ACIT,CC-2(1), Kolkata, Kolkata V. M/s Amrit Feeds Ltd., Kolkata

ITSSA 134/KOL/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3595 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 16-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure
• Section: 14A; 80IB

Judgement Text

IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER I.T.(S.S.)A. NOS. 134, 135 & 136/KOL./2016 ASSESSMENT YEARS: 2008-2009, 2011-2012 & 2012-2013 ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..............................APPELLANT CENTRAL CIRCLE-2(1), KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLI, E.M. BYE-PASS, KOLKATA-700 107 -VS.- M/S. AMRIT FEEDS LIMITED,.......................... ..................................RESPONDENT 158, LENIN SARANI, 2 ND FLOOR, KOLKATA-700 013 [PAN: AACCA 5571 D] APPEARANCES BY: SHRI G. MALLIKARJUNA, CIT, D.R., FOR THE DEPARTMENT SHRI D.S. DAMLE, FCA, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JANUARY 04, 2018 DATE OF PRONOUNCING THE ORDER : JANUARY 12, 2018 O R D E R PER SHRI P.M. JAGTAP, A.M.: THESE THREE APPEALS PREFERRED BY THE REVENUE AGAINS T THREE SEPARATE ORDERS PASSED BY THE LD. COMMISSIONER OF I NCOME TAX (APPEALS)- 20, KOLKATA FOR ASSESSMENT YEARS 2008-09, 2011-12 A ND 2012-13 INVOLVE SOME COMMON ISSUES AND THE SAME, THEREFORE, HAVE BE EN HEARD TOGETHER AND ARE BEING DISPOSED OF BY A CONSOLIDATED ORDER. 2. FIRST WE TAKE UP THE APPEAL OF THE REVENUE FOR A .Y. 2008-09 BEING IT(SS)A. NO. NO. 134/KOL/2016, WHICH IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-20, KO LKATA DATED 27.09.2016. IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 2 3. THE SOLITARY ISSUE INVOLVED IN THIS APPEAL RELAT ES TO THE RELIEF ALLOWED BY THE LD. CIT(APPEALS) TO THE ASSESSEE BY DIRECTING THE ASSESSING OFFICER TO EXCLUDE ONLY THE NET INTEREST INCOME AFT ER ADJUSTING THE INTEREST EXPENDITURE FROM THE PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT AND THE SAME IS RAISED BY WAY OF GROUNDS NO . 1 & 2, WHICH READ AS UNDER:- (I) THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO NET OFF THE INTEREST INCOME CREDITED IN THE PROFIT AND LOSS ACCOUNT OF THE ELIGIBLE UNDERTAKING AGAINST THE INTEREST EX PENSE DEBITED IN THE SAID PROFIT AND LOSS ACCOUNT WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E SUPPORTED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LIMITED VS. CIT,[2003] 12 9 TAXMAN 539 (SC) AND THE DECISION OF HIGH COURT OF J AMMU AND KASHMIR IN THE CASE OF ASIAN CEMENT INDUSTRIES VS INCOME TAX APPELLATE TRIBUNAL, [2012] 28 TAXMAN 290(JAMMU & KASHMIR). (II) THAT THE LD. CIT(A) HAS ERRED IN DIRECTING TH E A.O. TO RE- COMPUTE THE INCOME OF THE ELIGIBLE UNDERTAKING AND RE- COMPUTE THE DEDUCTION U/S 80LB AFTER NETTING OFF TH E 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. 4. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ANIMAL FEEDS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 27. 09.2008 DECLARING TOTAL INCOME OF RS.3,18,58,510/-. IN THE SAID RETURN, DED UCTION UNDER SECTION 80IB WAS CLAIMED BY THE ASSESSEE, INTER ALIA, IN RESPECT OF INCOME, WHICH WAS COMPRISING OF INTEREST INCOME OF RS.5,98,119/- RECEIVED FROM BANK DEPOSITS. ACCORDING TO THE ASSESSING OFFICER, THE I NTEREST INCOME RECEIVED BY THE ASSESSEE FROM BANK DEPOSITS WAS NOT DERIVED FROM THE ELIGIBLE BUSINESS AND THE SAME, THEREFORE, WAS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IB. FOR THIS CONCLUSION, HE RELIED, INTER ALIA, ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PANDIAN CH EMICALS LIMITED VS.