M/s M.P. Police Houshing Corpo. Ltd., V. The DCIT, 2(1),

ITA 348/IND/2006

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8777 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-08-2011
• Assessment Year: misc
• Appeal Filed On: 15-05-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Keywords: Business income; Depreciation; Unabsorbed depreciation; Revenue expenditure
• Section: 43B; 143(3); 234B; 143(2); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AACCM2221L I.T.A.NO. 348/IND/06 A.Y. : 2003 - 04 MADHYA PRADESH POLICE HOUSING CORPORATION LIMITED, DY. CIT, 2(1), BHOPAL. BHOPAL VS APPELLANT RESPONDENT APPELLANT BY : SHRI SUMIT NEMA, ADV. RESPONDENT BY : SHRI KESHAV SAXENA, CIT DR DATE OF HEARING : 15 . 02 .201 2 DATE OF PRONOUNCEMENT : 29 . 0 3 .201 2 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), BHOPAL, DATED 27.2.2006 FOR THE ASSESSME NT YEAR 2003-04. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : -: 2: - 2 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD.CIT(A) ERRED IN LAW BY NOT ADMITTING/ADJUDI CATING FOLLOWING ADDITIONAL GROUNDS OF APPEAL. 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. ASSESSING OFFICER ERRED IN LAW BY NOT ALLOWING EXPE NDITURE OF RS. 2,84,64,114.02 ON ACCOUNT OF INTEREST PAID ON UNSECURED LOANS RAISED FROM FINANCIAL INSTITUTIONS AND BANK U NDER SECTION 36(1 )(III) OF THE INCOME-TAX ACT, 1961. 1.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. ASSESSING OFFICER ERRED IN LAW BY NOT ALLOWING EXPE NDITURE OF RS.4,17,736/- ON ACCOUNT OF EMPLOYERS CONTRIBUTION TO PF DEPOSITED AFTER DUE DATE BUT BEFORE THE DATE PRESCR IBED FOR FILING RETURN OF INCOME FOR THE A.Y.2003-04 UNDER SECTION 36(1 )(IV) READ WITH SECTION 43B, IN VIEW OF OMISSION OF SECON D PROVISO TO SECTION 43B MADE BY FINANCE ACT,2003. 1 .3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, ASSESSING OFFICER ERRED IN LAW BY NOT SETTING OF CA RRIED FORWARD UNABSORBED DEPRECIATION OF RS. 30.05.324 UNDER SECT ION 32(2) OF THE INCOME-TAX ACT,1961 EVEN IF HE HAS TREATED I NTEREST ON FDRS AS INCOME ASSESSABLE, AS INCOME FROM OTHER SOU RCES UNDER SECTION 56 OF THE INCOME-TAX ACT,1961.' 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. LD . -: 3: - 3 ASSESSING OFFICER ERRED IN LAW BY NOT ALLOWING EXPE NDITURE OF RS. 2.84,64,114.02 ON ACCOUNT OF INTEREST PAID ON UNSECURED LOANS RAISED FROM FINANCIAL INSTITUTIONS AND BANK, U/S 36(1)(III) OF THE INCOME-TAX ACT, 1961. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. ASSESSING OFFICER ERRED IN LAW BY NOT ALLOWING EXP ENDITURE OF RS.4,17,736 ON ACCOUNT OF EMPLOYERS CONTRIBUTION T O PF DEPOSITED AFTER DUE DATE BUT BEFORE THE DATE PRES CRIBED FOR FILING RETURN OF INCOME FOR THE A. Y. 2003-04, UNDER SECTION 36(1)(IV) READ WITH SECTION 43B, IN VIEW OF OMISSI ON OF SECOND PROVISO TO SECTION 43B MADE BY FINANCE ACT, 2003. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, LD. ASSESSING OFFICER ERRED IN LAW BY NOT SETTING OF CA RRIED FORWARD UNABSORBED DEPRECIATION OF RS. 30,05,324 UNDER SECT ION 32(2) OF THE INCOME-TAX ACT,1961, EVEN IF HE HAS TREATED INTEREST ON FDRS AS INCOME ASSESSABLE, AS INCOME FROM OTHER SOU RCES UNDER SECTION 56 OF THE INCOME-TAX ACT,1961.' 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, NOTICE U/S 143(2) DATED 25.11.2004 HAS NEVER BEEN S ERVED ON THE APPELLANT IN ACCORDANCE WITH PROVISIONS CONTAIN ED IN THE INCOME ACT, 1961 IN THIS REGARD, AND THEREFORE. ASS ESSMENT MADE U/S 143(3) DATED 18.2.2005 IS NULLITY AND WITH OUT JURISDICTION AND THE SAME BE QUASHED/CANCELLED BEIN G INVALID. -: 4: - 4 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, ID.CITS FINDING THAT' AFTER DUE CONSIDERATION OF T HE MATTER, I HOLD THAT NOTICE U/S 143(2) WAS PROPERLY SERVED ON SH. SANJEEV CHANODIA, C.A., WHO IS PARTNER OF M/S L.K. MAHESHWARI & COMPANY RECEIVED THE NOTICE U/S 143(2) ON 25.11.2004. M/S. L.K. MAHESHWARI & COMPANY WAS DULY AUTHORISED BY THE APPELLANT CORPORATION TO REPRESEN T BEFORE THE INCOME-TAX AUTHORITIES' IS OF NO CONSEQUENCE F ROM THE APPELLANT. CORPORATIONS POINT OF VIEW AND THEREFORE , IT BE HELD THAT NOTICE U/S 143(2) DATED 25.11.2004 HAS NEVER B EEN SERVED ON THE APPELLANT CORPORATION AND THEREFORE, ASSESSMENT ORDER IS WITHOUT JURISDICTION AND THE SAME BE QUASHED/CANCELLED BEING INVALID. 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LAW, THE AUTHORITIES LOWER ERRED IN LAW BY TREATING INTERE ST ACCRUED ON FDRS AS INCOME FROM OTHER SOURCES INSTEAD OF PROFI TS AND GAINS OF APPELLANTS BUSINESS. 8. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE ID. AUTHORITIES LOWER ERRED IN LAW BY NOT ALLOWING SET OFF OF CARRIED FORWARD UNABSORBED BUSINESS LOSS OF RS. 1,90,87,590 AND UNABSORBED CARRIED FORWARD DEPRECIATION OF RS. 30.0 5,234 AGAINST CURRENT YEAR INCOME OF RS.2,20,92,824 U/S 7 2 AND U/S 32(2) OF RESPECTIVELY OF THE I.T. ACT,1961. -: 5: - 5 9. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.AO ERRED IN LAW BY LEVYING INTEREST OF RS. 19,58,001/- U/S 234B. 10. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, FOLLOWING FINDING OF THE LD.CIT(A) IN RESPECT OF UNLAWFUL LEVY OF INTEREST U/S 234B IS UNJUSTIFIED/UNLAWFUL A ND SAME BE QUASHED :- 'I FIND THAT INTEREST U/S 2348 IS CHARGEABLE WITH REFERENCE TO DETERMINATION OF INCOME SINCE APPELLAN T HAD NOT PAID ANY ADVANCE TAX, 1 APPELLANT IS LIABLE FOR CHA RGING OF INTEREST U/S 2348. IN MY CONSIDERED VIEW, CHARGING OF INTEREST U/S 234B IS WITH REFERENCE TO THE DETERMINATION OF INCOME U/S 143(3) AND IS ALMOST AUTOMATIC AND THUS, IN MY VIEW , THERE IS NO LEGAL FLAW IN THE ACTION OF THE ASSESSING OFFICE R IN CHARGING OF INTEREST U/S 234B OF THE INCOME-TAX ACT.1961. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FULLY OWNED STATE GOVERNMENT UNDERTAKING ENGAGED IN CONSTRUCTION OF RESIDENTIAL HOUSES FOR POLICE PERSO NNEL. THE ASSESSEE HAS AVAILED THE LOAN FROM FINANCIAL INSTITUTIONS FOR CONSTRUCTION OF HOUSING PROJECT FO R POLICE PERSONNEL BUT THE SAME WAS NOT CLAIMED AS DEDUCTION OUT OF BUSINESS INCOME. HOWEVER, IN THE BOOKS OF ACCOU NTS, -: 6: - 6 THE ASSESSEE HAS CAPITALISED THE INTEREST EXPENDITU RE. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASS ESSEE HAS RAISED ADDITIONAL GROUND THAT INTEREST PAID TO HUDOC AND STATE BANK OF INDORE SHOULD BE ALLOWED AS EXPENDITURE U/S 36(1)(III) OF THE ACT. HOWEVER, TH E COMMISSIONER OF INCOME TAX (APPEALS) DID NOT ACCEPT THE ADDITIONAL GROUND RAISED BEFORE HIM. THE COMMISSIO NER OF INCOME TAX (APPEALS) ALSO DID NOT CONSIDER THE ADDITIONAL GROUND RAISED WITH REGARD TO DISALLOWANC E OF EMPLOYEES CONTRIBUTION TO PF BY INVOKING THE PROVIS IONS OF SECTION 43B OF THE ACT AND FOR NOT ALLOWING SET OFF OF THE UNABSORBED DEPRECIATION U/S 32(2) OF THE ACT. 4. WITH REGARD TO THE GROUND TAKEN ON VALIDITY OF SERVICE OF NOTICE U/S 143(2) OF THE ACT, WE FIND TH AT THIS NOTICE WAS SERVED ON CA OF THE ASSESSEE WHO REPRESE NTED THE ASSESSEE BEFORE THE ASSESSING OFFICER. THIS NOT ICE WAS DULY COMPLIED WITH AND NO OBJECTION WAS RAISED BY T HE ASSESSEE BEFORE THE ASSESSING OFFICER REGARDING SER VICE OF -: 7: - 7 NOTICE. IN THE INSTANT CASE, THE CA REPRESENTING TH E ASSESSEE RECEIVED THE NOTICE AND THEREAFTER THE ASS ESSEE RATIFIED THE NOTICE BY FILING VARIOUS SUBMISSIONS. THUS, THESE ESTOPPELS FROM CHALLENGING SUCH SERVICE OF N OTICE AS HELD IN THE CASE OF KHODAY ESWAR & SONS; 271 ITR 44 8. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE GROUND RAISED BY THE ASSESSEE WITH REGARD TO VALIDITY OF SERVICE OF NOTICE U/S 143(2) OF THE ACT. 5. WITH REGARD TO THE TREATMENT OF INTEREST INCOME, THE CONTENTION OF THE LEARNED CIT DR WAS THAT THE ASSESSEE HIMSELF HAS SHOWN THE INTEREST INCOME AS I NCOME FROM OTHER SOURCES IN ITS RETURN OF INCOME AND MORE OVER THE ISSUE FOR TREATMENT OF INTEREST IS COVERED BY VARIOUS DECISIONS INCLUDING THE DECISION OF THE SUPREME COU RT IN THE CASE OF TUTICORIN ALKALI CHEMICAL & FERTILIZERS LIMITED. 