ACIT, Circle Circle-2(10, Kolkata, Kolkata V. M/s Amrit Feeds Ltd., Kolkata

ITSSA 129/KOL/2016

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3290 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 23-11-2016
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Assessee Lawyers: D S DAMLE
• Keywords: Business income; Earning of tax free income
• Section: 14A; 80IB; 10

Judgement Text

IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH 'C', KO LKATA [BEFORE HON'BLE SRI N.V.VASUDEVAN, JM & HON'BLE SRI M.BALAGANESH, AM] IT(SS) A NO 129/KOL/2016 ASSESSMENT YEAR : 2010-11 A.C.I.T., CENTRAL CIRCLE-2(1) -VS- M/S. AMRIT FEEDS LTD., KOLKATA KOLKATA (PAN AACCA 5571 D) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI.G.MALLIKARJUNA CIT DR FOR THE RESPONDENT: SHRI D.S.DAMLE, FCA DATE OF HEARING : 22.3.2017 DATE OF PRONOUNCEMENT : 05.04.2017. ORDER PER SHRI N.V.VASUDEVAN, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST ORD ER DATED 27.9.2016 OF CIT(A)-20, KOLKATA, RELATING TO AY 2010-11. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN THIS APPEAL READ AS FOLLOWS: (I) THAT THE LD. CIT(A) HAS ERRED IN ACCEPTING THA T THE TERM 'MANUFACTURE' OCCURRING IN THE CONTEXT OF SECTION 80-IB DOES NOT NECESSARILY REQUIRE THAT THE END PRODUCT OF THE MANUFACTURING PROCESS IS TO BE COMPL ETELY DIFFERENT FROM THE INGREDIENTS, AS REGARDS ITS CHEMICAL COMPOSITION, I NTEGRAL STRUCTURE OR ITS USE. (II) THAT THE LD. CIT(A) HAS ERRED IN ACCEPTING THA T THE PROCESS OF MANUFACTURING OF POULTRY FEEDS DOES NOT AMOUNT TO MERE MIXING TOG ETHER OF ALL DIFFERENT INGREDIENTS, WITHOUT INVOLVING ANY CHANGE IN THE CH EMICAL COMPOSITION OF THE INGREDIENTS. (III) THAT THE LD. CIT(A) HAS ERRED IN ACCEPTING TH AT THE PROCESS OF PREPARATION OF POULTRY FEEDS AMOUNT TO PRODUCTION OF AN ARTICLE WI THIN THE MEANING OF SECTION 80IB. (IV) THAT THE LD. CIT(A) HAS ERRED IN ALLOWING THE ENTIRE AMOUNT OF RS.1,24,21,2905/- CLAIMED AS DEDUCTION U/S 80-IB. IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 2 (V) THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO NET OFF THE INTEREST INCOME CREDITED IN THE PROFIT AND LOSS ACCOUNT OF T HE ELIGIBLE UNDERTAKING AGAINST THE INTEREST EXPENSE DEBITED IN THE SAID PROFIT AND LOSS ACCOUNT WITHOUT THE APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E SUPPORTED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMIC ALS LIMITED VS. CIT,[2003] 129 TAXMAN 539 (SC) AND THE DECISION OF HIGH COURT OF JAMMU AND KASHMIR IN THE CASE OF ASIAN CEMENT INDUSTRIES VS INCOME TAX APPELLATE TRIBUNAL, [2012] 28 TAXMAN 290(JAMMU & KASHMIR) (VI) THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO RECOMPUTE THE INCOME OF THE ELIGIBLE UNDERTAKING AND RE-COMPUTE THE DEDU CTION U/S 80IB AFTER NETTING OFF THE INTEREST INCOME CREDITED IN THE PROFIT AND LOSS ACCOUNT OF THE ELIGIBLE UNDERTAKING AGAINST THE INTEREST EXPENSE DEBITED IN THE SAID PROFIT AND LOSS ACCOUNT. 3. GROUNDS NO.(I) TO (III) RAISED BY THE REVENUE I S WITH REGARD TO THE ISSUE AS TO WHETHER THE CIT(A) WAS JUSTIFIED IN ALLOWING THE CL AIM OF THE ASSESSEE FOR DEDUCTION U/S.80IB(5) OF THE INCOME TAX ACT, 1961 (ACT) ON TH E PROFITS DERIVED BY THE ASSESSEE FROM MANUFACTURE AND SALE OF POULTRY FEED. 4. AT THE TIME OF HEARING IT WAS SUBMITTED BY THE L EARNED COUNSEL FOR THE ASSESSEE THAT THE AFORESAID ISSUE REGARDING THE ELIGIBILITY OF TH E ASSESSEE FOR DEDUCTION U/S 80IB(5) OF THE ACT HAS ALREADY BEEN DECIDED BY THE ITAT KOL KATA BENCH IN ASSESSEES OWN CASE IN ITA NO.1505/KOL/2007 FOR AY 2003-04 ORDER D ATED 17.8.2007 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE PR OFIT DERIVED FROM THE ACTIVITY OF MANUFACTURE OF POULTRY FEED WAS ENTITLED TO DEDUCT ION U/S.80IB(5) OF THE ACT. 5. IT WAS THE PLEA OF THE ASSESSEE THAT THE PROCES S OF PRODUCING POULTRY FEED INVOLVED MECHANICAL, CHEMICAL & ELECTRICAL PROCESSES FOR WHI CH THE ASSESSEE USED SOPHISTICATED PLANT & MACHINERY. IN THE COURSE OF PRODUCTION OF P OULTRY FEED RAW- MATERIALS WHICH EXCEEDED 30 IN NUMBER, LOST INDIVIDUAL IDENTITY AND THE