- CIT [262 ITR 278] AND DISALLOWED THE CLAIM OF THE A SSESSEE FOR DEDUCTION UNDER SECTION 80IB IN RESPECT OF INTEREST INCOME RE CEIVED FROM FIXED DEPOSITS. IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 3 5. ON APPEAL, THE LD. CIT(APPEALS) UPHELD THE ACTIO N OF THE ASSESSING OFFICER IN DISALLOWING THE ASSESSEES CLAIM FOR DED UCTION UNDER SECTION 80IB IN RESPECT OF INTEREST INCOME FROM BANK DEPOSI TS BY RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F PANDIAN CHEMICALS LIMITED (SUPRA). HE, HOWEVER, ALLOWED THE ALTERNATI VE CLAIM OF THE ASSESSEE THAT ONLY THE NET INTEREST INCOME AFTER AD JUSTING THE INTEREST EXPENDITURE WAS LIABLE TO BE EXCLUDED WHILE COMPUTI NG THE PROFITS OF THE ELIGIBLE UNDERTAKING FOR THE PURPOSE OF ALLOWING DE DUCTION UNDER SECTION 80IB. FOR THIS CONCLUSION, HE RELIED ON THE DECISIO N OF THIS TRIBUNAL IN THE CASE OF DCIT VS.-BMW INDUSTRIES LIMITED (ITA NO. 2 115/KOL/2007 DATED 29.02.2008) AS WELL AS THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS.- WARREN TEA LIMITED (374 ITR 6 ). AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE, THE RE VENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, A SIMILAR ISSUE H AD COME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEES OW N CASE FOR A.Y. 2010- 11 AND VIDE ITS ORDER DATED 05.04.2017 PASSED IN IT (SS)A NO. 129/KOL/2016, THE TRIBUNAL DECIDED THE SAME IN FAVO UR OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 18 OF ITS ORDER:- 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND A RE OF THE VIEW THAT THE INTEREST INCOME AND THE INTERE ST EXPENSES HAD A DIRECT NEXUS AND THEREFORE NETTING O F INTEREST INCOME AGAINST THE INTEREST EXPENSES HAD T O BE ALLOWED. 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 OUGHT TO BE ALLOWED. WE, THEREFO RE, UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE AND DISMIS S GROUND NOS. (IV) AND (VI) RAISED BY THE REVENUE. 7. THE LD. D.R., ON THE OTHER HAND, HAS RELIED ON T HE DECISION OF THE AGRA BENCH OF THIS TRIBUNAL IN THE CASE OF SPRING M ERCHANDISERS PVT. IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 4 LIMITED VS.- ITO (ITA NO. 110/AGRA/2011 DATED 31.0 8.2012) AS WELL AS THE DECISION OF THE HONBLE JAMMU & KASHMIR HIGH CO URT IN THE CASE OF ASIAN CEMENT INDUSTRIES VS.- ITAT (I.T. APPEAL NO. 5 & 6 OF 2007 DATED 24.08.2012) IN SUPPORT OF THE REVENUES CASE ON THI S ISSUE. 8. WE HAVE CAREFULLY GONE THROUGH BOTH THESE DECISI ONS CITED BY THE LD. D.R. IT IS OBSERVED THAT THE CASE OF SPRING MERCHAN DISERS PVT. LIMITED (SUPRA) DECIDED BY THE AGRA BENCH OF THIS TRIBUNAL AND CITED BY THE LD. D.R. IS DISTINGUISHABLE ON FACTS, INASMUCH AS, THE INTEREST INCOME EARNED ON FDRS IN THE SAID CASE WAS HELD TO BE CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES WHILE INTEREST EXPENDIT URE CONSTITUTED THE BUSINESS EXPENDITURE OF THE ASSESSEE. IN THESE FACT S AND CIRCUMSTANCES OF THE CASE, IT WAS HELD BY THE TRIBUNAL THAT NETTING OF THE INCOME UNDER ONE HEAD OF INCOME AGAINST EXPENDITURE UNDER THE DIFFER ENT HEAD OF INCOME IS NOT POSSIBLE AS PER LAW. IN THE PRESENT CASE, INTER EST INCOME WAS OFFERED BY THE ASSESSEE TO TAX AS BUSINESS INCOME AND EVEN THE INTEREST EXPENDITURE WAS ALSO CLAIMED UNDER THE SAME HEAD AS BUSINESS EXPENDITURE. AS REGARDS THE CASE OF ASIAN CEMENT IN DUSTRIES VS.