6. IT WAS SUBMITTED BY LD. AUTHORIZED REPRESENTATIVE THAT THE ENTRIES FOR CAPITALIZING THE INTEREST EXPE NDITURE IN BOOKS OF ACCOUNT ARE NOT DETERMINATIVE OF THE ALLOW ABILITY OF EXPENDITURE. RELIANCE IS PLACED ON FOLLOWING JUDGME NTS : -: 8: - 8 (1) CIT VS. ASAHI INDIA SAFETY GLASS LIMITED DATED 4 TH OCTOBER, 2011. (2) KEDARNATH JUTE MFG. CO.LTD. VS. CIT, (1971) 82 ITR 363 ( S.C.) (3) SUTLEJ COTTON MILLS LIMITED VS. CIT, 116 ITR 1 (S.C.). 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT THE ASSESSEE HAS PAID INTEREST TO THE BANK AND FINANCIAL INSTITUTIONS IN RESPECT OF LOANS TAKEN BY IT FOR CO NSTRUCTION OF BUILDINGS. HOWEVER, IN THE BOOKS OF ACCOUNT INSTEAD OF CLAIMING THE SAME AS REVENUE EXPENDITURE, THE SAME HAVE BEEN CAPITALIZED. FOR THE FIRST TIME, BEFORE THE CI T(A), THE ASSESSEE HAS CLAIMED DEDUCTION OF SUCH INTEREST EXP ENDITURE U/S 36(1)(III) OF THE INCOME-TAX ACT, 1961. AS PER PROVISIONS OF SECTION 36(1)(III), ANY INTEREST PAID ON THE LOANS TAKEN FOR THE PURPOSE OF BUSINESS IS TO BE ALLOWED AS BUSINESS EX PENDITURE. THERE IS NO DISPUTE TO THE WELL SETTLED LEGAL PROPO SITION THAT CLAIM OF DEDUCTION UNDER THE INCOME-TAX ACT, 1961, IS TO BE ALLOWED AS PER PROVISIONS OF INCOME-TAX ACT, 1961, AND NOT AS PER THE ENTRIES MADE IN THE BOOKS OF ACCOUNT. AN EX PENDITURE WHICH HAS BEEN CLAIMED IN THE PROFIT AND LOSS ACCOU NT BY -: 9: - 9 RECORDING THE SAME IN REGULAR BOOKS OF ACCOUNT, WHI CH IS NOT ALLOWABLE UNDER INCOME-TAX ACT, 1961, CANNOT BE ALL OWED MERELY BECAUSE AN ENTRY HAS BEEN PASSED IN THE BOOK S OF ACCOUNT. SIMILARLY, AN EXPENDITURE, WHICH IS ALLOWA BLE UNDER THE INCOME-TAX ACT, 1961, CANNOT BE DECLINED MERELY BECAUSE SUCH EXPENDITURE HAS NOT BEEN CORRECTLY DEBITED IN THE BOOKS OF ACCOUNT. THE CASE LAWS RELIED UPON BY THE LD. AU THORIZED REPRESENTATIVE IN THE CASE OF SUTLEJ COTTON MILLS LIMITED,116 ITR 1 AND KEDARNATH JUTE MFG. CO., 82 ITR 363, SUPP ORTS THIS PROPOSITION. IN VIEW OF THESE DECISIONS, EVEN IF TH E ASSESSEE HAS CAPITALIZED ITS INTEREST EXPENDITURE IN THE BOO KS OF ACCOUNT, THE SAME IS ELIGIBLE FOR CLAIM OF DEDUCTIO N U/S 36(1)(III) OF THE INCOME-TAX ACT, 1961. SINCE THIS IS A PURELY LEGAL CLAIM AND ENTIRE FACTS ARE AVAILABLE ON RECOR D, THE CIT(A) WAS NOT JUSTIFIED IN NOT ADMITTING THE PURELY LEGAL GROUND RAISED BEFORE HIM FOR THE FIRST TIME. AS THE