Quadro Info Technologies Pvt. Ltd., Kolkata V. I.T.O.,Ward-1(4), Kolkata

ITA 2617/KOL/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7102 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 19-12-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: S JHAJHARIA
• Keywords: Business income; Depreciation; Set aside
• Section: 80HHC; 115JB; 80IB; 250; 80IA; 80IC; 80HH; 80IC; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA B BENCH, KOLKATA {VIRTUAL COURT HEARING} (BEFORE SHRI P.M. JAGTAP, HONBLE VICE-PRESIDENT, KZ & MS. MADHUMITA ROY, HONBLE JUDICIAL MEMBER) ITA NO. 2617/KOL/2019 ASSESSMENT YEAR: 2011-12 QUADRO INFO TECHNOLOGIES PVT. LTD........................................................................APPELLANT C/O. M/S. SALARPURIA JAJODIA & CO. 7, C.R. AVENUE 3 RD FLOOR KOLKATA 700 072 [PAN : AAACQ 1163 F] VS. INCOME TAX OFFICER, WARD-1(4), KOLKATA...................................................................RESPONDENT APPEARANCES BY: SHRI S. JHAJHARIA, A/R, APPEARED ON BEHALF OF THE ASSESSEE. SHRI RANU BISWAS, ADDL. CIT, D/R, APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : AUGUST 24 TH , 2021 DATE OF PRONOUNCING THE ORDER : AUGUST 27 TH , 2021 ORDER PER P.M. JAGTAP, VICE-PRESIDENT, KZ :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 1, KOLKATA, (HEREINAFTER THE LD. CIT(A)), DT. 25/10/2019, PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE FIRST ISSUE RELATING TO THE DISALLOWANCE OF RS.3,85,596/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IA(4)(III) OF THE ACT, ON INTEREST INCOME RECEIVED IS RAISED BY THE ASSESSEE IN GROUND NO. 1 & 2, WHICH READ AS FOLLOWS:- 1. THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAD GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF RS.3,85,596/- MADE BY THE AO U/S 80IA(4)(III) ON ACCOUNT OF INTEREST RECEIVED AND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE SUCH ACTION OF THE LD. CIT(A) IS WITHOUT CONSIDERING THE MATERIAL PLACED BEFORE HIM DURING THE COURSE OF THE APPELLATE PROCEEDINGS AND IT IS PRAYED THE SAME MAY KINDLY BE ALLOWED. 2. THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO GROUND NO. 1, ABOVE THE INTEREST EARNED OF RS.3,85,596/-, IS LIABLE TO BE NETTED OFF WITH INTEREST PAID AND IT MAY KINDLY BE HELD ACCORDINGLY. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPMENT. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 19/09/2011, DECLARING BOOK PROFIT OF RS.7,45,54,677/- U/S. 115JB OF THE ACT AND TOTAL INCOME AT NIL UNDER THE NORMAL PROVISIONS OF THE ACT, AFTER CLAIMING DEDUCTION U/S 80IA OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE U/S 80IA OF THE ACT WAS EXAMINED BY THE ASSESSING OFFICER AND ON SUCH EXAMINATION, HE FOUND THAT DEDUCTION U/S 80IA WAS CLAIMED BY THE ASSESSEE EVEN IN RESPECT OF INTEREST OF RS.2,29,193/- ISSUED ON BANK FIXED DEPOSITS AND INTEREST OF RS.1,56,403/ LOAN GIVEN TO M/S. SALARPURIA PROPERTIES PVT. LTD. ACCORDING TO THE ASSESSING OFFICER, THE SAID I NTEREST INCOME AGGREGATING TO RS.3,85,596/ ASSESSEE COMPANY DERIVED FROM THE BUSINESS OF OPERATING AND MAINTAINING INDUSTRIAL PARK AND THE SAME, THEREFORE, WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IA(4) ACC ORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE U/S 80IA TO THAT EXTENT IN THE ASSESSMENT COMPLETED U/S 143( 4. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ITS CLAIM U/S 80IA(4) IN RESPECT OF INTEREST BEFORE THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), IT WAS CONTENDED ON BEHALF OF THE ASSESSEE COMPANY HAVING BEEN RECEIVED IN CONNECTION WITH ITS DEPOSITS MADE AGAINST OVERDRAFT FACILITIES WAS RELATED TO ITS BUSINESS AND THE SAME, THEREFORE, WAS ELIGIBLE FOR DEDUCTION U/S 80IA. IT WAS ALSO CONTENDED ON BEHALF OF THE ASSESSEE COMPANY THAT THE DISALLOWANCE ON ACCOUNT OF INTEREST I NCOME, EVEN OTHERWISE, SHOULD HAVE BEEN RESTRICTED TO THE NET AMOUNT OF INTEREST. 5. THE LD. CIT(A) DID NOT FIND MERIT IN THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE COMPANY ON THIS ISSUE AND PROCEEDED TO CONFIRM THE DISALLOWANCE MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION U/S 80IA IN RESPECT OF INTEREST INCOME FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH 5.4. TO 5.10. OF HIS IMPUGNED ORDER:- 5.4. A BARE LOOK AT SECTION 80 DERIVED FROM SUCH INDUSTRIAL UNDERTAKINGS AND NOT TO PROFIT AND GAINS DERIVED FROM ANY BUSINESS OF THE INDUSTRIAL UNDERTAKING. A CONJOINT READING OF SECTION 80 THE EXPRESSION PROFITS AND GAINS DERIVED FROM ANY BUSINESS IS TO BE READ AS PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THE SCOPE AND AMBIT OF SECTION 80 WIDER THAN THAT OF 80- IB(4). A HOLISTIC VIEW OF SE THE LAW MAKERS TO QUALIFY FOR DEDUCTION IS PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING. THERE IS, THEREFORE, NO REASON TO BRING WITHIN THE FOLD OF PROFITS AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKINGS ANY INCOME BEYOND THE ACTIVITIES OF THE INDUSTRIAL UNDERTAKINGS ON THE GROUND THAT THE WORDS ANY BUSINESS FINDS EXPRESSION IN 80 CANNOT BE SAID THAT INTEREST INCOME EARNED FROM MANUFACTURING ACTIVITIES THE INTEREST INCOME ON FDRS CANNOT BE SAID THAT IT DERIVED FROM MANUFACTURING ACTIVITY OF THE APPELLANT. 5.5. THE FOLLOWING JUDICIAL DECISIONS THROW ENOUGH LIGHT ON THE ISSUE. 5.5.1 THE HONORABLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. RAASI CEMENT LTD., [232 ITR 554] HAS ANSWERED SIMILAR QUESTIONS INVOLVED IN FAVOR OF THE REVENUE.. THE QUESTION BEFORE THE HONORABLE HIGH COURT WAS WHETHER THE INTEREST EARNED ON SURPLUS FUNDS DURING THE INSTALLATION OF THE COMPANY, THE STATUS OF THE COMPANY BEFORE COMMENCEMENT OF THE BUSINESS. THE HONORABLE HIGH COURT HAS HELD THAT SUCH INTEREST HAS TO BE SEPARATELY TREATED AS INCOME FROM OTHER SOURCES AND CANNOT BE TAKEN DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS 2 QUADRO INFO TECHNOLOGIES PVT. LTD ISSUED ON BANK FIXED DEPOSITS AND INTEREST OF RS.1,56,403/ LOAN GIVEN TO M/S. SALARPURIA PROPERTIES PVT. LTD. ACCORDING TO THE ASSESSING OFFICER, THE NTEREST INCOME AGGREGATING TO RS.3,85,596/ - DID NOT CONSTITUTE THE PROFITS OF THE ASSESSEE COMPANY DERIVED FROM THE BUSINESS OF OPERATING AND MAINTAINING INDUSTRIAL PARK AND THE SAME, THEREFORE, WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IA(4) ORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE U/S 80IA TO THAT EXTENT IN THE ASSESSMENT COMPLETED U/S 143( 3 ) OF THE ACT VIDE ORDER DT. 28/03/2014. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ITS CLAIM U/S 80IA(4) IN RESPECT OF INTEREST INCOME WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), IT WAS CONTENDED ON BEHALF OF THE ASSESSEE COMPANY INTERALIA THAT INTEREST FROM BANK CONNECTION WITH ITS DEPOSITS MADE AGAINST OVERDRAFT FACILITIES WAS RELATED TO ITS BUSINESS AND THE SAME, THEREFORE, WAS ELIGIBLE FOR DEDUCTION U/S 80IA. IT WAS ALSO CONTENDED ON BEHALF OF THE ASSESSEE COMPANY THAT THE DISALLOWANCE ON NCOME, EVEN OTHERWISE, SHOULD HAVE BEEN RESTRICTED TO THE NET THE LD. CIT(A) DID NOT FIND MERIT IN THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE COMPANY ON THIS ISSUE AND PROCEEDED TO CONFIRM THE DISALLOWANCE MADE BY THE G OFFICER ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION U/S 80IA IN RESPECT OF INTEREST INCOME FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH 5.4. TO 5.10. OF HIS A BARE LOOK AT SECTION 80 -IB( 4) WOULD REVEAL THAT REFERENCE MADE TO PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKINGS AND NOT TO PROFIT AND GAINS DERIVED FROM ANY BUSINESS OF THE INDUSTRIAL UNDERTAKING. A CONJOINT READING OF SECTION 80 -IB(L) AND 80- IB(4) WOULD REVEAL THA THE EXPRESSION PROFITS AND GAINS DERIVED FROM ANY BUSINESS IS TO BE READ AS PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THE SCOPE AND AMBIT OF SECTION 80 - IB(L) IS NOT IN ANY MANNER IB(4). A HOLISTIC VIEW OF SE CTION 80- IB WOULD REVEAL THAT WHAT IS INTENDED BY THE LAW MAKERS TO QUALIFY FOR DEDUCTION IS PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING. THERE IS, THEREFORE, NO REASON TO BRING WITHIN THE FOLD OF PROFITS AND GAINS DERIVED FROM UNDERTAKINGS ANY INCOME BEYOND THE ACTIVITIES OF THE INDUSTRIAL UNDERTAKINGS ON THE GROUND THAT THE WORDS ANY BUSINESS FINDS EXPRESSION IN 80 -IB(1). THE INTEREST EARNED ON THE FDRS CANNOT BE SAID THAT INTEREST INCOME EARNED FROM MANUFACTURING ACTIVITIES THE INTEREST INCOME ON FDRS CANNOT BE SAID THAT IT DERIVED FROM MANUFACTURING ACTIVITY OF THE FOLLOWING JUDICIAL DECISIONS THROW ENOUGH LIGHT ON THE ISSUE. THE HONORABLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. RAASI CEMENT LTD., [232 ITR 554] HAS ANSWERED SIMILAR QUESTIONS INVOLVED IN FAVOR OF THE REVENUE.. THE QUESTION BEFORE THE HONORABLE HIGH COURT WAS WHETHER THE INTEREST EARNED ON SURPLUS FUNDS DEPOSITED IN THE BANKS DURING THE INSTALLATION OF THE COMPANY, THE STATUS OF THE COMPANY BEFORE COMMENCEMENT OF THE BUSINESS. THE HONORABLE HIGH COURT HAS HELD THAT SUCH INTEREST HAS TO BE SEPARATELY TREATED AS INCOME FROM OTHER SOURCES AND CANNOT BE TAKEN AS PART OF THE CAPITAL STRUCTURE FOLLOWING THE DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS ITA NO. 2617/KOL/2019 ASSESSMENT YEAR: 2011-12 QUADRO INFO TECHNOLOGIES PVT. LTD . ISSUED ON BANK FIXED DEPOSITS AND INTEREST OF RS.1,56,403/ - RECEIVED ON LOAN GIVEN TO M/S. SALARPURIA PROPERTIES PVT. LTD. ACCORDING TO THE ASSESSING OFFICER, THE DID NOT CONSTITUTE THE PROFITS OF THE ASSESSEE COMPANY DERIVED FROM THE BUSINESS OF OPERATING AND MAINTAINING INDUSTRIAL PARK AND THE SAME, THEREFORE, WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IA(4) OF THE ACT. HE ORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE U/S 80IA TO THAT EXTENT IN THE ) OF THE ACT VIDE ORDER DT. 28/03/2014. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ITS CLAIM U/S INCOME WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), IT THAT INTEREST FROM BANK CONNECTION WITH ITS DEPOSITS MADE AGAINST OVERDRAFT FACILITIES WAS RELATED TO ITS BUSINESS AND THE SAME, THEREFORE, WAS ELIGIBLE FOR DEDUCTION U/S 80IA. IT WAS ALSO CONTENDED ON BEHALF OF THE ASSESSEE COMPANY THAT THE DISALLOWANCE ON NCOME, EVEN OTHERWISE, SHOULD HAVE BEEN RESTRICTED TO THE NET THE LD. CIT(A) DID NOT FIND MERIT IN THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE COMPANY ON THIS ISSUE AND PROCEEDED TO CONFIRM THE DISALLOWANCE MADE BY THE G OFFICER ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION U/S 80IA IN RESPECT OF INTEREST INCOME FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH 5.4. TO 5.10. OF HIS 4) WOULD REVEAL THAT REFERENCE MADE TO PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKINGS AND NOT TO PROFIT AND GAINS DERIVED FROM ANY BUSINESS OF IB(4) WOULD REVEAL THA T THE EXPRESSION PROFITS AND GAINS DERIVED FROM ANY BUSINESS IS TO BE READ AS PROFITS AND GAINS DERIVED IB(L) IS NOT IN ANY MANNER IB WOULD REVEAL THAT WHAT IS INTENDED BY THE LAW MAKERS TO QUALIFY FOR DEDUCTION IS PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING. THERE IS, THEREFORE, NO REASON TO BRING WITHIN THE FOLD OF PROFITS AND GAINS DERIVED FROM UNDERTAKINGS ANY INCOME BEYOND THE ACTIVITIES OF THE INDUSTRIAL UNDERTAKINGS ON THE THE INTEREST EARNED ON THE FDRS CANNOT BE SAID THAT INTEREST INCOME EARNED FROM MANUFACTURING ACTIVITIES OF THE APPELLANT. THE INTEREST INCOME ON FDRS CANNOT BE SAID THAT IT DERIVED FROM MANUFACTURING ACTIVITY OF THE HONORABLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. RAASI CEMENT LTD., [232 ITR 554] HAS ANSWERED SIMILAR QUESTIONS INVOLVED IN FAVOR OF THE REVENUE.. THE QUESTION BEFORE THE DEPOSITED IN THE BANKS DURING THE INSTALLATION OF THE COMPANY, THE STATUS OF THE COMPANY BEFORE COMMENCEMENT OF THE BUSINESS. THE HONORABLE HIGH COURT HAS HELD THAT SUCH INTEREST HAS TO BE SEPARATELY TREATED AS AS PART OF THE CAPITAL STRUCTURE FOLLOWING THE DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD., VS. CIT - [227 ITR 172] (SC). IT WAS CATEGORICALLY HELD THAT INTEREST EARNED ON SURPLUS FUNDS DEPOSITED IN BANKS DURING INSTALLATION OF COMPANY, PRIOR TO COMMENCEMENT OF BUSINESS, HAS TO BE BROUGHT TO TAX AS INCOME FROM OTHER SOURCES U/S. 57 OF THE ACT. 5.5.2 IN K. RAVINDRANATHAN ASSESSEE WHO WAS ENGAGED IN EXPORT CLAIMED RELIEF UNDER SECTION 80HHC. THE ASSESSING OFFICER TREATED THE INTEREST RECEIVED ON SHORT A SSESSEE CONTENDED THAT THE SHORT TO OPEN A LETTER OF CREDIT AND TO GRANT FACILITIES NECESSARY TO ENABLE THE ASSESSEE TO EXPORT GOODS. THE DIVISION BENCH HELD THAT THE EXPRESSION DERIVED FRO PROFIT DIRECTLY ARISING FROM EXPORT ACTIVITIES. THE INTEREST RECEIVED BY THE ASSESSEE FROM SHORT DEPOSITS WAS NOT A DIRECT RESULT OF AN EXPORT OF GOODS OR MERCHANDISE. HENCE, THE COURT HELD THAT THE INTEREST R ECEIVED FROM SHORT HAS BEEN REITERATED BY THE KERALA HIGH COURT IN SOUTHERN CASHEW EXPORTERS V. DY. CIT [2003] 130 TAXMAN 203 AND IN URBAN STANISLAUS CO. V. CIT [2003] 263 ITR 10/ 130 5.5.3 THE DELHI HIGH COURT HAS HELD IN CIT V. SHRI 158 TAXMAN 474 THAT WHERE SURPLUS FUNDS ARE PARKED WITH A BANK AND INTEREST IS EARNED THEREON, IT CAN ONLY BE CATEGORIZED AS INCOME FROM OTHER SOURCES. SUCH A RECEIPT MERITS SEPARATE TREATMENT UNDER SECTION 56, WH ICH IS OUTSIDE THE RING OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. HENCE, THE VIEW OF THE DELHI HIGH COURT IS THAT SUCH A RECEIPT WOULD BE OUT OF THE RECKONING FOR THE PURPOSES OF SECTION 80HHC. A SIMILAR VIEW HAS BEEN TAKEN BY THE DELHI HIGH COURT IN INDUSTRIES [2008] 174 TAXMAN 187 AND CIT V. COSMOS INTERNATIONAL [2009] 318 ITR 314/ 177 TAXMAN 363. 5.5.4. IN KASHMIR ARTS V. CIT [2008] 166 TAXMAN 237 THE DELHI HIGH COURT HELD THAT THE INTEREST EARNED BY AN ASSESSEE WHO IS AN FOR AVAILING OF CREDIT FACILITIES COULD NOT BE TERMED AS BUSINESS INCOME BUT INCOME FROM OTHER SOURCES. SUCH INCOME COULD NOT BE INCLUDED IN THE PROFITS AND GAINS OF BUSINESS IN TERMS OF THE EXPLANATION (BAA) (I) TO SUB AUTHORITY ON SECTION 80HHC, IT WOULD BE NECESSARY TO RE THIS COURT IN CIT V. RAVI RATNA EXPORTS (P.) LTD. [2000 BEEN HELD THAT INTEREST ON FIXED DEPOSITS RECEIVED BY THE ASSESSEE WAS CORRECTLY CLASSIFIED BY THE ASSESSING OFFICER AS BEING TAXABLE AS INCOME FROM OTHER SOURCES AND THAT CONSEQUENTLY SUCH INCOME COULD NOT FAL L UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE DIVISION BENCH HELD THAT AS A RESULT SUCH INCOME CO FORMULA UNDER SECTION 80HHC. 5.5.5. IN PANDIAN CHEMICALS LTD. V. CIT [2003] 262 ITR 278/ 129 TAXMAN 539 THE SUPREME COURT CONSTRUED THE AMBIT OF THE EXPRESSION DERIVED FROM IN SECTION 80HH. THE ASSESSEE HAD EARNED INTEREST ON A DEPOSIT PLACED WITH THE ELECTRICITY BOARD FOR THE SUPPLY OF ELECTRICITY. THE ASSESSEE WAS THAT THIS SHOULD BE TREATED AS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING UNDER SECTION 80HH BECAUSE, WITHOUT ELECTRIC SUPPLY, THE UNDERTAKING COULD NOT BE RUN. THE SUPREME COURT HELD THAT THE EXPRESSION DERIVED FRO HAS DIRECT OR IMMEDIATE NEXUS WITH THE INDUSTRIAL UNDERTAKING. THOUGH ELECTRICITY MAY BE REQUIRED FOR THE PURPOSES OF THE INDUSTRIAL UNDERTAKING, THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED FROM THE BU SINESS OF THE INDUSTRIAL UNDERTAKING. THE DERIVATION OF PROFITS ON THE DEPOSIT MADE WITH THE ELECTRICITY BOARD CANNOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF (PAGES 280, 281). 5.5.6. IN CASE OF ASIAN CEMENT INDUSTRIES VS INCOME T KASHMIR) THE HONBLE HIGH COURT) INCOME FLOWING FROM THE BUSINESS ACTIVITY OF INDUSTRIAL UNDERTAKING, THUS, CANNOT BE COMPUTED FOR DEDUCTION U/S 80- IB OF THE 2005. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80 AMOUNTING- TO RS.2,21,845/ R ESPECTIVELY DECLARING IT AS INCOME OF AN INDUSTRIAL UNDERTAKING BEFORE ASSESSING OFFICER (FOR SHORT A.O.) ON THE PLEA THAT THE SAID FDRS WERE KEPT AS GUARANTEE WITH THE ELECTRICITY DEPARTMENT AND THE BANKS FOR SECURING CREDIT FACILITIES. IT WAS CONTENDED INCOME OF AN INDUSTRIAL UNDERTAKING AND THEREFORE, ELIGIBLE FOR DEDUCTION UNDER SECTION 80 HOWEVER, DISALLOWED THE DEDUCTION AND TREATED IT AS INCOME FROM OTHER SOURCES. AGGRIEVED THEREOF, 3 QUADRO INFO TECHNOLOGIES PVT. LTD [227 ITR 172] (SC). IT WAS CATEGORICALLY HELD THAT INTEREST EARNED ON SURPLUS FUNDS IN BANKS DURING INSTALLATION OF COMPANY, PRIOR TO COMMENCEMENT OF BUSINESS, HAS TO BE BROUGHT TO TAX AS INCOME FROM OTHER SOURCES U/S. 57 OF THE ACT. IN K. RAVINDRANATHAN NAIR V. DY. CIT [2003] 262 ITR 669 / 129 TAXMAN 811 {KER.), AN ASSESSEE WHO WAS ENGAGED IN EXPORT CLAIMED RELIEF UNDER SECTION 80HHC. THE ASSESSING OFFICER TREATED THE INTEREST RECEIVED ON SHORT - TERM DEPOSITS WITH BANKS AS INCOME FROM OTHER SOURCES. THE SSESSEE CONTENDED THAT THE SHORT - TERM DEPOSITS WERE EFFECTED AS A CONDITION PRECEDENT FOR THE BANK TO OPEN A LETTER OF CREDIT AND TO GRANT FACILITIES NECESSARY TO ENABLE THE ASSESSEE TO EXPORT GOODS. THE DIVISION BENCH HELD THAT THE EXPRESSION DERIVED FRO M IN SECTION 80HHC MUST BE UNDERSTOOD AS PROFIT DIRECTLY ARISING FROM EXPORT ACTIVITIES. THE INTEREST RECEIVED BY THE ASSESSEE FROM SHORT DEPOSITS WAS NOT A DIRECT RESULT OF AN EXPORT OF GOODS OR MERCHANDISE. HENCE, THE COURT HELD THAT THE ECEIVED FROM SHORT - TERM DEPOSITS COULD NOT BE CLASSIFIED AS BUSINESS INCOME. THE SAME VIEW HAS BEEN REITERATED BY THE KERALA HIGH COURT IN