ITO, Hyderabad V. M/s. Matrix Power Pvt.Ltd, Hyderabad

ITA 1662/HYD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2798 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAYA MAHESWARI
• Assessee Lawyers: A V RAGHURAM
• Keywords: Business income; Proportionate interest; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNA L HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1661/HYD/2010 A.Y. 2006-07 ITA NO. 1662/HYD/2010 A.Y. 2003-04 INCOME TAX OFFICER WARD-16(1) HYDERABAD VS. M/S. MATRIX POWER PVT. LTD., HYDERABAD PAN: AACCM2002M APPELLANT RESPONDENT APPELLANT BY: SMT. MAYA MAHESWARI RESPONDENT BY: SRI A.V. RAGHURAM DATE OF HEARING: 04.04.2013 DATE OF PRONOUNCEMENT: 04.04.2013 O R D E R PER CHANDRA POOJARI, AM: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE CIT(A) DATED 14.10. 2010 FOR ASSESSMENT YEARS 2006-07 AND 2003-04. 2. FIRSTLY WE TAKE ITA NO. 1662/HYD/2010 FOR A.Y. 2003-04. IN THIS APPEAL, THE REVENUE RAISED THE FO LLOWING GROUNDS OF APPEAL. 1. THE LEARNED CIT(A) ERRED BOTH IN LAW AND FACTS IN HOLDING THAT THE ISSUE OF NOTICE U/S. 148 OF THE IT ACT IS NOT CORRECT AND CONSEQUENTLY ENTIRE RE-ASSESSMENT PROCEEDINGS ARE NULL AND VOID. 2. THE LEARNED CIT(A) ERRED IN RELYING ON CASE- LAWS WHICH SPEAK OF CHANGE OF OPINION. THE LEARNED CIT(A) IGNORED THAT THERE IS NO CHANGE OF OPINION IN ISSUE OF NOTICE U/S. 148 SINCE THE ISSUE OF INSURANCE CLAIMS AND ITS ELIGIBILITY FOR DEDUCTION U/S. 80IA WAS NOT IT A NOS. 1661 & 1662/HYD/2010 M/S. MATRIX POWER PVT. LTD. ======================== 2 ADDRESSED AND EXAMINED BY THE ASSESSING OFFICER WHILE COMPLETING THE ORIGINAL ASSESSMENT AS SEEN FROM THE QUESTIONNAIRE (VIDE ANNEX-1) ISSUED DURING ORIGINAL ASSESSMENT PROCEEDINGS. HENCE THIS IS A CASE OF OVERSIGHT AND IS COVERED BY SUB-CLAUSES (I) & (IV) OF CLAUSE C UNDER EXPLANATION 2 TO PROVISO TO SECTION 147. 3. THE CIT(A) ERRED IN RELYING ON CASE-LAWS FACTS WHICH ARE DISTINGUISHABLE FROM THE FACTS OF THE ASSESSEE'S CASE. 3. BRIEF FACTS OF THE CASE ARE THAT FOR THE A.Y. 2003-04, THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME ON 24.11.2003 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT AT RS. 38,82,452. ASSESSMENT U/S. 1 43(3) WAS COMPLETED ON 25.11.2005 RESTRICTING THE CLAIM OF DE DUCTION U/S. 80IA OF THE ACT TO RS. 26,54,523. THEREAFTER, THE ASSESSMENT WAS REOPENED BECAUSE THE ASSESSEE HAD CLAIMED INSUR ANCE CLAIMS AMOUNTING TO RS. 90,15,756/- AS INCOME DERIV ED FROM BUSINESS UNDERTAKING AND HAD CLAIMED DEDUCTION UNDE R SECTION 80IA OF THE ACT ON THE SAME AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) R.W.S. 147 OF ACT DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 21,22,407. 