ASSESS EE HAS NOT CLAIMED THIS EXPENDITURE BEFORE THE LOWER AUTHORITI ES, THEY HAVE NOT GOT OPPORTUNITY TO EXAMINE THE SAME AS PER THE PROVISIONS OF SECTION 36(1)(III), WHICH REQUIRES TH AT INTEREST SHOULD BE PAID ON LOANS TAKEN FOR THE PURPOSE OF BU SINESS. IN -: 10: - 10 THE INTEREST OF JUSTICE, WE RESTORE THIS GROUND BAC K TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE A SSESSEES ELIGIBILITY TO CLAIM OF DEDUCTION IN RESPECT OF INT EREST EXPENDITURE U/S 36(1)(III) OF THE INCOME-TAX ACT, 1 961. WE DIRECT ACCORDINGLY. 8. AS PER LD. AUTHORIZED REPRESENTATIVE, INTEREST INC OME ACCRUED ON FDR WAS LIABLE TO BE TAXED UNDER THE HEA D INCOME FROM BUSINESS AND PROFESSION, SINCE IT IS NOT A SU RPLUS FUND BUT ARE THE ADVANCES FOR CONSTRUCTION, WHICH HAVE B EEN KEPT IN F. D. IT WAS ALSO BROUGHT TO OUR NOTICE THAT A R EVISED COMPUTATION WAS FILED BEFORE THE ASSESSING OFFICER CLAIMING EXPENSES OF INTEREST PAID TO HUDCO & OTHER FINANCIA L INSTITUTIONS AND BANKS AND THIS DEDUCTION WAS CLAIM ED OUT OF BUSINESS INCOME. 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FIND FROM RECORD THAT M.P. POLICE HOUSING CORPORATION IS A COMPANY WHOLLY OWNED BY THE GOVERNMENT OF MADHYA PRADESH AND IS REGISTERED UNDER THE COMPANIES ACT, 1956. THE CORPORATION WAS INCORPORATED ON 31 ST MARCH, 1981. -: 11: - 11 THE MAIN OBJECTS OF THE COMPANY AS MENTIONED IN THE MEMORANDUM AND ARTICLES OF ASSOCIATION ARE AS BELOW :- (I) TO FORMULATE AND EXECUTE HOUSING SCHEMES FOR TH E BENEFIT OF SERVING EMPLOYEES OF THE GOVERNMENT OF MADHYA PRADESH. (II) TO UNDERTAKE CONSTRUCTION EITHER DIRECTLY OR T HROUGH CONTRACTORS OR OTHER AGENCY OF BUILDINGS AND PROVISION OF COMMON FACILITIES AS ARE REQUIRED BY A COLONY, FOR EXAMPLE, COMMUNITY HALL, HOSPITAL, WATE R TANK, ELECTRICITY, SANITARY FACILITIES OR OTHER CONVENIENCES, WHATSOEVER, FOR HOUSING POLICE EMPLOYEES OF THE GOVERNMENT OF MADHYA PRADESH (III) TO PURCHASE AND SALE HOUSE, BUILDINGS. 10. THERE IS NO DISPUTE TO THE WELL SETTLED LEGAL PROPO SITION THAT INTEREST INCOME ARISING OUT OF BANK DEPOSITS A RE LIABLE TO BE TAXED AS INCOME FROM OTHER SOURCES, IF SUCH DE POSITS ARE OUT OF SURPLUS FUND OF THE ASSESSEE. HOWEVER, WHERE SUCH FDRS ARE MADE AS A BUSINESS COMPULSION, THEN SUCH I NTEREST -: 12: - 12 INCOME IS LIABLE TO BE SET OFF AGAINST INTEREST EXP ENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINES S. 11. IN THE INSTANT CASE, WE FIND THAT THE STATE GOVERNM ENT IS THE CUSTOMER OF M.P. HOUSING BOARD AND RELEASES ADVANCE FOR CONSTRUCTION OF HOUSES FOR POLICE PERSONNEL OF STATE