- ITAT (SUPRA) CITED BY THE LD. D.R., IT IS OBSERVED THAT EVEN THOUGH THE ISSUE RELATING TO THE NETTING OFF INTEREST WAS RAISED AS QUESTION NO. 3, THE SAME APPARENTLY WAS NOT DECIDED BY THE HONBLE JAMMU & K ASHMIR HIGH COURT SPECIFICALLY BY GIVING ANY FINDING OR CONCLUSION. O N THE OTHER HAND, HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. - WARREN TEA LIMITED (SUPRA) RELIED UPON BY THE LD. CIT(APPEALS) IN HIS IMPUGNED ORDER HAS UPHELD THE PRINCIPLE OF NETTING OFF OF INTEREST INC OME AGAINST INTEREST EXPENDITURE AND ALTHOUGH THE SAID DECISION OF THE H ONBLE JURISDICTIONAL HIGH COURT WAS RENDERED IN THE CONTEXT OF COMPUTING BUSINESS INCOME OF THE TERM MANUFACTURING UNIT AS PER RULE 8, WE ARE O F THE VIEW THAT THE SAME ANALOGY CAN JUSTIFIABLY BE APPLIED EVEN IN THE PRESENT CASE TO HOLD THAT ONLY NET INTEREST INCOME AFTER ADJUSTING THE I NTEREST EXPENDITURE IS LIABLE TO BE EXCLUDED WHILE COMPUTING THE PROFIT EL IGIBLE FOR DEDUCTION UNDER SECTION 80IB. WE, THEREFORE, FIND NO INFIRMIT Y IN THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 5 AND UPHOLDING THE SAME, WE DISMISS THE APPEAL OF TH E REVENUE FOR A.Y. 2008-09. 9. NOW WE SHALL TAKE UP THE APPEAL OF THE REVENUE F OR A.Y. 2011-12 BEING IT(SS)A NO. 135/KOL/2016, WHICH IS DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-20, KOLKATA DATED 26.09.2016. THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL READ AS UNDER:- (I) THAT THE LD. CIT(A) HAS ERRED IN ACCEPTING TH AT THE TERM 'MANUFACTURE' OCCURRING IN THE CONTEXT OF SECT ION 80- IB DOES NOT NECESSARILY REQUIRE THAT THE END PRODUC T OF THE MANUFACTURING PROCESS IS TO BE COMPLETELY DIFFERENT FROM THE INGREDIENTS, AS REGARDS ITS CHEMICAL COMPOSITIO N, INTEGRAL 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 TOGETHER OF ALL DIFFERENT INGREDIENT S, WITHOUT INVOLVING ANY CHANGE IN THE CHEMICAL COMPOS ITION OF THE INGREDIENTS. (III) THAT THE LD. CIT(A) HAS ERRED IN ACCEPTING T HAT THE PROCESS OF PREPARATION OF POULTRY FEEDS AMOUNT TO PRODUCTION OF AN ARTICLE WITHIN THE MEANING OF SECT ION 80IB & 80IE. (IV) THAT THE LD. CIT(A) HAS ERRED IN ALLOWING THE ENTIRE AMOUNT OF RS.1,72,97,476/- CLAIMED AS DEDUCTION U/S 80-IB. (V) THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO NET OFF THE INTEREST INCOME CREDITED IN THE PROFIT AND LOSS ACCOUNT OF THE ELIGIBLE UNDERTAKING AGAINST THE INT EREST EXPENSE DEBITED IN THE SAID PROFIT AND LOSS ACCOUNT WITHOUT THE APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE SUPPORTED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LIMITED VS. CIT,[2003] 12 9 TAXMAN 539 (SC) AND THE DECISION OF HIGH COURT OF J AMMU 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 TH E A.O. TO RE-COMPUTE THE INCOME OF THE ELIGIBLE UNDERTAKING A ND RE- COMPUTE THE DEDUCTION U/S 80IB AFTER NETTING OFF TH E INTEREST INCOME CREDITED IN THE PROFIT AND LOSS ACC OUNT OF THE ELIGIBLE UNDERTAKING AGAINST THE INTEREST EXPEN SE DEBITED IN THE SAID PROFIT AND LOSS ACCOUNT. IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 6 (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 8D(2)(III) ONLY ON THE INVESTMENT IN THE SHARES OF PUNJAB NATIONAL BANK AMOUNTING TO RS.34,100/-. 10. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, THE LD. REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THE COMMON ISSUE INVOLVED IN GROUNDS NO. 1 TO 4 OF THE REVENUES APPEAL FOR A.Y. 2011-12 RELATING TO THE ELIGIBILITY OF THE BUSINESS OF THE ASSESSEE FOR DED UCTION UNDER SECTION 80IB IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN IT(SS)A NO. 129/ KOL/2016 FOR A.Y. 2010-11 RENDERED VIDE ITS ORDER DATED 05.04.2017 (S UPRA), WHEREIN A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE VIDE PARAGRAPH NO. 14 OF ITS ORDER, WHICH READS AS UNDER :- 14. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. IN THE CASE OF AMRIT FEEDS (SUPRA), TH E TRIBUNAL CONSIDERED THE DECISION RENDERED IN THE CA SE OF VENKATESWARA FEEDS (SUPRA) AND HELD THAT THE ASSESS EE IN THAT CASE HAD CLAIMED DEDUCTION UNDER SECTION 80IB ON THE ACTIVITY OR 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 DIFF ERENT ARTICLE CAME INTO EXISTENCE, AS SUCH, CONVERSION WA S PROCESSING ACTIVITY NOT MANUFACTURING. THE TRIBUNAL HELD THAT THE CASE OF THE ASSESSEE AMRIT FEEDS (SUPRA) W AS ENTIRELY DIFFERENT. THE ASSESSEE'S ELIGIBLE UNDERTA KING ITSELF WAS CARRYING OUT THE COMPLETE ACTIVITY I.E. FROM GRINDING TILL THE PELLEIISATION. THE RAW MATERIALS ONCE CONSUMED COULD NO! BE RECONVERTED INTO THE SAME POS ITION, ITS UTILITY GETS CHANGED, THE PRIME RAW MATERIALS S UCH AS, MAIZE, SOYA OIL, RICE BRAN ETC. CAN NO MORE BE REGA RDED TO BE THE RICE BRAN, SOYA OIL, MAIZE. WE ARE OF THE VI EW THAT THE ISSUE IN THE REVENUE'S APPEAL IS SQUARELY COVER ED AGAINST THE REVENUE BY THE DECISION OF THE COORDINA TE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR T HE EARLIER YEARS WHICH WAS BASED ON THE DECISION RENDE RED IN THE CASE OF AMRIT FEEDS (SUPRA). RESPECTFULLY FOLLO WING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N ASSESSEE'S OWN CASE, THE FINDING OF ID, CIT(A) ON T HIS ISSUE STANDS CONFIRMED AND THE GROUNDS OF APPEAL RAISED B Y THE REVENUE IN ALL THE APPEALS ON THIS ISSUE ARE DISMIS SED. IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 7 11. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDE RATION AS WELL AS THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO A.Y. 2010-11, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR A .Y. 2010-11 AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) HOLDING THE BUSINESS OF THE ASSESSEE AS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB. GROUNDS NO. 1 TO 4 OF THE REVENUES APPEAL ARE ACCORDINGLY DISMISSED. 12. AS REGARDS GROUNDS NO. 5 & 6 OF THE REVENUES A PPEAL FOR A.Y. 2011- 12, IT IS OBSERVED THAT THE COMMON ISSUE INVOLVED T HEREIN RELATING TO THE EXCLUSION OF ONLY THE NET INTEREST INCOME FOR COMPU TING THE PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB IS SIMILAR TO THE ONE INVOLVED IN REVENUES APPEAL FOR A.Y. 2008-09, WHICH HAS BEEN D ECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONC LUSION DRAWN IN A.Y. 2008-09, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CI T(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GR OUNDS NO. 5 & 6. 13. AS REGARDS GROUND NO. 7 OF THE REVENUES APPEAL FOR A.Y. 2011-12, IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATIN G TO THE RELIEF ALLOWED BY THE LD. CIT(APPEALS) TO THE ASSESSEE BY DIRECTIN G THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D ONLY ON THE INVESTMENT IN SHARES OF PUNJAB NATIONAL BANK IS ALSO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBU NAL FOR A.Y. 2010- 11(SUPRA), WHEREIN A SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL VIDE PARAGRAPHS NO. 27 & 28 OF ITS ORDER AS UNDER:- 27. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE ID. DR PLACED RELIANCE ON THE ORDER OF AO AND THE ID, COUN SEL FOR THE ASSESSEE APART FROM REITERATING THE SUBMISSIONS MAD E BEFORE CIT(A) AND THE ORDER OF CIT(A) ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF HDFC LTD 366 ITR 505 (BOMBAY) WHEREIN IT WAS LAID D OWN THAT IF THERE IS INTEREST FREE FUNDS AVAILABLE TO A N ASSESSEE SUFFICIENT TO MEET THE INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAS ALSO RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST FREE FUNDS. THE ID. COUNSEL RELIED ON THE FINDINGS OF CIT(A) WHERE THE CIT(A) H AS FOUND IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 8 THAT THE ASSESSEE HAD INTEREST FREE FUNDS SUFFICIEN T TO MEET THE INVESTMENTS WHICH ARE LIKELY TO YIELD TAX FREE INCOME. 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AR E OF THE VIEW THAT ORDER OF CIT(A) ON THIS ISSUE DOES NOT CA LL FOR ANY INTERFERENCE. AS RIGHTLY HELD BY CIT(A) DISALLOWANC E UNDER RULE 8D(2)(II) (INDIRECT INTEREST EXPENDITURE) CANN OT BE SUSTAINED IN THE LIGHT OF THE UNCONTROVERTED FINDIN G OF THE CIT(A) THAT ASSESSEE HAD SUFFICIENT INTEREST FREE F UNDS WHICH WERE MORE THAN THE VALUE OR INVESTMENTS WHICH ARE L IKELY TO YIELD TAX FREE INCOME. AS FAR AS DISALLOWANCE UNDER RULE 8D(2)(III) IS CONCERNED, IT IS ONLY THE INVESTMENT WHILE YIELD DIVIDEND INCOME THAT SHOULD BE CONSIDERED FOR THE P URPOSE OF APPLYING THE FORMULA AS HELD BY THIS TRIBUNAL IN TH E CASE OF REI AGRO LTD. (SUPRA) WHICH HAS SINCE BEEN AFFIRMED BY THE JURISDICTIONAL CALCUTTA HIGH COURT. IN VIEW OF THE ABOVE WE FIND NO MERITS IN THE GROUND RAISED BY THE REVENUE. ACCORDINGLY, WE DISMISS GROUND NO. (VII) RAISED BY THE REVENUE. 14. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDE RATION AS WELL AS THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE TO A.Y. 2010-11, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR A .Y. 2010-11 AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) COMPUTIN G THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D ONLY ON THE INV ESTMENT IN THE SHARES OF PUNJAB NATIONAL BANK. GROUND NO. 7 OF THE REVENU ES APPEAL IS DISMISSED. 15. NOW WE SHALL TAKE UP THE REVENUES APPEAL FOR A .Y. 2012-13 BEING IT(SS)A NO. 136/KOL/2016, WHICH IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(APPEALS)-20 DATED 27.09.2016. THE GROUNDS R AISED BY THE REVENUE IN THIS APPEAL READ AS UNDER:- (I) THAT THE LD. CIT(A) HAS ERRED IN ACCEPTING TH AT THE TERM 'MANUFACTURE' OCCURRING IN THE CONTEXT OF SECT ION 80- IB & 80IE DOES NOT NECESSARILY REQUIRE THAT THE END PRODUCT OF THE MANUFACTURING PROCESS IS TO BE COMPLETELY DI FFERENT FROM THE INGREDIENTS, AS REGARDS ITS CHEMICAL COMPO SITION, INTEGRAL 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 TOGETHER OF ALL DIFFERENT INGREDIENT S, IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 9 WITHOUT INVOLVING ANY CHANGE IN THE CHEMICAL COMPOS ITION OF THE INGREDIENTS. (III) THAT THE LD. CIT(A) HAS ERRED IN ACCEPTING T HAT THE PROCESS OF PREPARATION OF POULTRY FEEDS AMOUNT TO PRODUCTION OF AN ARTICLE WITHIN THE MEANING OF SECT ION 80IB & 80IE. (IV) THAT THE LD. CIT(A) HAS ERRED IN ALLOWING THE ENTIRE AMOUNT OF RS.2,53,35,634/- CLAIMED AS DEDUCTION U/S 80-IB & 80IE. (V) THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO NET OFF THE INTEREST INCOME CREDITED IN THE PROFIT AND LOSS ACCOUNT OF THE ELIGIBLE UNDERTAKING AGAINST THE INT EREST EXPENSE DEBITED IN THE SAID PROFIT AND LOSS ACCOUNT WITHOUT THE APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE SUPPORTED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LIMITED VS. CIT,[2003] 12 9 TAXMAN 539 (SC) AND THE DECISION OF HIGH COURT OF J AMMU 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 TH E A.O. TO RE-COMPUTE THE INCOME OF THE ELIGIBLE UNDERTAKING A ND RE- COMPUTE THE DEDUCTION U/S 80IB AFTER NETTING OFF TH E INTEREST INCOME CREDITED IN THE PROFIT AND LOSS ACC OUNT OF THE ELIGIBLE UNDERTAKING AGAINST THE INTEREST EXPEN SE DEBITED IN THE SAID PROFIT AND LOSS ACCOUNT. (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 8D(2)(III) ONLY ON THE INVESTMENT IN THE SHARES OF PUNJAB NATIONAL BANK AMOUNTING TO RS.34,100/-. 16. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, THE LD. REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THE COMMON ISSUE INVOLVED IN GROUNDS NO. 1 TO 4 OF THE REVENUES APPEAL FOR A.Y. 2011-12 RELATING TO THE ELIGIBILITY OF THE BUSINESS OF THE ASSESSEE FOR DED UCTION UNDER SECTION 80IB IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2010-11 RE NDERED VIDE ITS ORDER DATED 05.04.2017 (SUPRA), WHEREIN A SIMILAR ISSUE W AS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE VIDE PARAGRAPH N O. 14 OF ITS ORDER, WHICH READS AS UNDER:- IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 10 14. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. IN THE CASE OF AMRIT FEEDS (SUPRA), TH E TRIBUNAL CONSIDERED THE DECISION 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 OR MERELY CONVERTING POULTRY MASH FEED INT O PELLET FEED AND THEREFORE THAT BENCH HAS HELD THAT THERE W AS NO CHANGE IN THE BASIC COMPONENT OR NEW OR DIFFERENT A RTICLE CAME INTO EXISTENCE, AS SUCH, CONVERSION WAS PROCES SING ACTIVITY NOT MANUFACTURING. THE TRIBUNAL HELD THAT THE CASE OF THE ASSESSEE AMRIT FEEDS (SUPRA) WAS ENTIRELY DI FFERENT. THE ASSESSEE'S ELIGIBLE UNDERTAKING ITSELF WAS CARR YING OUT THE COMPLETE ACTIVITY I.E. FROM GRINDING TILL THE P ELLETISATION. THE RAW MATERIALS ONCE CONSUMED COULD NO! BE RECONV ERTED INTO THE SAME POSITION, ITS UTILITY GETS CHANGED, T HE PRIME RAW MATERIALS SUCH AS, MAIZE, SOYA OIL, RICE BRAN E TC. CAN NO MORE BE REGARDED TO BE THE RICE BRAN, SOYA OIL, MAI ZE. WE ARE OF THE VIEW THAT THE ISSUE IN THE REVENUE'S APP EAL IS SQUARELY COVERED AGAINST THE REVENUE BY THE DECISIO N OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE EARLIER YEARS WHICH WAS BASED ON THE DECISION R ENDERED IN THE CASE OF AMRIT FEEDS (SUPRA). RESPECTFULLY FO LLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUN AL IN ASSESSEE'S OWN CASE, THE FINDING OF ID, CIT(A) ON T HIS ISSUE STANDS CONFIRMED AND THE GROUNDS OF APPEAL RAISED B Y THE REVENUE IN ALL THE APPEALS ON THIS ISSUE ARE DISMIS SED. 17. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDE RATION AS WELL AS THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO A.Y. 2010-11, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR A .Y. 2010-11 AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) HOLDING THE BUSINESS OF THE ASSESSEE AS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB & 80IE. GROUNDS NO. 1 TO 4 OF THE REVENUES APPEAL ARE ACCORDINGLY DISM ISSED. 