4. COMING TO THE FIRST ISSUE I.E., REOPENING OF ASSESS MENT BY ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT, THE A SSESSEE CONTENDED IN THE STATEMENT OF FACTS THAT THE ASSESS ING OFFICER WAS ASKED TO PROVIDE DETAILED REASONS FOR REOPENING OF THE ASSESSMENT BUT SHE CHOSE TO PROVIDE CRISP REASONING . IT WAS IT A NOS. 1661 & 1662/HYD/2010 M/S. MATRIX POWER PVT. LTD. ======================== 3 STATED THAT THIS WAS MERELY A CHANGE IN OPINION. T HE SPECIFIC ARGUMENTS OF THE ASSESSEE ARE AS BELOW: 'OUR COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 24.11.2003 DECLARING 'NI L' INCOME AFTER CLAIMING EXEMPTION UNDER SECTION 80IA OF THE INCOME-TAX ACT, 1961. THE ASSESSMENT WAS COMPLE TED UNDER SECTION 143(3) OF THE INCOME-TAX ACT ON 21.11 .2005 AFTER EXHAUSTIVELY EXAMINING ALL THE ASPECTS OF THE CASE AND RESTRICTING THE CLAIM OF EXEMPTION UNDER SECTIO N 80IA TO RS. 26,54,523 AS AGAINST THE AMOUNT OF RS. 38,82 ,452 CLAIMED BY THE COMPANY BY TREATING THE INTEREST INC OME OF RS. 12,27,929 EARNED ON THE FIXED DEPOSIT AS INC OME FROM OTHER SOURCES. AGGRIEVED BY THIS, OUR COMPANY PREFERRED AN APPEAL TO THE LEARNED CIT(A)-V WHO PAR TIALLY DECIDED THE MATTER IN FAVOUR COMPANY BY RESTRICTING THE DISALLOWANCE TO RS. 2,06,651. THEREUPON, THE LEARNE D INCOME TAX OFFICER, WARD-16(1), HYDERABAD ISSUED A NOTICE UNDER SECTION 148 SEEKING TO REOPEN THE ASSESSMENT PROCEEDINGS FOR THE AY 2006-07. OUR COMP ANY RESPONDED TO THIS NOTICE REQUESTING THE LEARNED INC OME TAX OFFICER, WARD-16(1), HYDERABAD TO FURNISH DETAI LED REASONS FOR REOPENING THE ASSESSMENT PROCEEDINGS IN ACCORDANCE WITH THE DECISION OF HONOURABLE SUPREME COURT IN THE CASE OF GKN DRIVE SHAFTS (INDIA) LIMIT ED VS. ITO (259 ITR 19). HOWEVER, THE LEARNED INCOME TAX OFFICER, WARD - 16(1), HYDERABAD CHOSE TO FURNISH C RISP REASONS FOR HER ACTION IN REOPENING THE ASSESSMENT PROCEEDINGS WHICH ARE NOT IN ACCORDANCE WITH THE DECISION OF THE APEX COURT. FROM, A PLAIN READING OF THE REASONS FURNISHED BY THE LEARNED INCOME TAX OFFICER , WARD-16(1), HYDERABAD FOR REOPENING THE ASSESSMENT PROCEEDINGS, IT IS EVIDENT THAT INSURANCE CLAIMS RE CEIVED IT A NOS. 1661 & 1662/HYD/2010 M/S. MATRIX POWER PVT. LTD. ======================== 4 BY THE COMPANY DURING THE YEAR UNDER CONSIDERATION ARE INTENDED TO BE BROUGHT TO TAX AS THE SAME PARTAKES THE CHARACTER OF 'INCOME FROM OTHER SOURCES' AND HENCE INELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE INCOME TAX ACT. WE THEREFORE VEHEMENTLY CONTEND THAT THE ACTION OF THE LEARNED INCOME TAX OFFICER, WARD - 16(1), HYDERABAD CLEARLY SHOWS THE CHANGE OF OPINION IN TH E MATTER AND CANNOT BY ANY STRETCH OF IMAGINATION BE TREATED AS INCOME ESCAPING ASSESSMENT WITHIN THE MEANING OF THE PROVISIONS OF SECTION 147/148 OF THE INCOME TAX ACT, 1961.' 