SOUTHERN CASHEW EXPORTERS V. DY. CIT [2003] 130 TAXMAN 203 AND IN URBAN STANISLAUS CO. V. CIT [2003] 263 ITR 10/ 130 TAXMAN 244. THE DELHI HIGH COURT HAS HELD IN CIT V. SHRI RAM HONDA POWER EQUIP [2007] 289 ITR 475/ 158 TAXMAN 474 THAT WHERE SURPLUS FUNDS ARE PARKED WITH A BANK AND INTEREST IS EARNED THEREON, IT CAN ONLY BE CATEGORIZED AS INCOME FROM OTHER SOURCES. SUCH A RECEIPT MERITS SEPARATE TREATMENT ICH IS OUTSIDE THE RING OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. HENCE, THE VIEW OF THE DELHI HIGH COURT IS THAT SUCH A RECEIPT WOULD BE OUT OF THE RECKONING FOR THE PURPOSES OF SECTION 80HHC. A SIMILAR VIEW HAS BEEN TAKEN BY THE DELHI HIGH COURT IN CIT V. GOLDTEX FURNISHING INDUSTRIES [2008] 174 TAXMAN 187 AND CIT V. COSMOS INTERNATIONAL [2009] 318 ITR 314/ 177 IN KASHMIR ARTS V. CIT [2008] 166 TAXMAN 237 THE DELHI HIGH COURT HELD THAT THE INTEREST EARNED BY AN ASSESSEE WHO IS AN EXPORTER ON FDRS KEPT WITH A BANK AS MARGIN MONEY AS A CONDITION FOR AVAILING OF CREDIT FACILITIES COULD NOT BE TERMED AS BUSINESS INCOME BUT INCOME FROM OTHER SOURCES. SUCH INCOME COULD NOT BE INCLUDED IN THE PROFITS AND GAINS OF BUSINESS IN TERMS OF THE EXPLANATION (BAA) (I) TO SUB - SECTION (4A) OF SECTION 80HHC. FOR COMPLETING THE NARRATION THIS LINE OF AUTHORITY ON SECTION 80HHC, IT WOULD BE NECESSARY TO RE FER TO THE JUDGMENT OF A DIVISI THIS COURT IN CIT V. RAVI RATNA EXPORTS (P.) LTD. [2000 ] 246 ITR 443 / 112 TAXMAN 577 , WHERE IT HAS BEEN HELD THAT INTEREST ON FIXED DEPOSITS RECEIVED BY THE ASSESSEE WAS CORRECTLY CLASSIFIED BY THE ASSESSING OFFICER AS BEING TAXABLE AS INCOME FROM OTHER SOURCES AND THAT CONSEQUENTLY SUCH INCOME L UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE DIVISION BENCH HELD THAT AS A RESULT SUCH INCOME CO ULD NOT BE INCLU DED IN THE BUSINESS PROFITS FOR THE PURPOSES O 80HHC. CHEMICALS LTD. V. CIT [2003] 262 ITR 278/ 129 TAXMAN 539 THE SUPREME COURT CONSTRUED THE AMBIT OF THE EXPRESSION DERIVED FROM IN SECTION 80HH. THE ASSESSEE HAD EARNED INTEREST ON A DEPOSIT PLACED WITH THE ELECTRICITY BOARD FOR THE SUPPLY OF ELECTRICITY. THE ASSESSEE WAS THAT THIS SHOULD BE TREATED AS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING UNDER SECTION 80HH BECAUSE, WITHOUT ELECTRIC SUPPLY, THE UNDERTAKING COULD NOT BE RUN. THE SUPREME COURT HELD THAT THE EXPRESSION DERIVED FRO M SHOULD BE UNDERSTOOD AS SOMETHING WHICH HAS DIRECT OR IMMEDIATE NEXUS WITH THE INDUSTRIAL UNDERTAKING. THOUGH ELECTRICITY MAY BE REQUIRED FOR THE PURPOSES OF THE INDUSTRIAL UNDERTAKING, THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED SINESS OF THE INDUSTRIAL UNDERTAKING. THE DERIVATION OF PROFITS ON THE DEPOSIT MADE WITH THE ELECTRICITY BOARD CANNOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF (PAGES ASIAN CEMENT INDUSTRIES VS INCOME T AX APPELLATE TRIBUNAL (JAMMU AND KASHMIR) THE HONBLE HIGH COURT) HELD THAT INTEREST INCOME FROM FRDS CANNOT BE SAID TO BE AN INCOME FLOWING FROM THE BUSINESS ACTIVITY OF INDUSTRIAL UNDERTAKING, THUS, CANNOT BE COMPUTED FOR IB OF THE ACT.THE CONTROVERSY RELATES TO THE ASSESSMENT YEARS 2003 2005. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80 - IB OF I.T. ACT BY INCLUDING INTEREST TO RS.2,21,845/ - AND RS.2,86,486/- ON FDRS FOR THE AFORESAID TWO ASSESSMENT YEARS ESPECTIVELY DECLARING IT AS INCOME OF AN INDUSTRIAL UNDERTAKING BEFORE ASSESSING OFFICER (FOR SHORT A.O.) ON THE PLEA THAT THE SAID FDRS WERE KEPT AS GUARANTEE WITH THE ELECTRICITY DEPARTMENT AND THE BANKS FOR SECURING CREDIT FACILITIES. IT WAS CONTENDED THAT THE INTEREST PART WAS PART OF BUSINESS INCOME OF AN INDUSTRIAL UNDERTAKING AND THEREFORE, ELIGIBLE FOR DEDUCTION UNDER SECTION 80 HOWEVER, DISALLOWED THE DEDUCTION AND TREATED IT AS INCOME FROM OTHER SOURCES. AGGRIEVED THEREOF, ITA NO. 2617/KOL/2019 ASSESSMENT YEAR: 2011-12 QUADRO INFO TECHNOLOGIES PVT. LTD . [227 ITR 172] (SC). IT WAS CATEGORICALLY HELD THAT INTEREST EARNED ON SURPLUS FUNDS IN BANKS DURING INSTALLATION OF COMPANY, PRIOR TO COMMENCEMENT OF BUSINESS, HAS TO BE NAIR V. DY. CIT [2003] 262 ITR 669 / 129 TAXMAN 811 {KER.), AN ASSESSEE WHO WAS ENGAGED IN EXPORT CLAIMED RELIEF UNDER SECTION 80HHC. THE ASSESSING OFFICER TERM DEPOSITS WITH BANKS AS INCOME FROM OTHER SOURCES. THE TERM DEPOSITS WERE EFFECTED AS A CONDITION PRECEDENT FOR THE BANK TO OPEN A LETTER OF CREDIT AND TO GRANT FACILITIES NECESSARY TO ENABLE THE ASSESSEE TO EXPORT GOODS. THE M IN SECTION 80HHC MUST BE UNDERSTOOD AS PROFIT DIRECTLY ARISING FROM EXPORT ACTIVITIES. THE INTEREST RECEIVED BY THE ASSESSEE FROM SHORT -TERM DEPOSITS WAS NOT A DIRECT RESULT OF AN EXPORT OF GOODS OR MERCHANDISE. HENCE, THE COURT HELD THAT THE TERM DEPOSITS COULD NOT BE CLASSIFIED AS BUSINESS INCOME. THE SAME VIEW HAS BEEN REITERATED BY THE KERALA HIGH COURT IN SOUTHERN CASHEW EXPORTERS V. DY. CIT [2003] 130 TAXMAN 244. RAM HONDA POWER EQUIP [2007] 289 ITR 475/ 158 TAXMAN 474 THAT WHERE SURPLUS FUNDS ARE PARKED WITH A BANK AND INTEREST IS EARNED THEREON, IT CAN ONLY BE CATEGORIZED AS INCOME FROM OTHER SOURCES. SUCH A RECEIPT MERITS SEPARATE TREATMENT ICH IS OUTSIDE THE RING OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. HENCE, THE VIEW OF THE DELHI HIGH COURT IS THAT SUCH A RECEIPT WOULD BE OUT OF THE RECKONING FOR THE PURPOSES OF CIT V. GOLDTEX FURNISHING INDUSTRIES [2008] 174 TAXMAN 187 AND CIT V. COSMOS INTERNATIONAL [2009] 318 ITR 314/ 177 IN KASHMIR ARTS V. CIT [2008] 166 TAXMAN 237 THE DELHI HIGH COURT HELD THAT THE INTEREST EXPORTER ON FDRS KEPT WITH A BANK AS MARGIN MONEY AS A CONDITION FOR AVAILING OF CREDIT FACILITIES COULD NOT BE TERMED AS BUSINESS INCOME BUT INCOME FROM OTHER SOURCES. SUCH INCOME COULD NOT BE INCLUDED IN THE PROFITS AND GAINS OF BUSINESS IN TERMS OF THE SECTION (4A) OF SECTION 80HHC. FOR COMPLETING THE NARRATION THIS LINE OF FER TO THE JUDGMENT OF A DIVISI ON BENCH OF ] 246 ITR 443 / 112 TAXMAN 577 , WHERE IT HAS BEEN HELD THAT INTEREST ON FIXED DEPOSITS RECEIVED BY THE ASSESSEE WAS CORRECTLY CLASSIFIED BY THE ASSESSING OFFICER AS BEING TAXABLE AS INCOME FROM OTHER SOURCES AND THAT CONSEQUENTLY SUCH INCOME L UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE DIVISION BENCH HELD DED IN THE BUSINESS PROFITS FOR THE PURPOSES O F THE CHEMICALS LTD. V. CIT [2003] 262 ITR 278/ 129 TAXMAN 539 THE SUPREME COURT CONSTRUED THE AMBIT OF THE EXPRESSION DERIVED FROM IN SECTION 80HH. THE ASSESSEE HAD EARNED INTEREST ON A DEPOSIT PLACED WITH THE ELECTRICITY BOARD FOR THE SUPPLY OF ELECTRICITY. THE CONTENTION OF THE ASSESSEE WAS THAT THIS SHOULD BE TREATED AS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING UNDER SECTION 80HH BECAUSE, WITHOUT ELECTRIC SUPPLY, THE UNDERTAKING COULD NOT BE RUN. THE M SHOULD BE UNDERSTOOD AS SOMETHING WHICH HAS DIRECT OR IMMEDIATE NEXUS WITH THE INDUSTRIAL UNDERTAKING. THOUGH ELECTRICITY MAY BE REQUIRED FOR THE PURPOSES OF THE INDUSTRIAL UNDERTAKING, THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED SINESS OF THE INDUSTRIAL UNDERTAKING. THE DERIVATION OF PROFITS ON THE DEPOSIT MADE WITH THE ELECTRICITY BOARD CANNOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF (PAGES AX APPELLATE TRIBUNAL (JAMMU AND HELD THAT INTEREST INCOME FROM FRDS CANNOT BE SAID TO BE AN INCOME FLOWING FROM THE BUSINESS ACTIVITY OF INDUSTRIAL UNDERTAKING, THUS, CANNOT BE COMPUTED FOR ACT.THE CONTROVERSY RELATES TO THE ASSESSMENT YEARS 2003 -2004 AND 2004- IB OF I.T. ACT BY INCLUDING INTEREST ON FDRS FOR THE AFORESAID TWO ASSESSMENT YEARS ESPECTIVELY DECLARING IT AS INCOME OF AN INDUSTRIAL UNDERTAKING BEFORE ASSESSING OFFICER (FOR SHORT A.O.) ON THE PLEA THAT THE SAID FDRS WERE KEPT AS GUARANTEE WITH THE ELECTRICITY DEPARTMENT AND THAT THE INTEREST PART WAS PART OF BUSINESS INCOME OF AN INDUSTRIAL UNDERTAKING AND THEREFORE, ELIGIBLE FOR DEDUCTION UNDER SECTION 80 -IB. A.O., HOWEVER, DISALLOWED THE DEDUCTION AND TREATED IT AS INCOME FROM OTHER SOURCES. AGGRIEVED THEREOF, THE ASSESS EE FILED TWO SEPARATE APPEALS BEFORE C.I.T(A) REITERATING THE SAME STAND, BUT TO NO RELIEF. THEREAFTER, TWO STATUTORY APPEALS BEFORE ITAT (AMRITSAR BENCH), ALSO FACED DISMISSAL. THE HONBLE HIGH COURT AFTER DISCUSSING THE LANGUAGE AND WORDINGS OF THE SECTI HELD THAT INTEREST INCOME FROM FDRS IS NOT ALLOWABLE FOR COMPUTING AS DEDUCTION UNDER SECTION 80IB OF THE ACT. 5.5.7 THE HONBLE ITAT, DELHI IN CASE OF DCIT VS. SM NO. 205/DEL/2013 DATE OF JUDGEMENT/ORDER: 05/06/2018 FOR ASSESSMENT YEAR : 2009 INTEREST EARNED ON FDR MAINTAINED WITH THE PERFORMANCE OF ANY BUSINESS ACTIVITY EVEN IF PROJECT CANT OVERRIDE THE BASIC STRUCTURE OF SEC 80IA WHICH INTENDS TO PROVIDE DEDUCTION ONLY IN RESPECT OF ACTIVITIES DIRECTLY RELATED TO THE PROCESS OF PROVIDING INFRASTRUCTURE FACILITIES. INCOME CANNOT BE SAID TO BE DERIVED FROM AN ACTIVITY MERELY BY REASON OF THE ACTIVITY WAS PERFORMED TO EARN THE SAID INCOME IN AN INDIRECT, INCIDENTAL OR REMOTE MANNER. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF DEVELOPING, MAINTAINING AND OPERATING OF INFRASTRUCTURE FACILITIES. THE ASSESSING OFFICER HELD THAT IN PARTICULARLY OF THE HONBLE MADRAS HIGH COURT DECISION IN THE CASE OF PANDIAN CHEMICALS LTD (IN WHICH SLP REJECTED), AND OF ITAT, PUNE BENCH IN THE CASE OF KIRPA CHEMICALS (P) LTD. VS. DEPUTY COMMISSIONER OF INCOME- TAX (88 ITD 200),THE INTEREST INCOME AND MISCELLANEOUS INCOME CANNOT BE HELD TO BE DERIVED FROM THE BUSINESS OF PROVIDING INFRASTRUCTURAL FACILITIES AS THERE IS NO DIRECT NEXUS BETWEEN THE INTEREST EARNED ARID THE BUSINESS OF PROVIDING INFRASTRUCTURAL FAC OFFICER FURTHER OBSERVED THAT INCOME CAN BE SAID TO BE DERIVED FROM AN ACTIVITY IF THE SAID ACTIVITY IS IMMEDIATE AND EFFECTIVE SOURCE OF THE SAID INCOME. INCOME CANNOT BE SAID TO BE DERIVED FROM AN ACTIVITY MERELY BY REASON OF THE F INDIRECT, INCIDENTAL OR REMOTE MANNER. THUS, THE ASSESSING OFFICER HELD THAT THE INTEREST INCOME EARNED ON FDRS AND MISC. INCOME CANNOT BE CONSIDERED AS PROFIT DERIVED FROM THE BUSINESS OF DEVEL OPING, OPERATING OR MAINTAINING INFRASTRUCTURAL FACILITIES AND THEREBY NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT, 1961. INTEREST INCOME WAS HELD TO BE ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES ALONG WITH THE MISCELLANEOUS INCOME ON WHICH 8 ELIGIBLE. THE LD. AR MADE AN ALTERNATIVE PLEA THAT SECTION 37 OF THE INCOME TAX ACT LAYS DOWN THAT EXPENSES INCURRED AND INCOME SHOULD BE SET OFF AGAINST THAT PARTICULAR INCOME. THE LD. AR FURTHER SUBMITTED THAT IN THE PRESENT CASE, TH OVER DRAFT AND THE FDRS MADE BY THEM ONLY OUT OF SUCH OVER DRAFT BANK BALANCES. THE BANK INTEREST ON SUCH OVER DRAFT IS GENERALLY 2% TO 4% MORE THAN BANK INTEREST ON FDRS MEANING THEREBY THAT NO SURP LUS INCOME CAN RESULTS UNDER THIS HEAD. THEREFORE, THE LD. AR PRAYED THAT THE ORDER OF THE CIT(A) IS JUST AND PROPER AND THE APPEAL OF THE REVENUE BE DISMISSED. 5.6. THE OBSERVATIONS OF THE HONBLE ITAT ARE EXTRACTED AS UNDER: 'WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE BASIC STRUCTURE OF THE SECTION 80HH, 80IC, 80IA IS IN RESPECT OF EXEMPTION/BENEFIT' CLAIMED BY THE ASSESSEE. THE HONBLE SUPREME COURT HAS TAKEN COGNIZANCE ABOUT ALL THE ASPECTS REGA INTEREST EARNED ON FIXED DEPOSITS FOR THE PERFORMANCES OF BANK GUARANTEE FOR CARRYING ON THE BUSINESS FOR PROVIDING PERFORMANCE GUARANTEE. THE HONBLE SUPREME COURT IN CASE OF CONVENTIONAL FASTNERS VS. CIT (2018 MADE IT CLEAR THAT GUARANTEE IS NOT DERIVED FROM BUSINESS, HENCE NOT ENTITLE TO DEDUCTION. THE DECISION OF THE APEX COURT IS APPLICABLE IN THE PRESENT CASE WHICH ALSO CONSIDERED THE DECISION RELIED BY THE LD. AR I.E. PANDIAN CHEMICALS. THE DECI ARE FACTUALLY DIFFERENT AND ARE NOT APPLICABLE IN THE PRESENT CASE WHILE THE DECISION OF THE APEX COURT PASSED ON 16.05.20 18 (CONVENTIONAL FASTNERS) IS MORE APT IN THE PRESENT CASE. THEREFORE, THE ORDER OF THE CIT(A) IS SET 5.7. THE HONBLE HIGH COURT OF UTTARAKHAND IN THE CASE OF CONVENTIONAL FASTNERS VS. CIT, DEHRADUN (2017) 88 TAXMANN.COM SINCE INTEREST INCOME EARNED FROM FIXED DEPOSITS RESERVES KEPT AS SECURITY AND AS A BUSINESS PRE- REQUISITE HAD NOTHING TO DO WITH CARRYING ON ASSESSEES BUSINESS OF MANUFACTURE AND 4 QUADRO INFO TECHNOLOGIES PVT. LTD EE FILED TWO SEPARATE APPEALS BEFORE C.I.T(A) REITERATING THE SAME STAND, BUT TO NO RELIEF. THEREAFTER, TWO STATUTORY APPEALS BEFORE ITAT (AMRITSAR BENCH), ALSO FACED DISMISSAL. THE HONBLE HIGH COURT AFTER DISCUSSING THE LANGUAGE AND WORDINGS OF THE SECTI ON 80 IB AND VARIOUS CASE LAWS HELD THAT INTEREST INCOME FROM FDRS IS NOT ALLOWABLE FOR COMPUTING AS DEDUCTION UNDER SECTION 80IB THE HONBLE ITAT, DELHI IN CASE OF DCIT VS. SM - S PARYAVARAN (P) LTD. (ITAT DELHI) IN ITA DATE OF JUDGEMENT/ORDER: 05/06/2018 FOR ASSESSMENT YEAR : 2009 INTEREST EARNED ON FDR MAINTAINED WITH THE BANK FOR O BTAINING BANK GUARANTEE FOR PERFORMANCE OF ANY BUSINESS ACTIVITY EVEN IF RELATED TO ANY GOVERNMENT INFRASTRUCTURE OVERRIDE THE BASIC STRUCTURE OF SEC 80IA WHICH INTENDS TO PROVIDE DEDUCTION ONLY IN RESPECT OF ACTIVITIES DIRECTLY RELATED TO THE PROCESS OF PROVIDING INFRASTRUCTURE FACILITIES. INCOME CANNOT BE SAID TO BE DERIVED FROM AN ACTIVITY MERELY BY REASON OF THE ACTIVITY WAS PERFORMED TO EARN THE SAID INCOME IN AN INDIRECT, INCIDENTAL OR REMOTE MANNER. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF DEVELOPING, MAINTAINING AND OPERATING OF INFRASTRUCTURE FACILITIES. THE ASSESSING OFFICER HELD THAT IN VIEW OF THE RATIO OF THE DECISIONS AND PARTICULARLY OF THE HONBLE MADRAS HIGH COURT DECISION IN THE CASE OF PANDIAN CHEMICALS LTD (IN WHICH SLP REJECTED), AND OF ITAT, PUNE BENCH IN THE CASE OF KIRPA CHEMICALS (P) LTD. VS. DEPUTY TAX (88 ITD 200),THE INTEREST INCOME AND MISCELLANEOUS INCOME CANNOT BE HELD TO BE DERIVED FROM THE BUSINESS OF PROVIDING INFRASTRUCTURAL FACILITIES AS THERE IS NO DIRECT NEXUS BETWEEN THE INTEREST EARNED ARID THE BUSINESS OF PROVIDING INFRASTRUCTURAL FAC OFFICER FURTHER OBSERVED THAT INCOME CAN BE SAID TO BE DERIVED FROM AN ACTIVITY IF THE SAID ACTIVITY IS IMMEDIATE AND EFFECTIVE SOURCE OF THE SAID INCOME. INCOME CANNOT BE SAID TO BE DERIVED FROM AN ACTIVITY MERELY BY REASON OF THE F ACT THAT ACTIVITY WAS PERFORMED TO EARN THE SAID INCOME IN AN INDIRECT, INCIDENTAL OR REMOTE MANNER. THUS, THE ASSESSING OFFICER HELD THAT THE INTEREST INCOME EARNED ON FDRS AND MISC. INCOME CANNOT BE CONSIDERED AS PROFIT DERIVED FROM THE BUSINESS OF OPING, OPERATING OR MAINTAINING INFRASTRUCTURAL FACILITIES AND THEREBY NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT, 1961. INTEREST INCOME WAS HELD TO BE ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES ALONG WITH THE MISCELLANEOUS INCOME ON WHICH 8 ELIGIBLE. THE LD. AR MADE AN ALTERNATIVE PLEA THAT SECTION 37 OF THE INCOME TAX ACT LAYS DOWN THAT EXPENSES INCURRED AND INCOME SHOULD BE SET OFF AGAINST THAT PARTICULAR INCOME. THE LD. AR FURTHER SUBMITTED THAT IN THE PRESENT CASE, TH E ASSESSEE COMPANY HAD ONLY A NEGATIVE BANK BALANCE/BANK OVER DRAFT AND THE FDRS MADE BY THEM ONLY OUT OF SUCH OVER DRAFT BANK BALANCES. THE BANK INTEREST ON SUCH OVER DRAFT IS GENERALLY 2% TO 4% MORE THAN BANK INTEREST ON FDRS MEANING THEREBY THAT NO LUS INCOME CAN RESULTS UNDER THIS HEAD. THEREFORE, THE LD. AR PRAYED THAT THE ORDER OF THE CIT(A) IS JUST AND PROPER AND THE APPEAL OF THE REVENUE BE DISMISSED. THE OBSERVATIONS OF THE HONBLE ITAT ARE EXTRACTED AS UNDER: 'WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE BASIC STRUCTURE OF THE SECTION 80HH, 80IC, 80IA IS IN RESPECT OF EXEMPTION/BENEFIT' CLAIMED BY THE ASSESSEE. THE HONBLE SUPREME COURT HAS TAKEN COGNIZANCE ABOUT ALL THE ASPECTS REGA INTEREST EARNED ON FIXED DEPOSITS FOR THE PERFORMANCES OF BANK GUARANTEE FOR CARRYING ON THE BUSINESS FOR PROVIDING PERFORMANCE GUARANTEE. THE HONBLE SUPREME COURT IN CASE OF CONVENTIONAL FASTNERS VS. CIT (2018 -TIOL-2002-SC- IT JUDGMENT DATED 16 MADE IT CLEAR THAT GUARANTEE IS NOT DERIVED FROM BUSINESS, HENCE NOT ENTITLE TO DEDUCTION. THE DECISION OF THE APEX COURT IS APPLICABLE IN THE PRESENT CASE WHICH ALSO CONSIDERED THE DECISION RELIED BY THE LD. AR I.E. PANDIAN CHEMICALS. THE DECI SION RELIED UPON BY THE LD. AR ARE FACTUALLY DIFFERENT AND ARE NOT APPLICABLE IN THE PRESENT CASE WHILE THE DECISION OF THE APEX COURT PASSED ON 16.05.20 18 (CONVENTIONAL FASTNERS) IS MORE APT IN THE PRESENT CASE. THEREFORE, THE ORDER OF THE CIT(A) IS SET ASIDE AND APPEAL OF THE REVENUE IS ALLOWED'. THE HONBLE HIGH COURT OF UTTARAKHAND IN THE CASE OF CONVENTIONAL FASTNERS VS. CIT, TAXMANN.COM 163 (UTTARAKHAND ) IN WHICH IT WAS HELD AS UNDER: SINCE INTEREST INCOME EARNED FROM FIXED DEPOSITS RESERVES KEPT AS SECURITY AND AS A BUSINESS REQUISITE HAD NOTHING TO DO WITH CARRYING ON ASSESSEES BUSINESS OF MANUFACTURE AND ITA NO. 2617/KOL/2019 ASSESSMENT YEAR: 2011-12 QUADRO INFO TECHNOLOGIES PVT. LTD . EE FILED TWO SEPARATE APPEALS BEFORE C.I.T(A) REITERATING THE SAME STAND, BUT TO NO RELIEF. THEREAFTER, TWO STATUTORY APPEALS BEFORE ITAT (AMRITSAR BENCH), ALSO FACED DISMISSAL. THE HONBLE ON 80 IB AND VARIOUS CASE LAWS HELD THAT INTEREST INCOME FROM FDRS IS NOT ALLOWABLE FOR COMPUTING AS DEDUCTION UNDER SECTION 80IB S PARYAVARAN (P) LTD. (ITAT DELHI) IN ITA DATE OF JUDGEMENT/ORDER: 05/06/2018 FOR ASSESSMENT YEAR : 2009 -10 HELD THAT BTAINING BANK GUARANTEE FOR RELATED TO ANY GOVERNMENT INFRASTRUCTURE OVERRIDE THE BASIC STRUCTURE OF SEC 80IA WHICH INTENDS TO PROVIDE DEDUCTION ONLY IN RESPECT OF ACTIVITIES DIRECTLY RELATED TO THE PROCESS OF PROVIDING INFRASTRUCTURE FACILITIES. INCOME CANNOT BE SAID TO BE DERIVED FROM AN ACTIVITY MERELY BY REASON OF THE FACT THAT ACTIVITY WAS PERFORMED TO EARN THE SAID INCOME IN AN INDIRECT, INCIDENTAL OR REMOTE MANNER. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF DEVELOPING, MAINTAINING AND OPERATING OF VIEW OF THE RATIO OF THE DECISIONS AND PARTICULARLY OF THE HONBLE MADRAS HIGH COURT DECISION IN THE CASE OF PANDIAN CHEMICALS LTD (IN WHICH SLP REJECTED), AND OF ITAT, PUNE BENCH IN THE CASE OF KIRPA CHEMICALS (P) LTD. VS. DEPUTY TAX (88 ITD 200),THE INTEREST INCOME AND MISCELLANEOUS INCOME CANNOT BE HELD TO BE DERIVED FROM THE BUSINESS OF PROVIDING INFRASTRUCTURAL FACILITIES AS THERE IS NO DIRECT NEXUS BETWEEN THE INTEREST EARNED ARID THE BUSINESS OF PROVIDING INFRASTRUCTURAL FAC ILITIES. THE ASSESSING OFFICER FURTHER OBSERVED THAT INCOME CAN BE SAID TO BE DERIVED FROM AN ACTIVITY IF THE SAID ACTIVITY IS IMMEDIATE AND EFFECTIVE SOURCE OF THE SAID INCOME. INCOME CANNOT BE SAID TO BE DERIVED FROM AN ACT THAT ACTIVITY WAS PERFORMED TO EARN THE SAID INCOME IN AN INDIRECT, INCIDENTAL OR REMOTE MANNER. THUS, THE ASSESSING OFFICER HELD THAT THE INTEREST INCOME EARNED ON FDRS AND MISC. INCOME CANNOT BE CONSIDERED AS PROFIT DERIVED FROM THE BUSINESS OF OPING, OPERATING OR MAINTAINING INFRASTRUCTURAL FACILITIES AND THEREBY NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT, 1961. INTEREST INCOME WAS HELD TO BE ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES ALONG WITH THE MISCELLANEOUS INCOME ON WHICH 8 0IA DEDUCTION IS NOT ELIGIBLE. THE LD. AR MADE AN ALTERNATIVE PLEA THAT SECTION 37 OF THE INCOME TAX ACT LAYS DOWN THAT EXPENSES INCURRED AND INCOME SHOULD BE SET OFF AGAINST THAT PARTICULAR INCOME. THE LD. AR FURTHER E ASSESSEE COMPANY HAD ONLY A NEGATIVE BANK BALANCE/BANK OVER DRAFT AND THE FDRS MADE BY THEM ONLY OUT OF SUCH OVER DRAFT BANK BALANCES. THE BANK INTEREST ON SUCH OVER DRAFT IS GENERALLY 2% TO 4% MORE THAN BANK INTEREST ON FDRS MEANING THEREBY THAT NO LUS INCOME CAN RESULTS UNDER THIS HEAD. THEREFORE, THE LD. AR PRAYED THAT THE ORDER OF THE CIT(A) 'WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE BASIC STRUCTURE OF THE SECTION 80HH, 80IC, 80IA IS IN RESPECT OF EXEMPTION/BENEFIT' CLAIMED BY THE ASSESSEE. THE HONBLE SUPREME COURT HAS TAKEN COGNIZANCE ABOUT ALL THE ASPECTS REGA RDING THE INTEREST EARNED ON FIXED DEPOSITS FOR THE PERFORMANCES OF BANK GUARANTEE FOR CARRYING ON THE BUSINESS FOR PROVIDING PERFORMANCE GUARANTEE. THE HONBLE SUPREME COURT IN CASE OF IT JUDGMENT DATED 16 TH MAY 2018) MADE IT CLEAR THAT GUARANTEE IS NOT DERIVED FROM BUSINESS, HENCE NOT ENTITLE TO DEDUCTION. THE DECISION OF THE APEX COURT IS APPLICABLE IN THE PRESENT CASE WHICH ALSO CONSIDERED THE SION RELIED UPON BY THE LD. AR ARE FACTUALLY DIFFERENT AND ARE NOT APPLICABLE IN THE PRESENT CASE WHILE THE DECISION OF THE APEX COURT PASSED ON 16.05.20 18 (CONVENTIONAL FASTNERS) IS MORE APT IN THE PRESENT CASE. ASIDE AND APPEAL OF THE REVENUE IS ALLOWED'. THE HONBLE HIGH COURT OF UTTARAKHAND IN THE CASE OF CONVENTIONAL FASTNERS VS. CIT, ) IN WHICH IT WAS HELD AS UNDER: SINCE INTEREST INCOME EARNED FROM FIXED DEPOSITS RESERVES KEPT AS SECURITY AND AS A BUSINESS REQUISITE HAD NOTHING TO DO WITH CARRYING ON ASSESSEES BUSINESS OF MANUFACTURE AND SALE OF ELECTRIC METERS, SAME WOULD NOT BE ENTITLED TO BENEFIT OF DEDUCTIO IC. 5.8. HONBLE ITAT, DELHI IN CASE OF DATE OF ORDER : 18/05/2018 FOR ASSESSMENT YEAR : 2013 10. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT ASSESSEE EARNED, INTEREST ON FDRS WHICH WAS DEPOSITED WITH THE CONCERNED AUTHORITIES FOR TAKING TENDER/CONTRACTS. SIMILAR ISSUE WAS CONSIDERED AUTHORITIES BELOW HAVE ADMITTEDLY DENIED DEDUCTION UNDER SECTION 80IC TO THE ASSESSEE ON SAME SET OF FACTS. IN A.Y. 2009 WHICH WAS DISMISSED BY THE TRIBUNAL VIDE ORDER DATED 25.01.201 ORDER OF THE TRIBUNAL IS PLACED ON RECORD. IN THIS YEAR ALSO, SIMILAR FACTS HAVE BEEN RECORDED THAT THE ASSESSEE IN THIS YEAR HAS EARNED INTEREST INCOME ON FDRS WHICH WAS PLEDGED AS PERFORMANCE GUARANTEE IN TERMS OF CONTRACT AWARDED ELECTRONIC METERS. THE ISSUE BEFORE THE TRIBUNAL WAS, WHETHER SUCH INTEREST INCOME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE IT. ACT ? THE TRIBUNAL FOLLOWED ITS OWN ORDER IN THE CASE OF SAME ASSESSEE IN ITA.NO.2556/DEL. YEAR UNDER SECTION 263 OF THE I.T. ACT WHEREBY SIMILAR CLAIM OF THE TRIBUNAL FOLLOWING, APPEAL OF ASSESSEE. LEARNED COUNSEL FOR TH ORDER OF THE TRIBUNAL HAVE BEEN CONFIRMED BY THE THE CASE OF THE ASSESSEE CONVENTIONAL FASTNERS VS. CIT, DEHRADUN (2017) 88 TAXMANN.COM 163 (UTTARAKHAND) SINCE INTEREST INCOME EARNED FROM FIXED DEPOSITS RESERVES KEPT AS SECURITY AND AS A BUSINESS PRE- REQUISITE HAD NOTHING TO DO WITH CARRYING ON ASSESSEES BUSINESS OF MANUFACTURE AND SALE OF ELECTRIC METERS, SAME WOULD NOT BE ENTITLED TO BENE DEDUCTION UNDER SECTION 80 10.1. THE ISSUE IS, THEREFORE, COVERED IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF THE TRIBUNAL AS WELL AS THE JUDGMENT OF THE JURISDICTIONAL UTTARAKHAND HIGH COURT. THE HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF WITH THE CARRYING ON ASSESSEES BUSINESS OF MANUFACTURE AND SALE OF ELECTRIC METERS, SAME WOULD NOT BE ENTITLED TO BENEFIT OF DEDUCTION UNDER SECTION 80IC OF THE I.T. ACT. 5.9. IN VIEW OF THE ABOVE, RE PRINCIPLES LAID DOWN BY THE HONORABLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD., [227 ITR 172] (SC), BONGAIGAON REFINERY 8S PETROCHEMICALS LTD., [251 ITR AND CIT VS.- AUTOKAST LTD., [248 ITR 110] (SC) THE ORDER OF THE AO IN DISALLOWING RS.3,85,596 INTEREST INCOME EARNED ON FIXED DEPOSITS AND ADDING BACK TO THE TOTAL INCOME OF THE APPELLANT IS UPHELD. 5.10 AS REGARDS ALTERNATE PLEA TAKEN BY THE APPELLANT THAT THE INTEREST INCOME SHOULD BE ALLOWED TO SET OFF AGAINST THE INTEREST PAID IS ALSO NOT AVAILABLE IN VIEW OF THE DECISION OF HONBLE APEX COURT IN CASE CITV. DR. V.P. GCPINATHAN INTEREST PAID BY THE ASSESSEE AS INTEREST ON OVERDRAFT FACILITY CANNOT BE SET OFF AGAINST THE INTEREST RECEIVED ON THE FDRS PLEDGED BY HIM WITH THE BANK SO AS TO AVAIL ANY DEDUCTION UNDER THE HEAD INCOME FRCM OTHER SOURCES 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE MAINLY RAISED THREE CONTENTIONS IN SUPPORT OF THE ASSE HIM IS THAT, INTEREST OF RS.1,56,403/ 5 QUADRO INFO TECHNOLOGIES PVT. LTD SALE OF ELECTRIC METERS, SAME WOULD NOT BE ENTITLED TO BENEFIT OF DEDUCTIO HONBLE ITAT, DELHI IN CASE OF CONVENTIONAL FASTNERS VS ITO IN ITA.NO.6016/DEL./2017, DATE OF ORDER : 18/05/2018 FOR ASSESSMENT YEAR : 2013 -2014 HELD AS UNDER:- 10. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT ASSESSEE EARNED, INTEREST ON FDRS WHICH WAS DEPOSITED WITH THE CONCERNED AUTHORITIES FOR TAKING TENDER/CONTRACTS. SIMILAR ISSUE WAS CONSIDERED IN EARLIER YEAR AS WELL AS IN SUBSEQUENT Y AUTHORITIES BELOW HAVE ADMITTEDLY DENIED DEDUCTION UNDER SECTION 80IC TO THE ASSESSEE ON SAME SET OF FACTS. IN A.Y. 2009 - 2010 THE ASSESSEE PREFERRED APPEAL BEFORE ITAT, DELHI BENCH WHICH WAS DISMISSED BY THE TRIBUNAL VIDE ORDER DATED 25.01.201 7 (SUPRA). COPY OF THE ORDER OF THE TRIBUNAL IS PLACED ON RECORD. IN THIS YEAR ALSO, SIMILAR FACTS HAVE BEEN RECORDED THAT THE ASSESSEE IN THIS YEAR HAS EARNED INTEREST INCOME ON FDRS WHICH WAS PLEDGED AS PERFORMANCE GUARANTEE IN TERMS OF CONTRACT AWARDED BY UPCL FOR MANUFACTURE OF ELECTRONIC METERS. THE ISSUE BEFORE THE TRIBUNAL WAS, WHETHER SUCH INTEREST INCOME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE IT. ACT ? THE TRIBUNAL FOLLOWED ITS OWN ORDER IN THE CASE OF SAME ASSESSEE IN ITA.NO.2556/DEL. /2013 FOR THE VERY SAME ASSESSMENT YEAR UNDER SECTION 263 OF THE I.T. ACT WHEREBY SIMILAR CLAIM OF ASSESSEE HAVE BEEN DENIED. THE TRIBUNAL FOLLOWING, ITS OWN DECISION IN THE CASE OF THE SAME ASSESSEE DISMISSED THE APPEAL OF ASSESSEE. LEARNED COUNSEL FOR TH E ASSESSEE, THEREFORE, FAIRLY SUBMITTED THAT THE ORDER OF THE TRIBUNAL HAVE BEEN CONFIRMED BY THE HONBLE HIGH COURT OF UTTARAKHAND IN THE CASE OF THE ASSESSEE CONVENTIONAL FASTNERS VS. CIT, DEHRADUN (2017) 88 163 (UTTARAKHAND) IN WHICH IT WAS HELD AS UNDER: SINCE INTEREST INCOME EARNED FROM FIXED DEPOSITS RESERVES KEPT AS SECURITY AND AS A REQUISITE HAD NOTHING TO DO WITH CARRYING ON ASSESSEES BUSINESS OF MANUFACTURE AND SALE OF ELECTRIC METERS, SAME WOULD NOT BE ENTITLED TO BENE DEDUCTION UNDER SECTION 80 -IC. 10.1. THE ISSUE IS, THEREFORE, COVERED IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF THE TRIBUNAL AS WELL AS THE JUDGMENT OF THE JURISDICTIONAL UTTARAKHAND HIGH COURT. THE HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF ASSESSEE HELD THAT INTEREST INCOME HAD NOTHING TO DO WITH THE CARRYING ON ASSESSEES BUSINESS OF MANUFACTURE AND SALE OF ELECTRIC METERS, SAME WOULD NOT BE ENTITLED TO BENEFIT OF DEDUCTION UNDER SECTION 80IC OF THE I.T. ACT. IN VIEW OF THE ABOVE, RE SPECTFULLY FOLLOWING THE HIGH COURT JUDGEMENTS AS SUPPORTED BY THE PRINCIPLES LAID DOWN BY THE HONORABLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD., [227 ITR 172] (SC), BONGAIGAON REFINERY 8S PETROCHEMICALS LTD., [251 ITR AUTOKAST LTD., [248 ITR 110] (SC) THE ORDER OF THE AO IN DISALLOWING RS.3,85,596 INTEREST INCOME EARNED ON FIXED DEPOSITS AND ADDING BACK TO THE TOTAL INCOME OF THE APPELLANT IS AS REGARDS ALTERNATE PLEA TAKEN BY THE APPELLANT THAT THE INTEREST INCOME SHOULD BE ALLOWED TO SET OFF AGAINST THE INTEREST PAID IS ALSO NOT AVAILABLE IN VIEW OF THE DECISION OF HONBLE APEX COURT IN CITV. DR. V.P. GCPINATHAN [2001] 116 TAXMAN 489 (SC). THE APEX COURT HELD THAT THE INTEREST PAID BY THE ASSESSEE AS INTEREST ON OVERDRAFT FACILITY CANNOT BE SET OFF AGAINST THE INTEREST RECEIVED ON THE FDRS PLEDGED BY HIM WITH THE BANK SO AS TO AVAIL ANY DEDUCTION UNDER THE HEAD INCOME FRCM OTHER SOURCES . HENCE, THE GROUND NO 3 ON THIS ISSUE IS DISMISSED. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE MAINLY RAISED THREE CONTENTIONS IN SUPPORT OF THE ASSE SSEES CASE ON THIS ISSUE. THE FIRST CONTENTIONS RAISED BY HIM IS THAT, INTEREST OF RS.1,56,403/ - WAS ACTUALLY PAID TO THE ASSESSEE COMPANY ITA NO. 2617/KOL/2019 ASSESSMENT YEAR: 2011-12 QUADRO INFO TECHNOLOGIES PVT. LTD . SALE OF ELECTRIC METERS, SAME WOULD NOT BE ENTITLED TO BENEFIT OF DEDUCTIO N UNDER SECTION 80- ITA.NO.6016/DEL./2017, 10. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT ASSESSEE EARNED, INTEREST ON FDRS WHICH WAS DEPOSITED WITH THE CONCERNED AUTHORITIES FOR TAKING TENDER/CONTRACTS. SUBSEQUENT Y EARS AND THE AUTHORITIES BELOW HAVE ADMITTEDLY DENIED DEDUCTION UNDER SECTION 80IC TO THE ASSESSEE ON 2010 THE ASSESSEE PREFERRED APPEAL BEFORE ITAT, DELHI BENCH 7 (SUPRA). COPY OF THE ORDER OF THE TRIBUNAL IS PLACED ON RECORD. IN THIS YEAR ALSO, SIMILAR FACTS HAVE BEEN RECORDED THAT THE ASSESSEE IN THIS YEAR HAS EARNED INTEREST INCOME ON FDRS WHICH WAS PLEDGED AS BY UPCL FOR MANUFACTURE OF ELECTRONIC METERS. THE ISSUE BEFORE THE TRIBUNAL WAS, WHETHER SUCH INTEREST INCOME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE IT. ACT ? THE TRIBUNAL FOLLOWED ITS OWN /2013 FOR THE VERY SAME ASSESSMENT ASSESSEE HAVE BEEN DENIED. THE SAME ASSESSEE DISMISSED THE E ASSESSEE, THEREFORE, FAIRLY SUBMITTED THAT THE HONBLE HIGH COURT OF UTTARAKHAND IN THE CASE OF THE ASSESSEE CONVENTIONAL FASTNERS VS. CIT, DEHRADUN (2017) 88 SINCE INTEREST INCOME EARNED FROM FIXED DEPOSITS RESERVES KEPT AS SECURITY AND AS A REQUISITE HAD NOTHING TO DO WITH CARRYING ON ASSESSEES BUSINESS OF MANUFACTURE AND SALE OF ELECTRIC METERS, SAME WOULD NOT BE ENTITLED TO BENE FIT OF 10.1. THE ISSUE IS, THEREFORE, COVERED IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF THE TRIBUNAL AS WELL AS THE JUDGMENT OF THE JURISDICTIONAL UTTARAKHAND HIGH COURT. THE HONBLE ASSESSEE HELD THAT INTEREST INCOME HAD NOTHING TO DO WITH THE CARRYING ON ASSESSEES BUSINESS OF MANUFACTURE AND SALE OF ELECTRIC METERS, SAME WOULD NOT BE ENTITLED TO BENEFIT OF DEDUCTION UNDER SECTION 80IC OF THE I.T. ACT. SPECTFULLY FOLLOWING THE HIGH COURT JUDGEMENTS AS SUPPORTED BY THE PRINCIPLES LAID DOWN BY THE HONORABLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD., [227 ITR 172] (SC), BONGAIGAON REFINERY 8S PETROCHEMICALS LTD., [251 ITR 329] (SC) AUTOKAST LTD., [248 ITR 110] (SC) THE ORDER OF THE AO IN DISALLOWING RS.3,85,596 - OF INTEREST INCOME EARNED ON FIXED DEPOSITS AND ADDING BACK TO THE TOTAL INCOME OF THE APPELLANT IS AS REGARDS ALTERNATE PLEA TAKEN BY THE APPELLANT THAT THE INTEREST INCOME SHOULD BE ALLOWED TO SET OFF AGAINST THE INTEREST PAID IS ALSO NOT AVAILABLE IN VIEW OF THE DECISION OF HONBLE APEX COURT IN THE APEX COURT HELD THAT THE INTEREST PAID BY THE ASSESSEE AS INTEREST ON OVERDRAFT FACILITY CANNOT BE SET OFF AGAINST THE INTEREST RECEIVED ON THE FDRS PLEDGED BY HIM WITH THE BANK SO AS TO AVAIL ANY DEDUCTION UNDER THE HEAD HENCE, THE GROUND NO 3 ON THIS ISSUE IS DISMISSED. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE MAINLY RAISED THREE SSEES CASE ON THIS ISSUE. THE FIRST CONTENTIONS RAISED BY THE ASSESSEE COMPANY BY M/S. SALARPURIA PROPERTIES PVT. LTD. AND ALTHOUGH THIS FACTUAL POSITION WAS CLEARLY MENTIONED BY THE ASSESSING OF FICER ON PAGE NO. 2 OF THE ASSESSMENT ORDER, HE CONSIDERED THE SAME AS THE INTEREST RECEIVED BY THE ASSESSEE FOR THE PURPOSE OF MAKING DISALLOWANCE U/S 80IA(4). IN THIS REGARD, HE HAS INVITED OUR ATTENTION TO PARAGRAPH NO. 4.2. OF THE IMPUGNED ORDER OF THE LD. CIT(A) WHEREIN THIS FACT WAS ACCEPTED BY THE LD. CIT(A) BUT WHILE DECIDING THE ISSUE RELATED TO THE DISALLOWANCE U/S 80IA, THE SAME WAS IGNORED/OVERLOOKED BY. AFTER TAKING INTO CONSIDERATION, THE FINDING RECORDED BY THE ASSESSING OFFICER ON PAGE 2 OF ASSESSMENT ORDER, AS WELL AS BY THE LD. CIT(A) AT PARA 4.2. OF HIS IMPUGNED ACCEPT THE CONTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO CONSIDER ONLY THE AMOUNT OF INTEREST RECEIVED BY THE ASSESSEE COMPANY ON BANK FIXED DEPOSITS OF RS.2,29,193/ 7. THE SECOND CONTEN TION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE BY RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MANUFACTURES PVT. LTD. V/S. THE ASSTT. COMMISSIONER OF INCOME TAX10(2). MUMBAI & ANR. [INCOME TAX APPEAL NO. 415 BANK HAVING BEEN KEPT BY THE ASSESSEE COMPANY AGAINST OVERDRAFT FACILITIES AVAILED FOR THE PURPOSE OF BUSINESS, THE INTEREST ON THE SAID DEPOSITS HAD A DIRECT NEXUS WITH THE BUSINESS OF THE ASSES SEE COMPANY AND THE SAME, THEREFORE, IS ELIGIBLE FOR DEDUCTION U/S 80IA(4). ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. VARIOUS JUDICIAL PRONOUNCEMENTS, REFERRED TO AND RELIED UPON BY THE LD. CIT(A) IN HIS IM PUGNED ORDER INCLUDING THAT OF THE HONBLE SUPREME COURT, THE EXPRESSION DERIVED FROM ENVISAGES IMMEDIATE NEXUS OR FIRST DEGREE CONNECTION WITH THE BUSINESS OF THE ELIGIBLE UNDERTAKING INASMUCH AS, THE IMMEDIATE SOURCE OF SUCH INCOME SHOULD BE A BUSINESS OF THE UNDERTAKING IN ORDER TO BE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. IN THE PRESENT CASE, THE IMMEDIATE SOURCE OF INTEREST INCOME WAS THE FIXED DEPOSITS KEPT BY THE ASSESSEE WITH THE BANK AND NOT COMPANY AND THE SAME, IN OUR OPINION, IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA, HELD BY THE AUTHORITIES BELOW. 8. THE THIRD CONTENTION INTEREST INCOME AFTER ADJUSTMENT OF IN 80IA OF THE ACT. IN THIS REGARD, WE NOTE THAT THE CLAIM OF THE ASSESSEE FOR ADJUSTMENT OF INTEREST CAN BE ALLOWED ONLY WHEN THERE IS INEXPLICABLE LINK BETWEEN THE INTEREST INCOME 6 QUADRO INFO TECHNOLOGIES PVT. LTD SALARPURIA PROPERTIES PVT. LTD. AND ALTHOUGH THIS FACTUAL POSITION WAS CLEARLY MENTIONED FICER ON PAGE NO. 2 OF THE ASSESSMENT ORDER, HE CONSIDERED THE SAME AS THE INTEREST RECEIVED BY THE ASSESSEE FOR THE PURPOSE OF MAKING DISALLOWANCE U/S 80IA(4). IN THIS REGARD, HE HAS INVITED OUR ATTENTION TO PARAGRAPH NO. 4.2. OF THE IMPUGNED ORDER OF LD. CIT(A) WHEREIN THIS FACT WAS ACCEPTED BY THE LD. CIT(A) BUT WHILE DECIDING THE ISSUE RELATED TO THE DISALLOWANCE U/S 80IA, THE SAME WAS IGNORED/OVERLOOKED BY. AFTER TAKING INTO CONSIDERATION, THE FINDING RECORDED BY THE ASSESSING OFFICER ON PAGE 2 OF ASSESSMENT ORDER, AS WELL AS BY THE LD. CIT(A) AT PARA 4.2. OF HIS IMPUGNED RAISED BY THE LD. COUNSEL FOR THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO CONSIDER ONLY THE AMOUNT OF INTEREST RECEIVED BY THE ASSESSEE COMPANY ON BANK FIXED DEPOSITS OF RS.2,29,193/ - FOR MAKING DISALLOWANCE U/S 80IA OF THE ACT. TION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE BY RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. TEMA EXCHANGERS MANUFACTURES PVT. LTD. V/S. THE ASSTT. COMMISSIONER OF INCOME TAX10(2). MUMBAI & ANR. 415 OF 2004, DT. 18/07/2018] IS THAT, THE FIXED DEPOSITS IN THE BANK HAVING BEEN KEPT BY THE ASSESSEE COMPANY AGAINST OVERDRAFT FACILITIES AVAILED FOR THE PURPOSE OF BUSINESS, THE INTEREST ON THE SAID DEPOSITS HAD A DIRECT NEXUS WITH THE BUSINESS SEE COMPANY AND THE SAME, THEREFORE, IS ELIGIBLE FOR DEDUCTION U/S 80IA(4). ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. VARIOUS JUDICIAL PRONOUNCEMENTS, REFERRED TO AND RELIED UPON BY THE LD. CIT(A) IN HIS PUGNED ORDER INCLUDING THAT OF THE HONBLE SUPREME COURT, THE EXPRESSION DERIVED FROM ENVISAGES IMMEDIATE NEXUS OR FIRST DEGREE CONNECTION WITH THE BUSINESS OF THE ELIGIBLE UNDERTAKING INASMUCH AS, THE IMMEDIATE SOURCE OF SUCH INCOME SHOULD BE A OF THE UNDERTAKING IN ORDER TO BE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. IN THE PRESENT CASE, THE IMMEDIATE SOURCE OF INTEREST INCOME WAS THE FIXED DEPOSITS KEPT BY THE ASSESSEE WITH THE BANK AND NOT THE BUSINESS OF THE ELIGIBLE UNDERTAKING OF THE AS COMPANY AND THE SAME, IN OUR OPINION, IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA, HELD BY THE AUTHORITIES BELOW. RAISED BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT, ONLY THE NET INTEREST INCOME AFTER ADJUSTMENT OF IN TEREST PAID CAN BE CONSIDERED FOR DISALLOWANCE U/S 80IA OF THE ACT. IN THIS REGARD, WE NOTE THAT THE CLAIM OF THE ASSESSEE FOR ADJUSTMENT OF INTEREST CAN BE ALLOWED ONLY WHEN THERE IS INEXPLICABLE LINK BETWEEN THE INTEREST INCOME ITA NO. 2617/KOL/2019 ASSESSMENT YEAR: 2011-12 QUADRO INFO TECHNOLOGIES PVT. LTD . SALARPURIA PROPERTIES PVT. LTD. AND ALTHOUGH THIS FACTUAL POSITION WAS CLEARLY MENTIONED FICER ON PAGE NO. 2 OF THE ASSESSMENT ORDER, HE CONSIDERED THE SAME AS THE INTEREST RECEIVED BY THE ASSESSEE FOR THE PURPOSE OF MAKING DISALLOWANCE U/S 80IA(4). IN THIS REGARD, HE HAS INVITED OUR ATTENTION TO PARAGRAPH NO. 4.2. OF THE IMPUGNED ORDER OF LD. CIT(A) WHEREIN THIS FACT WAS ACCEPTED BY THE LD. CIT(A) BUT WHILE DECIDING THE ISSUE RELATED TO THE DISALLOWANCE U/S 80IA, THE SAME WAS IGNORED/OVERLOOKED BY. AFTER TAKING INTO CONSIDERATION, THE FINDING RECORDED BY THE ASSESSING OFFICER ON PAGE 2 OF THE ASSESSMENT ORDER, AS WELL AS BY THE LD. CIT(A) AT PARA 4.2. OF HIS IMPUGNED ORDER, WE RAISED BY THE LD. COUNSEL FOR THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO CONSIDER ONLY THE AMOUNT OF INTEREST RECEIVED BY THE ASSESSEE COMPANY ON BANK FOR MAKING DISALLOWANCE U/S 80IA OF THE ACT. TION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE BY RELYING ON THE M/S. TEMA EXCHANGERS MANUFACTURES PVT. LTD. V/S. THE ASSTT. COMMISSIONER OF INCOME TAX10(2). MUMBAI & ANR. IS THAT, THE FIXED DEPOSITS IN THE BANK HAVING BEEN KEPT BY THE ASSESSEE COMPANY AGAINST OVERDRAFT FACILITIES AVAILED FOR THE PURPOSE OF BUSINESS, THE INTEREST ON THE SAID DEPOSITS HAD A DIRECT NEXUS WITH THE BUSINESS SEE COMPANY AND THE SAME, THEREFORE, IS ELIGIBLE FOR DEDUCTION U/S 80IA(4). WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. AS HELD IN THE VARIOUS JUDICIAL PRONOUNCEMENTS, REFERRED TO AND RELIED UPON BY THE LD. CIT(A) IN HIS PUGNED ORDER INCLUDING THAT OF THE HONBLE SUPREME COURT, THE EXPRESSION DERIVED FROM ENVISAGES IMMEDIATE NEXUS OR FIRST DEGREE CONNECTION WITH THE BUSINESS OF THE ELIGIBLE UNDERTAKING INASMUCH AS, THE IMMEDIATE SOURCE OF SUCH INCOME SHOULD BE A OF THE UNDERTAKING IN ORDER TO BE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. IN THE PRESENT CASE, THE IMMEDIATE SOURCE OF INTEREST INCOME WAS THE FIXED DEPOSITS KEPT BY THE BUSINESS OF THE ELIGIBLE UNDERTAKING OF THE AS SESSEE COMPANY AND THE SAME, IN OUR OPINION, IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA, AS RIGHTLY RAISED BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT, ONLY THE NET TEREST PAID CAN BE CONSIDERED FOR DISALLOWANCE U/S 80IA OF THE ACT. IN THIS REGARD, WE NOTE THAT THE CLAIM OF THE ASSESSEE FOR ADJUSTMENT OF INTEREST CAN BE ALLOWED ONLY WHEN THERE IS INEXPLICABLE LINK BETWEEN THE INTEREST INCOME EARNED BY THE ASSESSEE AND HAVE NOT VERIFIED THIS ASPECT, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING AS TO WHETHER THERE IS ANY INEXPLICABLE LINK BETWEEN THE INTEREST P AID AND THE INTEREST EARNED BY THE ASSESSEE ON BANK DEPOSITS AND RECOMPUTE THE DISALLOWANCE ACCORDINGLY ON SUCH VERIFICATION, IN ACCORDANCE WITH LAW. OF THE ASSESSEES APPEAL ARE THUS PARTLY ALLOWED. 9. THE NEXT ISSUE RAISED BY THE 30,93,318/- MADE WHILE COMPUTING THE BOOK PROFITS U/S 115JB OF THE ACT ON ACCOUNT OF ADJUSTMENT OF DEPRECIATION. 10. WHILE COMPUTING THE BOOK PROFITS OF THE ASSESSEE COMPANY U/S 115JB OF THE ACT, THE DEPRECIATION OF RS.6,64,63,511/ COMPANIES ACT, WAS ADDED BACK BY THE ASSESSING OFFICER AND THE DEPRECIATION OF RS.6,33,73,193/- AS CALCULATED UNDER THE INCOME TAX ACT, WAS REDUCED BY HIM, THEREBY MAKING AN ADDITION OF RS. 30,93,318/ 11. THE ADDITION MADE BY THE ASSESSING OFFICER TO THE BOOK PROFIT ON ACCOUNT OF ADJUSTMENT FOR DEPRECIATION WAS CHALLENGED BY THE ASSESSEE IN APPEAL FILED BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE THIS ISSUE WAS DECIDED BY THE LD.CIT(A) VIDE PARAGRAPH NO. 10 OF HIS IMPUGNED ORDER AS FOLLOWS:- 10. THE GROUND NO. 9 30,93,580/- ON ACCOUNT OF AND AS PER AMOUNT ALLOWABLE UNDER INCOME 115JB ARE ABUNDANTLY CLEAR ON THIS ISSUE THAT THE AMOUNT ALLOWABLE FOR DEPRECIATION U/S 115JB SHALL BE THE AMO DEPRECIATION ON REVALUATION OF ASSETS. THE APPELLANT ARGUED THAT THE ADDITION MADE BY THE AO AMOUNTING T O RS. 30,93, 6,64,63,511/- DEBI TED IN THE P&L A/C. AND THE AMOUNT OF DEPRECIATION OF RS. 6,33,73,193/ ALLOWABLE UNDER INCOME THE CONTENTION OF THE APPELLANT IS NOT ACCEPTABLE SECTI ON 115JB OF THE ACT, THE AMOUNT OF DEPRECIATION CALCULATED AS PER THE COMPANIES ACT (CLAUSE Q) REQUIRES TO BE ADDED BACK TO THE NET PROFIT AND THE AMOUNT OF DEPRECIATION DEBITED TO PROFIT & LOSS ACCOUNT (CLAUSE IIA) REQUIRES TO BE REDUCED IN ORDER TO ARRIV BOOK PROFIT. ON PERUSAL OF THE DEPRECIATION OF RS.6,64,63,511 DEPRECIATION AS PER THE INCOME WHETHER THE APPELLANT HAS DEBITED THE DEPRECIATION OF RS. 6,33,73,193/ FROM NET PROFIT TO ARRIVE AT THE BOOK PROFIT AS PER THE CLAUSE IIA OF EXPLANATION, TO SECTION THE 115JB OF THE ACT. IF THE AMOUNT OF (EXCLUDING THE DEPRECIATION ACCOUNT OF REVALUATION OF ASSETS), THE DEPRECIATION HAS TO BE REDUCED IN ARRIVING AT THE BOOK PROFIT AND THE DIFFERENCE OF RS.30,90,318/ WRONGLY MENTIONED RS.30,93,318 DIFFERENCE AMOUNT REQUIRES TO BE DELETED. OTHERWISE, THE DIFFERENCE AMOUNT REQUIRES TO BE DELETED. 7 QUADRO INFO TECHNOLOGIES PVT. LTD EARNED BY THE ASSESSEE AND THE CORRESPONDING INTEREST PAID. SINCE THE AUTHORITIES BELOW HAVE NOT VERIFIED THIS ASPECT, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING AS TO WHETHER THERE IS ANY INEXPLICABLE LINK BETWEEN THE AID AND THE INTEREST EARNED BY THE ASSESSEE ON BANK DEPOSITS AND RECOMPUTE THE DISALLOWANCE ACCORDINGLY ON SUCH VERIFICATION, IN ACCORDANCE WITH LAW. OF THE ASSESSEES APPEAL ARE THUS PARTLY ALLOWED. THE NEXT ISSUE RAISED BY THE ASSESSEE IS GROUND NO. 3 RELATES TO THE ADDITION OF RS. MADE WHILE COMPUTING THE BOOK PROFITS U/S 115JB OF THE ACT ON ACCOUNT OF ADJUSTMENT OF DEPRECIATION. WHILE COMPUTING THE BOOK PROFITS OF THE ASSESSEE COMPANY U/S 115JB OF THE ACT, DEPRECIATION OF RS.6,64,63,511/ - AS DEBITED IN THE PROFIT AND LOSS ACCOUNT AS PER THE COMPANIES ACT, WAS ADDED BACK BY THE ASSESSING OFFICER AND THE DEPRECIATION OF AS CALCULATED UNDER THE INCOME TAX ACT, WAS REDUCED BY HIM, THEREBY 30,93,318/ - TO THE BOOK PROFIT. THE ADDITION MADE BY THE ASSESSING OFFICER TO THE BOOK PROFIT ON ACCOUNT OF ADJUSTMENT FOR DEPRECIATION WAS CHALLENGED BY THE ASSESSEE IN APPEAL FILED BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE COMPANY, THIS ISSUE WAS DECIDED BY THE LD.CIT(A) VIDE PARAGRAPH NO. 10 OF HIS IMPUGNED ORDER AS 10. THE GROUND NO. 9 IS AGAINST THE ACTION OF THE AO IN MAKING ADDITION OF RS. ON ACCOUNT OF DIFFERENCE IN DEPRECIATION AS PER AMOUNT DEBITED IN P & L A/C. AND AS PER AMOUNT ALLOWABLE UNDER INCOME - TAX ACT. THE PROVISIONS CONTAINED IN SEC. 115JB ARE ABUNDANTLY CLEAR ON THIS ISSUE THAT THE AMOUNT ALLOWABLE FOR DEPRECIATION U/S 115JB SHALL BE THE AMO UNT OF DEPRECIATION DEBITED IN THE P & L A/C. AS REDUCED BY DEPRECIATION ON REVALUATION OF ASSETS. THE APPELLANT ARGUED THAT THE ADDITION MADE BY THE O RS. 30,93, 380/- BEING THE DIFFERENCE (THE AMOUNT OF DEPRECIATION OF RS. TED IN THE P&L A/C. AND THE AMOUNT OF DEPRECIATION OF RS. 6,33,73,193/ ALLOWABLE UNDER INCOME - TAX ACT) IS NOT CORRECT AND ENQUIRES TO BE DELETED. IN THIS REGARD, THE CONTENTION OF THE APPELLANT IS NOT ACCEPTABLE BECAUSE AS PER THE EXPLANATION TO THE ON 115JB OF THE ACT, THE AMOUNT OF DEPRECIATION CALCULATED AS PER THE COMPANIES ACT (CLAUSE Q) REQUIRES TO BE ADDED BACK TO THE NET PROFIT AND THE AMOUNT OF DEPRECIATION DEBITED TO PROFIT & LOSS ACCOUNT (CLAUSE IIA) REQUIRES TO BE REDUCED IN ORDER TO ARRIV BOOK PROFIT. ON PERUSAL OF THE SCHEDULE-D TO TH E BALANCE SHEET, THE APPELLANT RS.6,64,63,511 /-AS PER THE COMPANIES ACT AND THE APPELLANT HAS CLAIMED