EMERGING PRODUCT WAS DISTINCT AND SEPARATE IN SHAPE, CHARACTER AND END-USE. THE R AW- MATERIALS CONSUMED IN PRODUCTION OF POULTRY FEED COULD BE INDIVIDUALLY US ED FOR DIFFERENT PURPOSES, BUT THE END PRODUCT AT THE END OF INTEGRATED PRODUCTION PRO CESS WAS KNOWN TO TRADE BY ITS DISTINCT COMMERCIAL NAME AS 'POULTRY FEED'. IT COUL D ONLY BE CONSUMED BY ONLY ONE CLASS OF CONSUMER I.E. POULTRY & NONE ELSE. IT WAS THE CLAIM OF THE ASSESSEE THE END IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 3 PRODUCT WAS KNOWN AS POULTRY FEED IN THE TRADE, COM MERCE AND INDUSTRY AND WAS CONSIDERED AS SEPARATE AND DISTINCT FROM VARIOUS MA TERIALS CONSUMED IN THE PROCESS OF ITS PRODUCTION. THE ASSESSEE ALSO PLEADED THAT POUL TRY FEED MANUFACTURING INDUSTRY WAS NOTIFIED BY THE CENTRAL GOVERNMENT TO BE ELIGIB LE FOR CLAIMING DEDUCTION FOR A CONSECUTIVE PERIOD OF 10 YEARS U/S 801B(4) OF THE A CT WHERE THE UNDERTAKING WAS LOCATED IN ANY OF THE NORTH EASTERN STATES. IT WAS THE PLEA OF THE ASSESSEE THAT DEDUCTION BOTH U/S 801B (4) & (5) COULD BE ALLOWED ONLY IF NEWLY SET UP INDUSTRIAL UNDERTAKING WAS ENGAGED IN MANUFACTURE AND PRODUCTI ON OF AN ARTICLE AND IF POULTRY FEED INDUSTRY WAS CONSIDERED ELIGIBLE BY THE CENTRA L GOVERNMENT FOR CLAIMING DEDUCTION U/S 801B(4) THEN THE SAME INDUSTRY SHOULD BE CONSIDERED TO BE ELIGIBLE FOR DEDUCTION U/S 801B(5) OF THE ACT ALSO ON THE GROUND AT IT WAS ENGAGED IN MANUFACTURE OR PRODUCTION OF AN ARTICLE. 6. THE AO HOWEVER WAS OF THE VIEW THAT IN THE PROD UCTION PROCESS EXPLAINED BY THE ASSESSEE, THERE WAS NO CHANGE IN CHEMICAL COMPOSITI ON OF THE END PRODUCT AND THEREFORE THERE WAS NO MANUFACTURE. HOWEVER BEFORE RECORDING SUCH AN AUTHENTIC TECHNICAL FINDING, THE AO HOWEVER DID NOT REFER TO ANY SCIENTIFIC DATA OR SCIENTIFIC EXPERIMENTS OR TECHNICAL REPORT TO SUPPORT HIS CONC LUSION. THE AO ACCORDINGLY REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/ S.80IB(5) OF THE ACT. 7. ON APPEAL BY THE ASSESSEE, THE CIT(A) HELD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S.80IB(5) OF THE ACT AND IN DOING SO RE LIED ON THE DECISION RENDERED IN ASSESSEES OWN CASE BY THE TRIBUNAL REFERRED TO IN THE EARLIER PART OF THIS ORDER. 8. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE IS IN APPEAL BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE ISSUE T O BE DECIDED IS AS TO WHETHER THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF A PRODUCT ION OF AN ARTICLE TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. THIS ISSUE HAS DULY B EEN DECIDED BY THIS BENCH IN ASSESSEE'S OWN CASE IN ITA NO.1505/KOL/2007 IN THE CASE OF ACIT-VS- AMRIT FEEDS LTD., KOLKATA, IN WHICH, THE SIMILAR ISSUE HAS ARIS EN. WHILE DECIDING THE SIMILAR ISSUE, THIS TRIBUNAL OBSERVED AS UNDER VIDE PARA 15 TO 18 OF ITS ORDER. IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 4 '15. SEC 801B (2) (III) REQUIRES THE ELIGIBLE INDUS TRIAL UNDERTAKING TO BE ENGAGED IN 'MANUFACTURE OF PRODUCTION OF AN ARTICLE '. THE SAID SECTION HOWEVER, DOES NOT DEFINE THE EXPRESSION 'MANUFACTURE OR PROD UCTION OF AN ARTICLE'. IN FACT THIS EXPRESSION IS NOT DEFINED IN THE ACT ALSO. THE LD. CIT (A) EXTENSIVELY ANALYSED MEANING OF THE SAID EXPRESSION WITH REFERE NCE TO JUDICIAL DECISIONS DISCUSSED IN HIS ORDER. THE TEST LAID DOWN BY THE C OURTS IS WHETHER THE EMERGING NEW PRODUCT IS KNOWN TO THE TRADE, INDUSTR Y AND COMMERCE BY ITS OWN NAME HAVING ITS OWN APPLICATION USE AND HAS A MARKE T OF ITS OWN. APPLYING THE CRITERIAS LAID DOWN IN THESE JUDICIAL DECISIONS WE FIND THAT IN PHYSICAL APPEARANCE, COLOUR AND SHAPE THE. POULTRY FEED VAST LY DIFFERS FROM THE INPUT MATERIALS. THE POULTRY FEED IS MANUFACTURED IN A SC IENTIFIC AND SYSTEMATIC MANNER WITH THE USE AND ASSISTANCE OF SOPHISTICATED PLANT AND MACHINERY ACQUIRED AT A SUBSTANTIAL COST. POULTRY FEED IS REC OGNISED NOT ONLY BY TRADE AND COMMERCE BUT ALSO BY THE STATUTORY AUTHORITIES UNDE R CENTRAL EXCISE, SALES TAX ETC AS INDEPENDENT PRODUCTS APPLYING THE RATIO LAID DOWN IN JUDICIAL DECISIONS DISCUSSED IN THE ORDER OF CTT(A) WE HAVE NO HESITAT ION IN HOLDING THAT THE ASSESSEE IS ENGAGED IN MANUFACTURE OR PRODUCTION OF AN ARTICLE, CONTEMPLATED IN SEC 801B (2) (III) . 