5. ON APPEAL THE CIT(A) OBSERVED THAT THE ENTIRE CLAIM OF THE ASSESSEE U/S. 80I OF THE ACT WAS EXAMINED BY THE ASS ESSING OFFICER WHILE COMPLETING ASSESSMENT U/S. 143(3) OF T HE INCOME- TAX ACT, 1961 AND REOPENING OF THE ASSESSMENT TO CO NSIDER THE SAME ISSUE IS CHANGE OF OPINION. ACCORDINGLY, THE CIT(A) ANNULLED THE ASSESSMENT. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. SIMILAR ISSUE CAME FOR CONSIDERATION BEF ORE THIS TRIBUNAL IN ITA NO. 1654/HYD/2011 FOR A.Y. 2004-05 IN ASSESSEES OWN CASE. THE TRIBUNAL VIDE ORDER DATED 3.2.2012 HELD AS FOLLOWS: '9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IT IS THE ALLOWANCE OF RELIEF UNDER S. 80IA IN RESPECT OF INSURANCE CLAIMS OF RS. 27,21,524 RECEIVED BY THE ASSESSEE, WHICH HAS PROMPTED THE ASSESSING OFFICER TO INITIATE THE PRESENT ASSESSMENT PROCEEDINGS UNDER S . IT A NOS. 1661 & 1662/HYD/2010 M/S. MATRIX POWER PVT. LTD. ======================== 5 148 OF THE ACT. IT IS THE CONTENTION OF THE ASSESSE E RIGHT FROM THE BEGINNING THAT THE INITIATION OF PRESENT PROCEEDINGS IS PROMPTED BY MERE CHANGE OF OPINION ON THE MATERIAL ALREADY AVAILABLE ON RECORD . IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FURNISHED BEFORE US, A COPY OF THE ORIGINAL ASSESSMENT ORDER DATED 26.6.2006 PASSED UNDER S. 143(3) OF THE ACT, AND INVITED OUR SPECIFI C ATTENTION TO THE FOLLOWING PORTION THEREOF- ' ..... THOUGH, SOME OTHER INCOMES SUCH AS INSURANCE CLAIMS, PERFORMANCE GUARANTEES, DISCOUNTS AND REBATES ARE ADMITTED UNDER THE HEAD 'OTHER INCOME', THEY HAVE DIRECT NEXUS WITH THE BUSINESS OF THE UNDERTAKING ..... ' IT IS VERY MUCH EVIDENT FROM THE ABOVE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE ASSESSING OFFICER HAS TAKEN NOTE OF 'SOME OTHER INCOMES SUCH AS INSURANCE CLAIMS' ETC. WHICH WERE ADMITTED UNDER THE HEAD 'OTHER SOURCES', IN RESPECT OF WHICH ALSO ASSESSEE CLAIMED RELIEF UNDER S. 80IA OF THE ACT. HE ALLOWED RELIEF UNDER S. 80IA OF THE ACT IN RESPECT OF SUCH ITEMS OF 'OTHER INCOME' OBSERVING THAT 'THEY HAVE DIRECT NEXUS WITH THE BUSINESS OF THE UNDERTAKING'. CONSIDERING THESE SPECIFIC OBSERVATIONS OF THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT ORDER, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO RECEIPTS OF THE ASSESSEE BY WAY OF INSURANCE CLAIMS, AND THE QUESTION WHETHER SUCH RECEIPTS FORM PART OF THE INCOME DERIVED BY THE ASSESSEE FROM THE BUSINESS. 10. IN VIEW OF THE ABOVE DISCUSSION, SINCE THE ASSESSING OFFICER HAS CLEARLY APPLIED HIS MIND TO T HESE ASPECTS AND ARRIVED AT A DEFINITE CONCLUSION THAT T HE INSURANCE CLAIMS, AMONG OTHERS, HAVE 'DIRECT NEXUS WITH THE BUSINESS OF THE UNDERTAKING', IT IS NOT PERMISSIBLE FOR THE ASSESSING OFFICER TO TAKE A CONTRARY VIEW BY MAKING RECOURSE TO THE PROVISIONS OF S. 148 OF THE ACT. IT IS SETTLED POSITION OF LAW AS PRONOUNCED BY VARIOUS COURTS, SOME OF