AS PER THE INCOME -TAX ACT OF RS.6,33,73,193/- . THE A.O. WHETHER THE APPELLANT HAS DEBITED THE DEPRECIATION OF RS. 6,33,73,193/ NET PROFIT TO ARRIVE AT THE BOOK PROFIT AS PER THE CLAUSE IIA OF EXPLANATION, TO SECTION 115JB OF THE ACT. IF THE AMOUNT OF DEPRECIATION IS DEBITED TO PROFIT & LOSS ACCOUNT (EXCLUDING THE DEPRECIATION ACCOUNT OF REVALUATION OF ASSETS), THE DEPRECIATION HAS TO BE REDUCED IN ARRIVING AT THE BOOK PROFIT AND THE DIFFERENCE OF RS.30,90,318/ WRONGLY MENTIONED RS.30,93,318 /- ) MADE BY THE A.O. STANDS UPHELD. OTHERWISE, THE DIFFERENCE AMOUNT REQUIRES TO BE DELETED. OTHERWISE, THE DIFFERENCE AMOUNT REQUIRES TO BE ITA NO. 2617/KOL/2019 ASSESSMENT YEAR: 2011-12 QUADRO INFO TECHNOLOGIES PVT. LTD . THE CORRESPONDING INTEREST PAID. SINCE THE AUTHORITIES BELOW HAVE NOT VERIFIED THIS ASPECT, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING AS TO WHETHER THERE IS ANY INEXPLICABLE LINK BETWEEN THE AID AND THE INTEREST EARNED BY THE ASSESSEE ON BANK DEPOSITS AND RECOMPUTE THE DISALLOWANCE ACCORDINGLY ON SUCH VERIFICATION, IN ACCORDANCE WITH LAW. GROUND NO. 1 & 2 ASSESSEE IS GROUND NO. 3 RELATES TO THE ADDITION OF RS. MADE WHILE COMPUTING THE BOOK PROFITS U/S 115JB OF THE ACT ON ACCOUNT OF WHILE COMPUTING THE BOOK PROFITS OF THE ASSESSEE COMPANY U/S 115JB OF THE ACT, AS DEBITED IN THE PROFIT AND LOSS ACCOUNT AS PER THE COMPANIES ACT, WAS ADDED BACK BY THE ASSESSING OFFICER AND THE DEPRECIATION OF AS CALCULATED UNDER THE INCOME TAX ACT, WAS REDUCED BY HIM, THEREBY THE ADDITION MADE BY THE ASSESSING OFFICER TO THE BOOK PROFIT ON ACCOUNT OF ADJUSTMENT FOR DEPRECIATION WAS CHALLENGED BY THE ASSESSEE IN APPEAL FILED BEFORE THE LD. SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE COMPANY, THIS ISSUE WAS DECIDED BY THE LD.CIT(A) VIDE PARAGRAPH NO. 10 OF HIS IMPUGNED ORDER AS IS AGAINST THE ACTION OF THE AO IN MAKING ADDITION OF RS. DIFFERENCE IN DEPRECIATION AS PER AMOUNT DEBITED IN P & L A/C. TAX ACT. THE PROVISIONS CONTAINED IN SEC. 115JB ARE ABUNDANTLY CLEAR ON THIS ISSUE THAT THE AMOUNT ALLOWABLE FOR DEPRECIATION U/S UNT OF DEPRECIATION DEBITED IN THE P & L A/C. AS REDUCED BY DEPRECIATION ON REVALUATION OF ASSETS. THE APPELLANT ARGUED THAT THE ADDITION MADE BY THE BEING THE DIFFERENCE (THE AMOUNT OF DEPRECIATION OF RS. TED IN THE P&L A/C. AND THE AMOUNT OF DEPRECIATION OF RS. 6,33,73,193/ - TAX ACT) IS NOT CORRECT AND ENQUIRES TO BE DELETED. IN THIS REGARD, BECAUSE AS PER THE EXPLANATION TO THE ON 115JB OF THE ACT, THE AMOUNT OF DEPRECIATION CALCULATED AS PER THE COMPANIES ACT (CLAUSE Q) REQUIRES TO BE ADDED BACK TO THE NET PROFIT AND THE AMOUNT OF DEPRECIATION DEBITED TO PROFIT & LOSS ACCOUNT (CLAUSE IIA) REQUIRES TO BE REDUCED IN ORDER TO ARRIV E AT THE E BALANCE SHEET, THE APPELLANT HAS CLAIMED THE APPELLANT HAS CLAIMED . THE A.O. IS DIRECTED TO VERIFY WHETHER THE APPELLANT HAS DEBITED THE DEPRECIATION OF RS. 6,33,73,193/ - SO AS TO REDUCE FIT NET PROFIT TO ARRIVE AT THE BOOK PROFIT AS PER THE CLAUSE IIA OF EXPLANATION, TO SECTION DEBITED TO PROFIT & LOSS ACCOUNT (EXCLUDING THE DEPRECIATION ACCOUNT OF REVALUATION OF ASSETS), THE DEPRECIATION HAS TO BE REDUCED IN ARRIVING AT THE BOOK PROFIT AND THE DIFFERENCE OF RS.30,90,318/ - (APPELLANT ) MADE BY THE A.O. STANDS UPHELD. OTHERWISE, THE DIFFERENCE AMOUNT REQUIRES TO BE DELETED. OTHERWISE, THE DIFFERENCE AMOUNT REQUIRES TO BE 12. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, THE PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT DEPRECIATION FOR THE PU RPOSE OF COMPUTING BOOK PROFIT AS PER U/S 115JB OF THE ACT AND THE AMOUNT OF DEPRECIATION DEBITED IN THE PROFIT AND LOSS ACCOUNT (EXCLUDING DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS) IS REQUIRED TO BE REDUCED. IT IS NOTED THAT THIS CONTENTION WAS APPARENTLY ACCEPTED EVEN BY THE LD. CIT COUNSEL FOR THE ASSESSEE, HOWEVER, HAS SUBMITTED THAT THE DIRECTION GIVE BY THE LD. CIT(A) TO THE ASSESSING OFFICER ON THIS ISSUE IS LITTLE CONFUSING INASMUCH AS, WHEN THE DEPRECIATION OF RS.6,64,63,511/ ASSESSEE COMPANY TO ITS PROFIT AND LOSS ACCOUNT, THE DIRECTION SHOULD HAVE BEEN GIVEN BY THE LD. CIT(A) TO VERIFY THIS ASPECT ALONE. HE HAS ALSO INVITED OUR ATTENTION TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY LISTED AT PAGE 4 THAT THE DEPRECIATION OF RS.6,64,63,511/ ACTUALLY DEBITED BY THE ASSESSEE COMPANY TO THE PROFIT AND LOSS ACCOUNT. WE ACCORDINGLY MODIFY THE DIRECTION OF THE LD. CIT(A) ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE OF HAVING DEBITED THE DEPRECIATION OF RS.6,64,63,511/- AS COMPUTED UNDER THE COMPANIES ACT TO THE PROFIT AND LOSS ACCOUNT AND DECIDE THIS ISSUE IN ACCORDANCE WITH EX NO. 3 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED PURPOSES. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. KOLKATA, THE SD/- [ MADHUMITA ROY ] JUDICIAL MEMBER DATED: 27.08.2021 {SC SPS} 8 QUADRO INFO TECHNOLOGIES PVT. LTD WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE ON RECORD. AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, THE IN THE PROFIT AND LOSS ACCOUNT IS REQUIRED TO BE INCREASED BY THE AMOUNT OF RPOSE OF COMPUTING BOOK PROFIT AS PER CLAUSE (G) U/S 115JB OF THE ACT AND THE AMOUNT OF DEPRECIATION DEBITED IN THE PROFIT AND LOSS ACCOUNT (EXCLUDING DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS) IS REQUIRED TO BE REDUCED. IT IS NOTED THAT THIS CONTENTION WAS APPARENTLY ACCEPTED EVEN BY THE LD. CIT COUNSEL FOR THE ASSESSEE, HOWEVER, HAS SUBMITTED THAT THE DIRECTION GIVE BY THE LD. CIT(A) TO THE ASSESSING OFFICER ON THIS ISSUE IS LITTLE CONFUSING INASMUCH AS, WHEN THE DEPRECIATION OF RS.6,64,63,511/ - AS WORKED OUT UNDER THE COMPANIES ACT ASSESSEE COMPANY TO ITS PROFIT AND LOSS ACCOUNT, THE DIRECTION SHOULD HAVE BEEN GIVEN BY THE LD. CIT(A) TO VERIFY THIS ASPECT ALONE. HE HAS ALSO INVITED OUR ATTENTION TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY LISTED AT PAGE 4 3 OF THE PAPER BOOK AND POINTED OUT THAT THE DEPRECIATION OF RS.6,64,63,511/ - AS WORKED OUT UNDER THE COMPANIES ACT WAS ACTUALLY DEBITED BY THE ASSESSEE COMPANY TO THE PROFIT AND LOSS ACCOUNT. WE ACCORDINGLY MODIFY THE DIRECTION OF THE LD. CIT(A) AS GIVEN IN HIS IMPUGNED ORDER AND DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE OF HAVING DEBITED THE DEPRECIATION OF AS COMPUTED UNDER THE COMPANIES ACT TO THE PROFIT AND LOSS ACCOUNT AND DECIDE THIS ISSUE IN ACCORDANCE WITH EX PLANATION 1 TO SECTION 115JB OF THE ACT. NO. 3 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. KOLKATA, THE 27 TH DAY OF AUGUST, 2021. [ P.M. JAGTAP JUDICIAL MEMBER VICE ITA NO. 2617/KOL/2019 ASSESSMENT YEAR: 2011-12 QUADRO INFO TECHNOLOGIES PVT. LTD . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE ON RECORD. AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, THE IS REQUIRED TO BE INCREASED BY THE AMOUNT OF (G) OF EXPLANATION 1 U/S 115JB OF THE ACT AND THE AMOUNT OF DEPRECIATION DEBITED IN THE PROFIT AND LOSS ACCOUNT (EXCLUDING DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS) IS REQUIRED TO BE REDUCED. IT IS NOTED THAT THIS CONTENTION WAS APPARENTLY ACCEPTED EVEN BY THE LD. CIT (A). THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, HAS SUBMITTED THAT THE DIRECTION GIVE BY THE LD. CIT(A) TO THE ASSESSING OFFICER ON THIS ISSUE IS LITTLE CONFUSING INASMUCH AS, WHEN THE WORKED OUT UNDER THE COMPANIES ACT IS DEBITED BY THE ASSESSEE COMPANY TO ITS PROFIT AND LOSS ACCOUNT, THE DIRECTION SHOULD HAVE BEEN GIVEN BY THE LD. CIT(A) TO VERIFY THIS ASPECT ALONE. HE HAS ALSO INVITED OUR ATTENTION TO THE PROFIT AND 3 OF THE PAPER BOOK AND POINTED OUT AS WORKED OUT UNDER THE COMPANIES ACT WAS ACTUALLY DEBITED BY THE ASSESSEE COMPANY TO THE PROFIT AND LOSS ACCOUNT. WE ACCORDINGLY IN HIS IMPUGNED ORDER AND DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE OF HAVING DEBITED THE DEPRECIATION OF AS COMPUTED UNDER THE COMPANIES ACT TO THE PROFIT AND LOSS ACCOUNT AND PLANATION 1 TO SECTION 115JB OF THE ACT. GROUND NO. 3 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. SD/- P.M. JAGTAP ] VICE -PRESIDENT COPY OF THE ORDER FORWARDED TO: 1. QUADRO INFO TECHNOLOGIES PVT. LTD C/O. M/S. SALARPURIA JAJODIA & CO. 7, C.R. AVENUE 3 RD FLOOR KOLKATA 700 072 2. INCOME TAX OFFICER, WARD- 1(4), KOLKATA 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 9 QUADRO INFO TECHNOLOGIES PVT. LTD INFO TECHNOLOGIES PVT. LTD C/O. M/S. SALARPURIA JAJODIA & CO. 1(4), KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES ITA NO. 2617/KOL/2019 ASSESSMENT YEAR: 2011-12 QUADRO INFO TECHNOLOGIES PVT. LTD . TRUE COPY BY ORDER ASSISTANT REGISTRAR /DDO ITAT, KOLKATA BENCHES