16. WE ALSO FIND ON THE IDENTICAL FACTS THE BANGALO RE BENCH OF ITAT IN THE CASE OF KOMRALA FEEDS --VS- DCIT 74 ITD 65 HELD THAT ACT IVITY OF PRODUCING POULTRY FEED AMOUNTS TO MANUFACTURE AND THEREFORE E LIGIBLE FOR DEDUCTION U/S 80 I. SEC 80I AND SEC 80IB ARE PARAMETERIA BECAUSE CON DITIONS FOR PART OF DEDUCTION ARE SAME AND THEREFORE THE SAID DECISION IS EQUALLY APPLICABLE IN THE PRESENT CASE. 17. SECTION 80IB IS AN INCENTIVE PROVISION OF THE INCOME TAX ACT ENACTED, BY THE LEGISLATURE TO PROMOTE ECONOMIC AND INDUSTRIAL GROWTH IN BACKWARD DISTRICTS AND STATES. IN THE CASE OF BAJAJ TEMPO LT D --VS. CIT (196 ITR 188) THE SUPREME COURT HAS OPINED THAT A PROVISION OF TAXING STATUTE GRANTING INCENTIVES FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE CONS TRUED LIBERALLY AND SINCE A PROVISION FOR PROMOTING ECONOMIC GROWTH HAS TO BE INTERPRETED LIBERALLY THE RESTRICTION THEREON TOO HAS TO BE CONSTRUED SO AS T O ADVANCE THE OBJECTIVE OF THE PROVISION AND NOT TO FRUSTRATE IT. CONDITIONS OF SE C 801B (2) (III) SHOULD BE FULFILLED BY EVERY NEW INDUSTRIAL UNDERTAKING CLAIM ING DEDUCTION EITHER/UNDER SUB SEC (3) (4) OR (5) OF SEC 80 IB I.E. TO SAY THE UNDERTAKING MUST BE ENGAGED IN MANUFACTURE OR PRODUCTION OF AN ARTICLE. IF THIS CONDITION IS NOT FULFILLED NO DEDUCTION IS PERMISSIBLE UNDER ANY OF THE SUB SECTI ONS OF SEC 801B. THE INDUSTRIAL UNDERTAKINGS NOTIFIED AND APPROVED BY TH E CENTRAL GOVT. AND SITUATED IN NORTH EASTERN STATES ARE ELIGIBLE FOR TAX HOLIDA Y FOR PERIOD OF 10 YEARS' AS AGAINST PERIOD OF 5 YEARS AVAILABLE TO OTHER BACKWA RDS STATES. IN NOTIFICATION NO. SO 627 (E) DATED 04.08.1999 THE CENTRAL GOVERNM ENT HAS RECOGNISED POULTRY AND CATTLE FEED INDUSTRY, TO BE AN ELIGIBLE INDUSTRY U/S 80 IB (4). ONCE THE CENTRAL GOVERNMENT NOTIFIED THE POULTRY 'FEED I NDUSTRY U/S 80 IB (4) THEN THERE IS A TACIT ADMISSION THAT IT IS ENGAGED IN 'M ANUFACTURE OR PRODUCTION OF AN IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 5 ARTICLE'. THIS IS SO BECAUSE UNLESS POULTRY FEED IN DUSTRY DOES NOT MANUFACTURE AN ARTICLE; NO DEDUCTION CAN BE PERMISSIBLE U/S 80I B. ONCE THE CENTRAL GOVT. ACCEPTED IN PRINCIPLE THAT POULTRY FEED IS AN ELIGI BLE INDUSTRY U/S 80IB(4); THEN THE VERY SAME INDUSTRY CANNOT BE CONSIDERED AS NON MANUFACTURING INDUSTRY UNDER SUB SECTIONS (3) AND (5) ' OF SEC 801B. WITH REFERENCE TO SAME SET OF FACTS THE REVENUE CANNOT HOLD THE POULTRY .FEED INDUSTRY AS MANUFACTURING INDUSTRY IF SITUATED IN NORTH EASTERN STATES AND A 'PROCESSING INDUSTRY' IF SITUATED IN ANY OTHER STATES SUCH AN INTERPRETATION WILL ONLY LEAD TO AN ABSURD LEGAL POSITION. 18. FOR THE REASONS AS SET OUT HEREIN BEFORE THEREF ORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) HOLDING THE ASSESS EE TO BE ENGAGED IN MANUFACTURE OR PRODUCTION OF AN ARTICLE WE ARE THER EFORE OF THE CONSIDERED OPINION THAT THE ASSESSEE SATISFIES THE CONDITIONS OF SEC 80-IB(2) (III) OF THE ACT AND IS THEREFORE ELIGIBLE FOR DEDUCTION U/S 80IB WE THEREFORE UPHOLD THE ORDER OF CIT (A) DIRECTING A 0 TO ALLOW DEDUCTION U/S 80 IB TO THE ASSESSEE.' 10. IN ASSESSEES OWN CASE THIS TRIBUNAL IN ITA NO. 2227/KOL/2010 FOR AY 2007-08 BY ORDER DATED 20.3.2013 ALLOWED SIMILAR CLAIM OF T HE ASSESSEE. FROM PERUSAL OF THE SAID DECISIONS OF THIS TRIBUNAL, IT IS APPARENT THA T THIS TRIBUNAL HAS CATEGORICALLY HELD IN THE CASE THAT THE ASSESSEE IS ENGAGED IN MANUFAC TURING OF POULTRY FEEDS AND THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OR PRODUCTIO N OF AN ARTICLE. 