18. AS REGARDS GROUNDS NO. 5 & 6 OF THE REVENUES A PPEAL FOR A.Y. 2012- 13, IT IS OBSERVED THAT THE COMMON ISSUE INVOLVED T HEREIN RELATING TO THE EXCLUSION OF ONLY THE NET INTEREST INCOME FOR COMPU TING THE PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB IS SIMILAR TO THE ONE INVOLVED IN REVENUES APPEAL FOR A.Y. 2008-09, WHICH HAS BEEN D ECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONC LUSION DRAWN IN A.Y. 2008-09, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CI T(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GR OUNDS NO. 5 & 6. IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 11 19. AS REGARDS GROUND NO. 7 OF THE REVENUES APPEAL FOR A.Y. 2012-13, IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATIN G TO THE RELIEF ALLOWED BY THE LD. CIT(APPEALS) TO THE ASSESSEE BY DIRECTIN G THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D ONLY ON THE INVESTMENT IN SHARES OF PUNJAB NATIONAL BANK IS ALSO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBU NAL FOR A.Y. 2010- 11(SUPRA), WHEREIN A SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL VIDE PARAGRAPHS NO. 27 & 28 OF ITS ORDER AS UNDER:- 27. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE ID. DR PLACED RELIANCE ON THE ORDER OF AO AND THE ID, COUN SEL FOR THE ASSESSEE APART FROM REITERATING THE SUBMISSIONS MAD E BEFORE CIT(A) AND THE ORDER OF CIT(A) ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF HDFC LTD 366 ITR 505 (BOMBAY) WHEREIN IT WAS LAID D OWN THAT IF THERE IS INTEREST FREE FUNDS AVAILABLE TO A N ASSESSEE SUFFICIENT TO MEET THE INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAS ALSO RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST FREE FUNDS. THE ID. COUNSEL RELIED ON THE FINDINGS OF CIT(A) WHERE THE CIT(A) H AS FOUND THAT THE ASSESSEE HAD INTEREST FREE FUNDS SUFFICIEN T TO MEET THE INVESTMENTS WHICH ARE LIKELY TO YIELD TAX FREE INCOME. 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AR C OF THE VIEW THAT ORDER OF CIT(A) ON THIS ISSUE DOES NOT CA LL FOR ANY INTERFERENCE. AS RIGHTLY HELD BY CIT(A) DISALLOWANC E UNDER RULE 8D(2)(II) (INDIRECT INTEREST EXPENDITURE) CANN OT BE SUSTAINED IN THE LIGHT OF THE UNCONTROVERTED FINDIN G OF THE CIT(A) THAT ASSESSEE HAD SUFFICIENT INTEREST FREE F UNDS WHICH WERE MORE THAN THE VALUE OR INVESTMENTS WHICH ARE L IKELY TO YIELD TAX FREE INCOME. AS FAR AS DISALLOWANCE UNDER RULE 8D(2)(III) IS CONCERNED, IT IS ONLY THE INVESTMENT WHILE YIELD DIVIDEND INCOME THAT SHOULD BE CONSIDERED FOR THE P URPOSE OF APPLYING THE FORMULA AS HELD BY THIS TRIBUNAL IN TH E CASE OF REI AGRO LTD. (SUPRA) WHICH HAS SINCE BEEN AFFIRMED BY THE JURISDICTIONAL CALCUTTA HIGH COURT. IN VIEW OF THE ABOVE WE FIND NO MERITS IN THE GROUND RAISED BY THE REVENUE. ACCORDINGLY, WE DISMISS GROUND NO. (VII) RAISED BY THE REVENUE. 20. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDE RATION AS WELL AS THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE TO A.Y. 2010-11, WE IT(SS)A. NOS. 134-136/KOL/2016 ASSESSMENT YEARS: 2008-09, 2011-12 & 2012-13 12 RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR A .Y. 2010-11 AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) COMPUTIN G THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D ONLY ON THE INV ESTMENT IN THE SHARES OF PUNJAB NATIONAL BANK. GROUND NO. 7 OF THE REVENU ES APPEAL IS DISMISSED. 21. IN THE RESULT, ALL THE THREE APPEALS OF THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH DAY OF JANUARY, 2018. SD/- SD/- (A.T. VARKEY) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 12 TH DAY OF JANUARY, 2018 COPIES TO : (1) ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1), KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLI, E.M. BYE-PASS, KOLKATA-700 107 2) M/S. AMRIT FEEDS LIMITED, 158, LENIN SARANI, 2 ND FLOOR, KOLKATA-700 013 (3) CIT(APPEALS)-20, KOLKATA, (4) CIT- , KOLKATA, (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO, INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.