WHICH HAVE BEEN NOTED BY THE CIT(A) IN THE IMPUGNED ORDER, BESIDES THE ONES RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US BEFORE US, THAT BASED ON MERE CHANGE OF OPINION, THE ASSESSING OFFICER CANNO T REOPEN THE ASSESSMENT UNDER S. 148 OF THE ACT. IN T HIS CONTEXT, WE MAY REFER TO THE RECENT DECISION OF THE APEX COURT IN THE CASE OF CIT VS. KELVINATOR OF IND IA IT A NOS. 1661 & 1662/HYD/2010 M/S. MATRIX POWER PVT. LTD. ======================== 6 LTD. (320 ITR 561), WHEREIN EXPLAINING THE CONCEPT OF 'CHANGE OF OPINION' ON THE PART OF THE ASSESSING OFFICER IN THE LIGHT OF AMENDMENT TO THE PROVISIONS OF S. 147 OF THE ACT, BY THE DIRECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1989, IT HAS BEEN HELD, VIDE HEAD-NOTE ON P. 562 OF THE REPORTS (320 ITR), AS FOLLOWS - ' THE CONCEPT OF 'CHANGE OF OPINION' ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOME- TAX ACT, 1961, BY THE DIRECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1989. AFTER THE AMENDMENT, THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT THAT DOES NOT IMPLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF 'CHANGE OF OPINION' MUST BE TREATED AS AN IN- BUILT TEST TO CHECK THE ABUSE OF POWER. HENCE AFTER APRIL 1, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMATION OF THE BELIEF.' ADMITTEDLY IN THE PRESENT CASE, THERE IS NO NEW MATERIAL WHICH HAS COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER SO AS TO PROMPT HIM TO BELIEVE TH AT THERE IS ESCAPEMENT OF INCOME. ON THE OTHER HAND, BASED ON THE VERY SAME MATERIAL, APPLYING HIS MIND TO WHICH HE HAS COME TO A CONCLUSION THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER S. 80IA IN RESPECT OF INSURANCE CLAIMS, THAT HE DEVELOPED AN OPINION THAT ASSESSEE IS NOT ELIGIBLE FOR SUCH DEDUCTION. IN THE FACTS OF THE PRESENT CASE THEREFO RE, THE ASSESSING OFFICER'S 'REASON TO BELIEVE' HAS NO LINK WITH THE 'FORMATION OF BELIEF'. IN THE CIRCUMSTANCE S, RESPECTFULLY FOLLOWING THE SETTLED POSITION OF LAW AND MORE SPECIFICALLY APPLYING THE RATIO LAID DOWN BY T HE APEX COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA), WE HOLD THAT THE ACTION OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT IS NOT LEGAL OR VALID. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A ) AND REJECT THE GROUNDS OF THE REVENUE IN THIS APPEAL.' IT A NOS. 1661 & 1662/HYD/2010 M/S. MATRIX POWER PVT. LTD. ======================== 7 7. IN VIEW OF THE ORDER OF THE TRIBUNAL AND THE FACTS OF THE PRESENT CASE BEING SIMILAR TO THAT ONE, WE ARE INCL INED TO DISMISS THE GROUND RAISED BY THE REVENUE IN ITA NO. 1662/HYD/2010 8. NOW WE TAKE UP ITA NO. 1661/HYD/2010 FOR A.Y. 2006-07 . THE FOLLOWING GROUNDS ARE RAISED BY THE REVENUE: 1. THE LEARNED CIT(A) ERRED BOTH IN LAW AND FACTS