11. THE LEARNED DR HOWEVER SUBMITTED THAT IN THE D ECISIONS RENDERED BY THE TRIBUNAL, THE DECISION RENDERED BY THE HYDERABAD BENCH OF ITA T IN THE CASE OF VENKATESWARA FEEDS -VS- ACIT 22 TAXMANN.COM 234 (HYD.) WAS NOT P ROPERLY CONSIDERED AND THEREFORE THE DECISION RENDERED IN ASSESSEES OWN C ASE REQUIRES RECONSIDERATION. IN THIS REGARD IT WAS SUBMITTED THAT THE TRIBUNAL IN T HE CASE OF VENKATESWAR FEEDS (SUPRA) FOUND THAT VARIOUS FEED INGREDIENTS SUCH AS MAIZE, RICE BRAN, DE-OILED SOYA ETC., ALONG WITH CERTAIN FEED PREMIXES ARE MIXED IN DIFFERENT P ROPORTIONS AND THEN GROUND TO FORM A COURSE POWDERED MATERIAL WHICH WAS CALLED MA SH FEED. SUCH FEED UNDERWENT A CERTAIN KIND OF PHYSICAL CHANGES AND WAS CONVERTED INTO SMALL PELLETS. THE ACTUAL PROCESS INVOLVED WAS THAT THE MASH FEED WAS CARRIED THROUGH AN ELEVATOR TO A PELLET MAKING MACHINE WHERE IT GOT MIXED WITH STEAM AND TH EN FORCED THROUGH A PRESS CONTAINING SMALL HOLES TO CONVERT THE FEED INTO SMA LL PELLETS. IT WAS HELD THAT THERE WAS NO CHANGE OF COMPOSITION IN THE MASH FEED AND T HE PELLET FEED. HENCE CONVERSION OF PHYSICAL SHAPE OF THE FEED INVOLVES ONLY PROCESS ING AND NOT MANUFACTURE. IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 6 IT WAS SUBMITTED BY HIM THAT THE RAW MATERIAL AND E ND PRODUCT WERE THE SAME AND THEREFORE WHAT THE ASSESSEE DOES IS ONLY PROCESSING AND NOT MANUFACTURE. FOR AN ACTIVITY TO BE CALLED MANUFACTURE ONE OF THE IMPO RTANT CRITERIA IS THAT THE END PRODUCT OF THE MANUFACTURING PROCESS IS TO BE COMPL ETELY DIFFERENT FROM THE INGREDIENTS, AS REGARDS ITS CHEMICAL COMPOSITION, I NTEGRAL STRUCTURE OR ITS USE AND SUCH FACTOR IS MISSING IN THE CASE OF THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE ACTIVITY CARRIED OUT BY THE ASSESSEE WAS MERE MIXING TOGETHER OF DIFFERENT INGREDIENTS, WITHOUT INVOLVING ANY CHANGE IN THE CH EMICAL COMPOSITION OF THE INGREDIENTS AND THEREFORE, THE DECISIONS RENDERED O N THIS ISSUE HAVE OVERLOOKED THIS ASPECT. IT WAS SUBMITTED THAT THE DECISION RENDERE D IN ASSESSEES OWN CASE DID NOT CONSIDER THE DECISION OF THE HYDERABAD BENCH OF ITAT IN THE CASE OF VENKATESWARA FEEDS (SUPRA) AND THEREFORE THE DECISION REQUIRES R ECONSIDERATION. 12 . THE LEARNED DR FILED BEFORE US A CHART EXPLAINING THE PROCESS CARRIED OUT BY THE ASSESSEE, WHICH IS AS FOLLOWS: RAW MATERIALS (CORN, SOYA MEAL, RICE BRAN, CASSAVA, OTHERS QUALITY INSPECTION (AFLATCOCIN, MOISTURE, ENERGY, PROTEIN, ETC. HATCH WEIGHING (PER FORMULATION) GRINDING OF RAW MATERIALS MIXING PELLETING COOLING CRUMBLING QUALITY INSPECTION WEIGHING AND PACKAGING STORAGE IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 7 13. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REL YING ON THE ORDER OF THE CIT(A) AND DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN AY 2005-06 ALSO SUBMITTED THAT IN ASSESSEES OWN CASE (SUPRA), THE HONBLE ITAT HAD C ONSIDERED AND DISTINGUISHED THE DECISION RENDERED IN THE CASE OF VENKATESWARA FEEDS (SUPRA) BY ITAT HYDERABAD BENCH. 14. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS. IN THE CASE OF AMRIT FEEDS (SUPRA), THE TRIBUNAL CONSIDERED THE DE CISION RENDERED IN THE CASE OF VENKATESWARA FEEDS (SUPRA) AND HELD THAT THE ASSESS EE IN THAT CASE HAD CLAIMED DEDUCTION UNDER SECTION 80IB ON THE ACTIVITY OF MERELY CONVERTING POULTRY MASH FEED INTO PELLET FEED AND THEREFORE THAT BENCH HAS HELD THAT THERE WAS NO CHANGE IN THE BASIC COMPONENT OR NEW OR DIFFERENT ARTICLE CAME INTO EXI STENCE. AS SUCH, CONVERSION WAS PROCESSING ACTIVITY NOT MANUFACTURING. THE TRIBUNAL HELD THAT THE CASE OF THE ASSESSEE AMRIT FEEDS (SUPRA) WAS ENTIRELY DIFFERENT. THE ASS ESSEE'S ELIGIBLE UNDERTAKING ITSELF WAS INDEPENDENTLY CARRYING OUT THE COMPLETE ACTIVIT Y I.E. FROM MIXING, GRINDING TILL THE PELLETISATION. THE RAW MATERIALS ONCE CONSUMED COUL D NOT BE RECONVERTED INTO THE SAME POSITION. ITS UTILITY GETS CHANGED. THE PRIME RAW MATERIALS SUCH AS, MAIZE, SOYA OIL, RICE BRAN, ETC. CAN NO MORE BE REGARDED TO BE THE RICE BRAN, SOYA OIL, MAIZE. WE ARE OF THE VIEW THAT THE ISSUE IN THE REVENUE'S APPEAL IS SQUARELY COVERED AGAINST THE REVENUE BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE EARLIER YEARS WHICH WAS BASED ON THE D ECISION RENDERED IN THE CASE OF AMRIT FEEDS (SUPRA). RESPECTFULLY FOLLOWING THE DE CISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE THE FINDING OF LD. CIT(A) ON THIS ISSUE STANDS CONFIRMED AND THE GROUNDS OF APPEAL RAISED BY THE R EVENUE IN ALL THE APPEALS ON THIS ISSUE ARE DISMISSED. 