GOVERNMENT POLICE DEPARTMENT. ASSESSEE HAS ALSO TAK EN LOAN FROM BANK AND FINANCIAL INSTITUTION FOR THE PURPOSE OF ITS BUSINESS OF CONSTRUCTION OF HOUSING. OUT OF THESE A DVANCES RECEIVED FROM STATE GOVERNMENT AND LOAN FROM BANK F OR CONSTRUCTION PURPOSE, MONEY WAS ALLEGED TO BE DEPOS ITED BY ASSESSEE IN THE FORM OF FDRS ON WHICH INTEREST WAS EARNED. AS PER THE LEARNED COUNSEL FOR THE ASSESSEE, SINCE THE ASSESSEE USED TO PAY INTEREST ON THE LOANS TAKEN FROM FINANC IAL INSTITUTIONS, THE SAME IS ALLOWABLE AS BUSINESS EXP ENDITURE, THEREFORE, THE INTEREST INCOME EARNED ON FDRS OUT O F THE LOANS AND ADVANCES RECEIVED IN THE COURSE OF ASSESSEES B USINESS OF CONSTRUCTION OF HOUSES, THE SAME SHOULD BE ALLOWED TO BE REDUCED OUT OF THE INTEREST EXPENDITURE SO INCURRED BY THE ASSESSEE. -: 13: - 13 12. THE ISSUE WITH REGARD TO TREATMENT OF INTEREST INCOME AND NETTING OF INTEREST EXPENDITURE HAS BEEN CONSIDERED BY HON'BLE SUPREME COURT RECENTLY IN THE CASE OF AC G ASSOCIATED CAPSULES PRIVATE LIMITED WHEREIN THE ASS ESSEE, BEING AN EXPORTER, WAS PAYING INTEREST EXPENDITURE AND WAS ALSO RECEIVING INTEREST ON FDRS. WHILE ALLOWING THE ASSESSEE'S CLAIM FOR DEDUCTION U/S 80HHC,THE AO EXCLUDED THE G ROSS AMOUNT OF INTEREST INCOME FROM THE BUSINESS PROFITS BY TREATING THE SAME AS INTEREST INCOME FROM OTHER SOURCES. TH US, THE AO ALLOWED THE DEDUCTION ONLY ON THE AMOUNT OF PROFIT AFTER EXCLUDING GROSS INTEREST INCOME RECEIVED BY THE ASS ESSEE. THE TRIBUNAL BY FOLLOWING THE DECISION OF ITAT SPECIAL BENCH IN THE CASE OF LALSON; 89 ITD 25 AND DELHI HIGH COURT IN T HE CASE OF SHRIRAM HONDA POWER EQUIP; 289 ITR 475 HELD THAT O NLY THE NET INTEREST COULD BE DEDUCTED (SUBJECT TO NEXUS BE TWEEN THE EXPENDITURE AND INCOME BEING APPROVED). ON APPEAL B Y THE DEPARTMENT, THE HIGH COURT REVERSED THE ORDER OF TH E TRIBUNAL AND HELD THAT GROSS INTEREST RECEIVED HAD TO BE EXC LUDED. ON FURTHER APPEAL BY THE ASSESSEE, THE HON'BLE SUPREME COURT REVERSED THE ORDER OF THE HIGH COURT AND HELD THAT ONLY NET OF -: 14: - 14 INTEREST INCOME IS TO BE EXCLUDED AND APPROVED THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF SHRIRAM HO NDA POWER EQUIP (SUPRA) AND ITAT SPECIAL BENCH IN CASE OF LAL SONS (SUPRA). 13. IN THE CASE OF SHRIRAM HONDA POWER EQUIP (SUPRA) THE HON'BLE HIGH COURT HELD THAT WHERE THE ASSESSEE IS PAYING INTEREST EXPENDITURE AND ALSO IN RECEIPT OF INTERES T INCOME, NET INTEREST INCOME IS TO BE ARRIVED AT AFTER EXCLUDING THE INTEREST EXPENDITURE INCURRED FOR EARNING SUCH INTEREST INC OME. THUS, WHILE COMPUTING DEDUCTION U/S 80HHC, ONLY THE NET I NTEREST INCOME IS TO BE EXCLUDED. 