IN DIRECTING THE ASSESSING OFFICER TO TAX THE NET INTE REST INCOME UNDER THE HEAD 'OTHER SOURCES' AND RECOMPUTE THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF DEDU CTION U/S. 80IA 2. THE LEARNED CIT(A) ERRED IN FOLLOWING THE DECISION OF HON'BLE INCOME TAX APPELLATE TRIBUNAL IN THE CASE O F ASSESSEE FOR A.Y. 2003-04 THEREBY IGNORING THE FACT THAT THERE IS CHANGE IN FACTS IN THE ASSESSMENT YEAR UND ER CONSIDERATION AS COMPARED TO THE FACTS OF ASSESSMEN T YEAR 2003-04. 3. THE CIT(A) ERRED IN HOLDING THAT INTEREST OF RS. 12,52,406/- EARNED ON FIXED DEPOSIT WITH KARNATAKA BANK LTD IS BUSINESS INCOME. THE CIT(A) IGNORED THE FACT THAT THERE WAS NO PRECONDITION/REQUIREMENT OF KEEPI NG FIXED DEPOSIT WITH SAID BANK TOWARDS MARGIN MONEY A S IN EARLIER YEARS THEREBY IGNORING THE FACT THAT BUS INESS NEXUS IS NOT THE IMMEDIATE SOURCE FOR EARNING INTER EST INCOME OF RS. 12,52,406/-. 4. THE CIT(A) IGNORED THE FACT THAT THE TERM LOAN FROM KARNATAKA BANK LIMITED WAS TAKEN OVER BY THE ANDHRA BANK WITHOUT ANY CONDITION OF KEEPING FIXED DEPOSIT AND HENCE THE INTEREST EARNED ON FIXED DEPOSIT WITH KARNATAKA BANK LTD IS NOT BUSINESS INCOME 9. BRIEF FACTS OF THE ISSUE ARE THAT FOR THE A.Y. 2006 -07, THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME ON 27.1 0.2006 ADMITTING TOTAL INCOME AT NIL AFTER CLAIMING DEDUCT ION OF RS. 56,50,259 U/S. 80IA OF THE ACT. THE ASSESSING OFFIC ER IT A NOS. 1661 & 1662/HYD/2010 M/S. MATRIX POWER PVT. LTD. ======================== 8 COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT DETE RMINING THE TOTAL INCOME OF THE ASSESSEE-COMPANY AT RS. 12, 52,406. 10. THERE IS ONLY ONE ISSUE IN APPEAL AND THAT PERTAINS TO THE ADDITION OF RS. 11,32,055 BY REDUCING THE INTEREST ON LOAN AGAINST FIXED DEPOSITS FROM THE ELIGIBLE INCOME PER TAINING TO DEDUCTION U/S. 80IA OF THE ACT. THE FACTS ARE THAT THE ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER FROM ITS BIOMASS BASED POWER PLANT IN GUNTUR DISTRI CT. THE ASSESSEE MADE A CLAIM U/S. 80IA OF THE ACT FOR RS. 5 6,50,259. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE-COM PANY HAD TAKEN A TERM LOAN OF RS. 11,51,54,000 FROM IRDA IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04. DURI NG THE CURRENT PREVIOUS YEAR, THE OUTSTANDING LOAN WAS TAK EN OVER BY M/S. ANDHRA BANK WITHOUT ANY PRECONDITIONS. THE ASS ESSEE WAS ALSO HAVING CERTAIN FIXED DEPOSITS WITH THE BANK AN D THE INCOME FROM FIXED DEPOSITS AMOUNTED TO RS. 11,32,055 TOWAR DS LOAN AGAINST THE FIXED DEPOSITS. THE ASSESSING OFFICER HELD THAT THIS INTEREST DOES NOT TANTAMOUNT TO BUSINESS INCOME DER IVED FROM THE BUSINESS UNDERTAKING AND REDUCED THIS AMOUNT FR OM THE ELIGIBLE INCOME WITH RESPECT TO CLAIM U/S. 80IA OF T HE ACT. 11. ON APPEAL THE CIT(A) ALLOWED THE CLAIM