15. AS FAR AS GROUND NOS. (IV) TO (VI) RAISED BY TH E REVENUE IS CONCERNED THE ISSUE FOR CONSIDERATION IS AS TO WHETHER INTEREST INCOME SHOU LD BE EXCLUDED FROM THE PROFITS OF THE BUSINESS ON WHICH DEDUCTION U/S 80IB(5) OF THE ACT HAS TO BE ALLOWED. THE CASE OF THE AO IS THAT INTEREST INCOME HAD NO DIRECT NEXUS WITH THE BUSINESS OF MANUFACTURE AND SALE OF POULTRY FEED AND THEREFORE THE SAID INC OME CANNOT BE CONSIDERED AS PART OF IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 8 PROFITS OF THE ELIGIBLE BUSINESS FOR THE PURPOSE OF ALLOWING DEDUCTION U//S 80IB(5) OF THE ACT. THE CIT(A) HOWEVER FOUND THAT THE INTEREST INCOME AROSE OUT OF FIXED DEPOSITS WHICH WERE SECURITIES FOR AVAILING CREDIT FACILITIES BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS OF MANUFACTURE AND SALE OF P OULTRY FEED. THE FDS WERE MADE ONLY FOR THE PURPOSE OF OFFERING THEM A SECURITY FO R CREDIT FACILITIES AVAILED FROM THE BANKS AND SUCH A CONDITION WAS ALSO IMPOSED BY THE BANKS FOR EXTENDING CREDIT FACILITIES. THE CIT(A) FURTHER FOUND THAT THE ASSES SEE HAD EARNED INTEREST INCOME OF RS.25,46,860/- AND HAD PAID INTEREST ON LOANS AND C REDIT FACILITIES OF RS.39,22,489/-. TAKING NOTE OF ALL THESE FACTS THE CIT(A) CAME TO T HE FOLLOWING CONCLUSION :- I HAVE CONSIDERED THE FINDING OF THE AO IN THE ASS ESSMENT ORDER AND THE WRITTEN SUBMISSION FILED BY THE AR ALONG WITH DIFFERENT CAS E LAWS ON THIS ISSUE. I HAVE CONSIDERED THE HON'BLE SUPREME COURT'S DECISION IN THE PANDIAN CHEMICAL'S CASE (SUPRA) AND I HAVE ALSO CONSIDERED THE DECISION OF THE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES (P) LTD VS CIT (343 ITR 89. I THINK, EVEN THOUGH THE SAID DECISION WAS RENDERED IN THE CONTEXT OF PR OVISIONS OF SECTION 80HHC, YET IN MY OPINION THE PRINCIPLE LAID DOWN IN THAT DECIS ION HAS EQUAL APPLICATION IN THE ASSESSEE'S CASE AS WELL. I FURTHER FIND THAT ON SIM ILAR FACTS THE ITAT, KOLKATA IN THE CASE OF DCIT VS BMW INDUSTRIES LIMITED (ITA NO. 2115JKOLJ2007) DATED 29TH FEBRUARY 2008 HAD SIMILARLY HELD THAT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80IB, THE INTEREST INCOME WAS LIABLE TO BE NETTED OFF AGAINST INTEREST EXPENSES AND ONLY THE NET INTEREST EXPENDITURE WAS REQUIRED TO BE ALLOWED IN ARRIVING AT QUALIFYING PROFITS OF THE - ELIGIBLE UN DERTAKING U/S 80IB OF THE ACT. I ALSO FIND THAT THE PRINCIPLE OF NETTING OFF OF INTE REST INCOME AGAINST INTEREST EXPENSE HAS BEEN UPHELD BY JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF CIT VS WARREN TEA LTD (374 ITR 6) FOR THE PURPOSES OF I NTERPRETING & COMPUTING BUSINESS INCOME IN THE CONTEXT OF RULE 8 APPLICABLE TO TEA COMPANIES. FOLLOWING THE RATIO LAID DOWN IN THESE DECISIONS THEREFORE, I HOLD THAT THE AO SHOULD NET OFF THE INTEREST INCOME CREDITED IN THE PROFIT AND LOSS ACCOUNT OF THE ELIGIBLE UNDERTAKING AGAINST THE INTEREST EXPENSE DEBITED IN THE SAID PROFIT AND LOSS ACCOUNT. IF NET RESULT THEREOF IS EXPENDITURE, THE SAME SHALL BE CONSIDERED TO BE THE EXPENDITURE RELATABLE TO ELIGIBLE UNDERTAKING. HOWEVER IF THE NET RESULT AFTER SET OFF IS INCOME, THEN THE ASSESSEE WILL NOT BE EL IGIBLE TO CLAIM DEDUCTION U/ S 80LB IN RESPECT OF SUCH NET INCOME. THE AO SHALL AC CORDINGLY RE-COMPUTE THE INCOME OF THE ELIGIBLE UNDERTAKING AND RE-COMPUTE T HE DEDUCTION U/S 80LB. THUS, ASSESSEE'S APPEAL ON GROUNDS NO 3 TO 6 ARE ALLOWED. 16. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS PREFERRED GROUND NOS. (IV) TO (VI) BEFORE THE TRIBUNAL. IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 9 17. THE LD.DR RELIED ON THE ORDER OF AO. THE LD. C OUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND RELIED ON TH E ORDER OF CIT(A). HE ALSO BROUGHT TO OUR NOTICE THAT THE BANK AS A CONDITION FOR GIVING CREDIT FACILITY INSISTED THAT THE FDRS SHOULD BE OFFERED AS A SECURITY AND THEREF ORE INTEREST EXPENDITURE AND THE INTEREST INCOME HAD A DIRECT NEXUS AND HENCE NETTIN G OF INTEREST INCOME WITH THE INTEREST EXPENSES WAS RIGHTLY ALLOWED BY CIT(A). 