14. IN VIEW OF THE ABOVE DECISION, THE MATTER IS RESTO RED TO THE FILE OF THE AO FOR DECIDING IT AFRESH KEEPIN G IN VIEW THE PROPOSITION OF LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF ACG ASSOCIATE CAPSULES PRIVATE LIMTED ( SUPRA) AND DELHI HIGH COURT IN CASE OF SHRI RAM HONDA (SUPRA). WE DIRECT ACCORDINGLY. 15. IN THE INSTANT CASE, LOWER AUTHORITIES HAVE NOT CONSIDERED AND THE ASSESSEE HAS ALSO NOT BROUGHT ON RECORD FULL FACTS WITH REGARD TO THE BUSINESS COMPULSION O F MAKING -: 15: - 15 FDRS AND THE CONSEQUENTIAL INTEREST EARNED THEREON. THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE T HE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR DECIDING AFRES H IN TERMS OF OUR ABOVE OBSERVATION. THE ASSESSEE IS FURTHER DIRE CTED TO BRING ON RECORD COMPLETE FACTS OF SOURCE OF FDRS AN D THE PURPOSE FOR WHICH SUCH FDR WAS REQUIRED TO BE MADE OUT OF BUSINESS COMPULSION. ASSESSEES CLAIM OF DEDUCTION OF INTEREST EXPENDITURE U/S 36(1)(III) IS DIRECTED TO BE ADJUD ICATED AFRESH BY ASSESSING OFFICER IN TERMS OF ASSESSEES OBJECT CLAUSE AND PURPOSE FOR WHICH LOAN WAS TAKEN FROM FINANCIAL INS TITUTION AND BANKS. WE DIRECT ACCORDINGLY. 16. THE DISALLOWANCE OF PF CONTRIBUTION UNDER SECTION 43B OF THE ACT IS DIRECTED TO BE CONSIDERED AFRESH IN VIEW OF THE FACT THAT THE AMOUNT OF CONTRIBUTION WAS PAID BEFOR E THE LAST DATE OF FILING THE RETURN AS PER THE AMENDED PROVIS IONS OF LAW BY FINANCE ACT, 2003, WHEREIN SECOND PROVISO TO SEC 43B WAS OMITTED. WE DIRECT ACCORDINGLY. 17. WITH REGARD TO THE GROUND TAKEN REGARDING SET OFF OF UNABSORBED BUSINESS LOSS AND DEPRECIATION, THE CONT ENTION OF THE LEARNED CIT DR WAS THAT THE ASSESSEE HAS EARNE D ONLY -: 16: - 16 INTEREST INCOME ON SHORT TERM DEPOSIT WHICH WAS TAX ED AS INCOME FROM OTHER SOURCES, THEREFORE, CARRIED FOR WARD UNABSORBED BUSINESS LOSS AND DEPRECIATION CANNOT BE SET OFF AGAINST SUCH INCOME. AS PER THE LEARNED CIT DR EVE N AS PER PROVISIONS OF SECTION 57 ONLY THAT EXPENDITURE IS A LLOWED AGAINST SUCH INCOME WHICH IS USED TO EARN THIS INCO ME. AS WE HAVE ALREADY RESTORED THE GROUND WITH REGARD TO TRE ATMENT OF INTEREST INCOME, THE ASSESSING OFFICER IS TO DECIDE THE ISSUE OF SET OFF AFRESH. 18. GROUND NOS. 4, 8, 9 AND 10 ARE CONSEQUENTIAL IN NAT URE . 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART IN TERMS INDICATED HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH, 2012. SD/ - SD/ - (JOGINDER SINGH) ( R.C.SHARMA) JUDI CIAL MEMBER ACCOUNTANT MEMBER DATED : 29 TH MARCH, 2012. CPU* 293