in disallowing the assessee s claim for deduction under section 80IB in respect of interest income from Bank deposits by relying on the decision of the Hon ble Supreme Court in the case of Pandian Chemicals Limited (supra). He, however, allowed the alternative claim of the assessee that only the net interest income after adjusting the interest expenditure was liable to be excluded while computing the profits of the eligible undertaking for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal that netting of the income under one head of income against expenditure under the different head of income is not possible as per law. In the present case, interest income was offered by the assessee to tax as business income and even the interest expenditure was also claimed under the same head as business expenditure. As regards the case of Asian Cement Industries vs.- ITAT (supra) cited by the ld. D.R., it is observed that even though the issue relating to the netting off interest was raised as question no. 3, the same apparently was not decided by the Hon ble Jammu Kashmir High Court specifically by giving any finding or conclusion. On the other hand, Hon ble Calcutta High Court in the case of CIT vs.- Warren Tea Limited (supra) relied upon by the ld. CIT(Appeals) in his impugned order has upheld the principle of netting off of interest income against interest expenditure and although the said decision of the Hon ble jurisdictional High Court was rendered in the context of computing business income of the term manufacturing unit as per Rule 8, we are of the view that the same analogy can justifiably be applied even in the present case to hold that only net interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s account. (vii) That the Ld. CIT(A) has erred in directing the A.O. to compute the disallowance u/s 14A read with rule 8D(2(ii) and 8D(2)(iii) only on the investment in the shares of Punjab National Bank amounting to Rs.34,100/- . 10. At the time of hearing before the Tribunal, the ld. representatives of both the sides have agreed that the common issue involved in Grounds No. 1 to 4 of the Revenue s appeal for A.Y. 2011-12 relating to the eligibility of the business of the assessee for deduction under section 80IB is squarely covered in favour of the assessee by the decision of the Tribunal in assessee s own case in IT(SS)A No. 129/KOL/2016 for A.Y. 2010-11 rendered vide its order dated 05.04.2017 (supra), wherein a similar issue was decided by the Tribunal in favour of the assessee vide paragraph no. 14 of its order, which reads as under:- 14. We have given a careful consideration to the rival submissions. In the case of Amrit Feeds (supra), the Tribunal considered the decision rendered in the case of Venkateswara Feeds (supra) and held that the assessee in that case had claimed deduction under section 80IB on the activity or merely converting poultry mash feed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer to compute the disallowance under section 14A read with Rule 8D only on the investment in shares of Punjab National Bank is also squarely covered in favour of the assessee by the order of the Tribunal for A.Y. 201011(supra), wherein a similar issue has been decided by the Tribunal vide paragraphs no. 27 28 of its order as under:- 27. We have heard the rival submissions. The Id. DR placed reliance on the order of AO and the id, Counsel for the assessee apart from reiterating the submissions made before CIT(A) and the order of CIT(A) also placed reliance on the decision of the Hon ble Bombay High Court in the case of HDFC Ltd 366 ITR 505 (Bombay) wherein it was laid down that if there is interest free funds available to an assessee sufficient to meet the investments and at the same time the assessee has also raised a loan it can be presumed that the investments were from the interest free funds. The Id. Counsel relied on the findings of CIT(A) where the CIT(A) has found that the assessee had interest free funds sufficient to meet the investments which are likely to yield tax free income. 28. We have considered the rival submissions and are of the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 80-IB 80IE. (v) That the Ld. CIT(A) has erred in directing the A.O. to net off the interest income credited in the profit and loss account of the eligible undertaking against the interest expense debited in the said profit and loss account without the appreciating the facts and circumstances of the case supported by the decision of Hon'ble Supreme Court in the case of Pandian Chemicals Limited Vs. CIT,[2003] 129 TAXMAN 539 (SC) and the decision of High Court of Jammu and Kashmir in the case of Asian Cement Industries Vs Income Tax Appellate Tribunal, [2012] 28 TAXMAN 290(Jammu Kashmir). (vi) That the Ld. CIT(A) has erred in directing the A.O. to re-compute the income of the eligible undertaking and recompute the deduction u/s 80IB after netting off the interest income credited in the profit and loss account of the eligible undertaking against the interest expense debited in the said profit and loss account. (vii) That the Ld. CIT(A) has erred in directing the A.O. to compute the disallowance u/s 14A read with rule 8D(2(ii) and 8D(2)(iii) only on the investment in the shares of Punjab National Bank amounting to Rs.34,100/- . 16. At the time of heari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as eligible for deduction under section 80IB 80IE. Grounds No. 1 to 4 of the Revenue s appeal are accordingly dismissed. 18. As regards Grounds No. 5 6 of the Revenue s appeal for A.Y. 201213, it is observed that the common issue involved therein relating to the exclusion of only the net interest income for computing the profit eligible for deduction under section 80IB is similar to the one involved in Revenue s appeal for A.Y. 2008-09, which has been decided by us in the foregoing portion of this order. Following our conclusion drawn in A.Y. 2008-09, we uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and dismiss Grounds No. 5 6. 19. As regards Ground No. 7 of the Revenue s appeal for A.Y. 2012-13, it is observed that the issue involved therein relating to the relief allowed by the ld. CIT(Appeals) to the assessee by directing the Assessing Officer to compute the disallowance under section 14A read with Rule 8D only on the investment in shares of Punjab National Bank is also squarely covered in favour of the assessee by the order of the Tribunal for A.Y. 201011(supra), wherein a similar issue has been decided by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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