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND A RE OF THE VIEW THAT THE INTEREST INCOME AND THE INTEREST EXPENSES HAD A DIRECT NEXUS AND THEREFORE NETTING OF INTEREST INCOME AGAINST THE INTEREST EXPENSES HAD TO BE ALLO WED. SINCE THE INTEREST EXPENSES WAS MUCH MORE THAN THE INTEREST INCOME NO INTEREST INCOME CAN BE EXCLUDED FROM THE PROFITS ON WHICH DEDUCTION U/S 80IB(5) OF THE ACT O UGHT TO BE ALLOWED. WE THEREFORE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE AND DISMIS S GROUND NOS. (IV) AND (VI) RAISED BY THE REVENUE. 19. GROUND NO.(VII) RAISED BY THE REVENUE READS AS FOLLOWS :- (VII) THAT THE LD. CIT(A) HAS ERRED IN DIRECTING T HE A.O. TO COMPUTE THE DISALLOWANCE U/S 14A READ WITH RULE 8D(2)(II) AND 8 D(2)(III) ONLY ON THE INVESTMENT IN THE SHARES OF PUNJAB NATIONAL BANK AM OUNTING TO RS.34,100/-. 20. THE AO DISALLOWED A SUM OF RS.66,678/- AND RS.5 9,170/- AS EXPENSES INCURRED IN EARNING EXEMPT INCOME AND ACCORDINGLY MADE ADDITIO NS OF THE AFORESAID SUM BY INVOKING THE PROVISION OF SECTION 14A OF THE ACT RE AD WITH RULE 8D(2)(II) AND 8D(2)(III) OF THE RULES RESPECTIVELY. THE FOLLOWING WERE THE OBSERVATIONS OF THE AO IN THIS REGARD :- 3.2 ASSESSEE DEBITED AN AMOUNT OF RS.9,09,083/- ON ACCOUNT OF INTEREST PAYMENT AGAINST UNSECURED LOAN. IT IS FURTHER OBSERVED THAT , ASSESSEE RECEIVED EXEMPT INCOME IN THE FORM OF DIVIDEND, ETC. IN THE LIGHT O F ABOVE I AM SATISFIED THAT PROVISION OF SECTION 14A R.W.R 8D WOULD APPLY IN TH E CASE OF ASSESSEE AND TO BE CALCULATED ON THE BASIS OF METHOD PROVIDED U/S 14A READ WITH RULE 8D(2)(II) AS BELOW. IT IS MENTIONED WORTHY HERE THAT ASSESSEE PA ID AN AMOUNT OF RS.15.56 LAKH AS INTEREST ON SECURED LOAN, WHICH WAS UTILIZE FOR SPECIFIC PURPOSES AS THE TERM AND CONDITIONS OF LOAN. HENCE, PAYMENT OF INTE REST ON SECURED LOAN NOT CONSIDERED FOR CALCULATION OF DISALLOWANCE U/S 14A. IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 10 (I) AMOUNT OF DIRECT EXPENDITURE NIL (II) A AMOUNT OF INTEREST EXPENDITURE 9,09,083 B AVERAGE VALUE OF INVESTMENT 1,18,34,000 AS ON 01.04.2009 1,18,34,000 AS ON 31.03.2010 1,18,34,000 C AVERAGE OF TOTAL ASSETS 1,41,58,83,500 AS ON 01.04.2009 1,21,27,85,000 AS ON 31.03.2010 1,61,89,82,000 AXB/C 7,598 (III) % OF AVERAGE VALUE OF INVESTMENT I.E. B 59 ,170 TOTAL (I+II+III ) 66,768 AMOUNT ALREADY DISALLOWED BY ASSE SSEE IN COMPUTATION NIL DISALLOWANCE U/S 14A R.W. S. 8D(2)(II) 66,768 DISALLOWANCE: RS.66,768/- 3.3 ASSESSEE HAD RECEIVED CERTAIN INCOMES DURING TH E YEAR SUCH AS DIVIDEND INCOME WHICH ARE EXEMPT INCOME IN THE HANDS OF ASSE SSEE. ASSESSEE ALSO CLAIMED VARIOUS EXPENSES UNDER THE HEAD PROFIT AND GAIN OF BUSINESS OR PROFESSION. AS, IT IS NOT POSSIBLE TO SEGREGATE PORTION OF THESE EXPEN SES INCURRED FOR EARNING EXEMPT INCOME I.E. DIVIDEND AND OTHERS, HENCE IT HAS BEEN DECIDED THAT PROVISIONS OF SECTION 14A WOULD APPLY IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010-11. THE NEXT QUESTION THAT ARISES IS THE QUANT UM OF DISALLOWANCE. THE ONLY BASIS OF QUANTIFICATION OF DISALLOWANCE IS THE ONE PROVIDED IN RULE 8D(2)(III), I.E., 0.5% OF THE AVERAGE INVESTMENT. ACCORDINGLY, DISALL OWANCE UNDER RULE 8D(2)(III) IS WORKED AT 0.5% OF (B) ABOVE: DISALLOWANCE U/S 14A R.W.R 8D(2)(III) 0.5% OF L,L8,34,000/- 59,170/- 3.4 IN VIEW OF THE AFORESAID PARAGRAPH, AN AMOUNT O F RS.59,170/- IS DISALLOWED U/S 14A READ WITH RULE 8D. HENCE DISALLOWANCE ADDED TO THE TOTAL INCOME OF ASSESSEE. 21. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT T HE INVESTMENTS PRIMARILY COMPRISED OF INVESTMENTS IN SHARES OF SUBSIDIARIES AND GROUP COMPANIES. THE DETAILS OF INVESTMENTS HELD BY THE APPELLANT AT THE OPENING & THE CLOSING OF THE RELEVANT AY 2010-11 WERE GIVEN AND THE SAME IS AS FOLLOWS :- PARTICULARS 31.03.2009 31.03.2010 INVESTMENTS IN EQUITY & PREFERENCE SHARES OF GROUP COMPANIES 118.00 118.00 IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 11 OTHER INVESTMENTS IN SHARES & MF 0.34 0.34 TOTAL INVESTMENTS 118.34 118.34 22. IT WAS SUBMITTED THAT ON PERUSAL OF THE ABOV E TABLE IT CAN BE SEEN THAT ALMOST 99.71 PERCENT OF THE INVESTMENTS WERE IN