OF THE ASSES SEE BY PLACING RELIANCE ON THE ORDER OF THE TRIBUNAL FOR A .Y. 2003-04 IN ITA NO. 1119/HYD/2006 DATED 28.3.2008 IN ASSESSEES O WN CASE. IT A NOS. 1661 & 1662/HYD/2010 M/S. MATRIX POWER PVT. LTD. ======================== 9 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. SIMILAR ISSUE WAS CONSIDERED BY THIS TR IBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2003-04 AND OBSERVED A S FOLLOWS: '6. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RECORD. IN OUR OPINION, THE PRINCIPLE LAID DOW N BY THE HON'BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. (262 ITR 278) IS FULLY APPLICABLE TO THE CASE OF THE ASSESSEE. HENCE NO DEDUCTION U/S. 801A OF THE ACT IS ALLOWABLE IN RESPECT OF THE SAID INTERES T RECEIPT OF RS. 12,27,929 ON THE BANK FIXED DEPOSIT. THEREFORE, THE ACTION OF THE REVENUE AUTHORITIES IN DISALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SEC. 801A OF THE ACT IS UPHELD. HOWEVER, THE A.O. HAD ASSESSED THE SAID INTEREST UNDER THE HEAD 'INCOME FROM OTHER SOURCES' VIDE PAGE NO. 3 OF THE ASSESSMENT ORDER DATED 25.11.2005. TO GIVE EFFECT T O THIS POSITION, THE A.O. WHILE COMPUTING PROFITS OF THE BUSINESS FOR THE PURPOSE OF SEC. 80IA WILL HAVE TO ADD THE PROPORTIONATE INTEREST PAID TO IREDA ON THE AMOUNT OF RS. 85 LAKHS WHICH WAS SPECIFICALLY GRANTED BY IREDA FOR THE PURPOSE OF MAKING THE FD, ON INCOME FROM BUSINESS AND THE EQUIVALENT INTEREST EXPENDITURE THAT HAS TO BE REDUCED FROM INTEREST RECEIVED ON FIXED DEPOSIT UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. OTHERWISE, THIS WILL DEPRESS T HE PROFITS BY AN AMOUNT WHICH IS OUT OF THE RECKONING OF SEC. 80IA; A CONSEQUENCE NOT INTENDED TO BE BROUGHT ABOUT. HENCE NET INTEREST INCOME ONLY IS ASSESSABLE TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. TH E AO SHALL REDO THE COMPUTATION ACCORDINGLY.' 13. FURTHER IT IS ALSO BROUGHT TO OUR NOTICE THAT THE S UPREME COURT RECENTLY IN THE CASE OF ACG ASSOCIATED CAPSUL ES PVT. LTD. VS. CIT & ORS (343 ITR 89) OBSERVED THAT WHEN THERE IS NEXUS BETWEEN INTEREST RECEIVED AND INTEREST PAID NETTING OF INTEREST IS TO BE DONE. IN VIEW OF THE ABOVE ORDER OF THE TRIB UNAL THE GROUNDS TAKEN BY THE DEPARTMENT ARE DISMISSED. IT A NOS. 1661 & 1662/HYD/2010 M/S. MATRIX POWER PVT. LTD. ======================== 10 14. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 4 TH APRIL, 2013. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 4 TH APRIL, 2013 TPRAO COPY FORWARDED TO: 1. THE INCOME TAX OFFICER, WARD-16(1), ROOM NO. 613, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. MATRIX POWER PVT. LTD, D. NO. 8-2-277/12, NO. 296, ROAD NO. 3, UBI COLONY, BANJARA HILLS, HYDERABAD. 3. THE CIT(A)-V, HYDERABAD. 4. THE CIT-IV, HYDERABAD. 5. THE DR B BENCH, ITAT, HYDERABAD.