SHARES OF ITS GROUP COMPANIES. THESE SHARES WERE ACQUIRED WITH THE PURPOSE TO ACQUIRE AND ENJOY CONTROLLING INTEREST AND FINANCE THE BUSINESS ACTIVITIES/PROJECTS UNDERTAKEN FOR FUR THERANCE OF THE BUSINESS OBJECTIVES OF THE GROUP OF WHICH THE APPELLANT WAS THE FLAGSHIP. THE PRINCIPAL PURPOSE BEHIND MAKING INVESTMENT IN SHARES OF THESE GROUP COMPANIE S WAS TO ENJOY CONTROLLING INTEREST AND TO FINANCE THE BUSINESS ACTIVITIES CON DUCTED THROUGH THE GROUP COMPANIES. THE PRESUMED INTEREST PAID ON SUCH INVESTMENT WAS T HEREFORE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. IT WAS CONTENDED THAT THESE INVESTMENTS HAVE NOT BEEN MADE WITH THE OBJECT TO EARN ANY TAX FREE DIVIDEND INCOM E BUT WITH THE SPECIFIC PURPOSE OF ACHIEVING THE BUSINESS OBJECTIVE. IT WAS ARGUED THA T ALL THE INVESTMENTS IN GROUP COMPANIES / SUBSIDIARIES ARE FOR STRATEGIC BUSINESS PURPOSES WITH A LARGER BUSINESS MOTIVE AND NOT TO MERELY EARN DIVIDEND INCOME. THE APPELLANT SUBSTANTIALLY EXERCISED CONTROL OVER THE MANAGEMENT AND OPERATIONS OF THE S UBSIDIARIES AND ASSOCIATE COMPANIES. THE INVESTMENTS IN SHARES OF THESE COMPA NIES WERE MADE PURELY ON COMMERCIAL BUSINESS CONSIDERATIONS AND NOT AS AN IN VESTMENT TO EARN CAPITAL APPRECIATION AND DIVIDEND INCOME. 23. IT WAS FURTHER SUBMITTED THAT THE INVESTMENT S WERE MADE OUT OF OWN FUNDS AND NOT OUT OF THE BORROWED FUNDS. AS AT 31.03.2010, TH E APPELLANT'S OWN FUNDS IN THE FORM OF SHARE CAPITAL AND FREE RESERVES WERE RS. 4027.70 LACS WHEREAS COST OF INVESTMENTS WAS ONLY RS.118.34 LACS. AS SUCH OWN FUNDS WERE SUB STANTIALLY HIGHER THAN THE COST OF INVESTMENTS. THE APPELLANT THEREFORE SUBMITS THAT T HE ENTIRE INVESTMENTS HAVE BEEN MADE OUT OF OWN INTEREST FREE FUNDS AND NO INTEREST BEARING BORROWINGS WHATSOEVER HAS BEEN UTILIZED FOR MAKING SUCH INVESTMENTS. RELI ANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF RELIANCE UTILITIES & POWER LTD (313 ITR 340) WHEREIN THE ASSESSEE MADE INVESTM ENT OF RS.389.60 CRS IN SHARES ON WHICH TAX FREE DIVIDEND INCOME WAS RECEIVED. IT WAS THE CASE OF THE ASSESSEE THAT THERE WERE SUFFICIENT FUNDS AVAILABLE IN THE FORM O F SHARE CAPITAL (180 CRS), RESERVE & IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 12 SURPLUS (215CRS) FOR MAKING INVESTMENT IN SHARES. O N THE OTHER HAND, THE REVENUE CONTENDED THAT SHARE CAPITAL AND RESERVES ETC. HAD ALREADY BEEN INVESTED IN ACQUIRING IN FIXED ASSETS. ON APPEAL, THE HON'BLE HIGH COURT FOL LOWING THE DECISION OF THE SUPREME COURT IN THE CASE OF EAST INDIA PHARMACEUTICAL WORK S (224 ITR 627) OBSERVED AS FOLLOWS: 'IF THERE BE INTEREST FREE FUNDS AVAILABLE TO AN AS SESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAD R AISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTERES T FREE FUNDS AVAILABLE.' ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE BO MBAY HIGH COURT IN THE CASE OF CIT VS HDFC BANK LTD [ITA NO. 330 OF 2012 DATED 23. 07.2014 AFFIRMED THE DECISION OF THE COORDINATE BENCH IN THE CASE OF REL IANCE UTILITIES & POWER LTD (SUPRA) AND HELD THAT IF THE ASSESSEE HAS SUFFICIENT INTERE ST FREE FUNDS THEN IT WILL HAVE TO BE PRESUMED THAT THE INVESTMENT MADE BY THE ASSESSEE W ERE OUT OF SUCH INTEREST-FREE FUNDS AVAILABLE WITH THE ASSESSEE. IT WAS POINTED OUT THAT THE FACTS INVOLVED IN THE PRESENT CASE AND APPLYING THE RATIO LAID DOWN IN TH E ABOVE JUDICIAL PRECEDENTS, IT IS SUBMITTED THAT THE ENTIRE INVESTMENTS WERE MADE OUT OF OWN SURPLUS FUNDS AND ACCORDINGLY THE DISALLOWANCE OF INTEREST WAS NOT WA RRANTED UNDER SECTION 14A READ WITH RULE 8D(2)(II). 24. AS FAR AS DISALLOWANCE UNDER RULE 8D(2)(III) IS CONCERNED THE ASSESSEE SUBMITTED THAT IT IS ONLY THE DIVIDEND YIELDING INVESTMENTS T HAT SHOULD BE CONSIDERED FOR THE PURPOSE OF COMPUTING DISALLOWANCE UNDER RULE 8D(2)( III) OF THE RULES. IN THIS REGARD THE ASSESSEE PLACED RELIANCE ON THE DECISION OF ITA T, KOLKATA IN THE CASE OF REI AGRO LTD. 144 ITD 141. 25. CIT(A) ACCEPTED THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AND HE HELD AS FOLLOWS :- I HAVE CONSIDERED THE FINDING OF THE AO AND THE WR ITTEN SUBMISSION FILED BY THE AR DURING THE APPELLATE PROCEEDING. I FIND THAT THE ASSESSEE HAS MADE INVESTMENTS PRIMARILY IN THE GROUP COMPANIES WHICH ARE ENGAGED IN THE SAME LINE OF BUSINESS. THE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF CIT VS REI AGRO LTD (ITA NO.220 OF 2013) HAS HELD THAT NO DISA LLOWANCE U/S 14A IS IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 13 PERMISSIBLE WHERE THE INVESTMENTS HAVE PRODUCED ANY TAX FREE INCOME DURING THE RELEVANT PREVIOUS YEAR. THE SAME VIEW HAS ALSO BEEN EXPRESSED BY THE DELHI HIGH COURT IN THE CASE OF CIT VS HOLEIM INDIA PVT LTD (2 72 CITR 282), GUJARAT HIGH COURT IN THE CASE OF CIT VS CORTECH ENERGY PVT LTD (223 TAXMAN 130) & ALLAHABAD HIGH COURT IN THE CASE OF CIT VS SHIVAM M OTORS (P) LTD (230 TAXMAN 63). I FURTHER FIND THAT IN SOME CASES OF THIS GROU P THE DIVIDEND WAS PAID ONLY BY THE ASSOCIATE COMPANIES. THE INVESTMENT IN THESE SH ARES WAS MADE FOR ACQUIRING MANAGEMENT CONTROL AND NOT TO EARN TAX FREE DIVIDEN D. THE ITAT, KOLKATA IN THE CASE OF DCIT VS BINANI INDUSTRIES LIMITED (ITA NO.4 43/KOL/2013) HAS HELD THAT NO DISALLOWANCE U/S 14A IS WARRANTED WHERE THE INVE STMENTS ARE MADE IN ASSOCIATE & SUBSIDIARY COMPANIES FOR STRATEGIC BUSI NESS PURPOSES. DURING THE APPELLATE PROCEEDINGS THE AR HAS SU BMITTED THAT DIVIDEND/ EXEMPT INCOME RECEIVED FROM OTHER THAN OWN SUBSIDIARIES CO MPANIES IS ONLY ONE SCRIPT I.E. FROM PUNJAB NATIONAL BANK. TOTAL INVESTMENT IN THE SHARES OF THE PUNJAB NATIONAL BANK IS AN OLD INVESTMENT I.E. RS.34100/-. ACCORDINGLY, THE AO IS DIRECTED TO COMPUTE DISALLOWANCE U/S 14A READ WITH RULE 8D(2)(II) AND 8D(2)(III) FOR THIS INVESTMENT ONLY. THUS, ASSESSEE'S APPEAL O N GROUNDS NO 7 AND 8 ARE PARTLY ALLOWED. 26. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS RAISED GROUND NO.(VII) BEFORE THE TRIBUNAL. 27. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. DR PLACED RELIANCE ON THE ORDER OF AO AND THE LD. COUNSEL FOR THE ASSESSEE APART FROM REITERATING THE SUBMISSIONS MADE BEFORE CIT(A) AND THE ORDER OF CIT(A) ALSO PLACED R ELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC LTD 3 66 ITR 505 (BOMBAY) WHEREIN IT WAS LAID DOWN THAT IF THERE IS INTEREST FREE FUNDS AVAILABLE TO AN ASSESSEE SUFFICIENT TO MEET THE INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAS ALSO RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE F ROM THE INTEREST FREE FUNDS. THE LD. COUNSEL RELIED ON THE FINDINGS OF CIT(A) WHERE THE CIT(A) HAS FOUND THAT THE ASSESSEE HAD INTEREST FREE FUNDS SUFFICIENT TO MEET THE INVESTMENTS WHICH ARE LIKELY TO YIELD TAX FREE INCOME. 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ARE OF THE VIEW THAT ORDER OF CIT(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFER ENCE. AS RIGHTLY HELD BY CIT(A) DISALLOWANCE UNDER RULE 8D(2)(II) (INDIRECT INTERES T EXPENDITURE) CANNOT BE SUSTAINED IT(SS)A.NO.129/KOL/2016-M/S. AMRIT FEEDS LTD. A.Y. 2010-11 14 IN THE LIGHT OF THE UNCONTROVERTED FINDING OF THE C IT(A) THAT ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS WHICH WERE MORE THAN THE VALUE OF INVESTMENTS WHICH ARE LIKELY TO YIELD TAX FREE INCOME. AS FAR AS DISALLOWANCE UNDER RULE 8D(2)(III) IS CONCERNED IT IS ONLY THE INVESTMENT WHICH YIELD DIVIDEND INCOME THA T SHOULD BE CONSIDERED FOR THE PURPOSE OF APPLYING THE FORMULA AS HELD BY THIS TRI BUNAL IN THE CASE OF REI AGRO LTD. (SUPRA) WHICH HAS SINCE BEEN AFFIRMED BY THE JURISD ICTIONAL CALCUTTA HIGH COURT. IN VIEW OF THE ABOVE WE FIND NO MERITS IN THE GROUND R AISED BY THE REVENUE. ACCORDINGLY WE DISMISS GROUND NO.(VII) RAISED BY THE REVENUE. 29. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.04.2017. SD/- SD/- [M.BALAGANESH] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 05.04.2017. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S. AMRIT FEEDS LTD., 158, LENIN SARANI, 2 ND FLOOR, KOLKATA-700013. 2. A.C.I.T., CENTRAL CIRCLE-2(1), KOLKATA 3. CIT(A)-20, KOLKATA 4. CIT CENTRAL-I, KOLKATA. 5. CIT DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR, ITAT, KOLKATA BENCHES