2016 (2) TMI 1156 - AT - Income Tax

Tribunal grants deduction for interest income under section 10A, directs AO to verify

The Tribunal allowed the assessee's claim for deduction under section 10A for interest income earned, following previous decisions in the assessee's case ... Deduction under section 10A - interest income derived from industrial undertaking - nexus between interest income and business of undertaking - precedential effect of co-ordinate bench and High Court decisionsDeduction under section 10A - interest income derived from industrial undertaking - nexus between interest income and business of undertaking - precedential effect of co-ordinate bench and High Court decisions - Assessee entitled to claim exemption under section 10A in respect of interest income where such interest has a direct nexus with and is derived from the business of the industrial undertaking. - HELD THAT: - The Tribunal examined whether interest income earned by the assessee in the relevant year constituted income 'derived from the business of the industrial undertaking' so as to qualify for deduction under section 10A. The Tribunal noted that the identical issue had been considered and decided by co ordinate benches in the assessee's own case and in the case of the assessee's sister concern, and that the High Court had, in appeals filed by the Department, dismissed those appeals indicating that no substantial question of law arose. Having found no material difference of fact for the year under appeal, the Tribunal respectfully followed the decisions of the co ordinate bench and High Court which held that the interest income had a direct nexus with and was derived from the assessee's ITES business and was therefore eligible for exemption under section 10A. The Tribunal rejected reliance upon Menon Impex (Madras High Court) as inapplicable on the facts and differing statutory context. The Tribunal, however, observed a discrepancy in the recorded amount of interest income and directed the Assessing Officer to verify the exact quantum before giving effect to the deduction. [Paras 6, 7]Appeal allowed by holding that the interest income is eligible for deduction under section 10A, subject to verification of the exact amount of interest income by the Assessing Officer.Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2008 09, holding that the interest income is eligible for exemption under section 10A as income derived from the business of the industrial undertaking, and directed the Assessing Officer to verify the exact amount of interest income before giving effect to the deduction. Issues involved:- Disallowance of exemption under section 10A on interest income earned by the assessee.Detailed Analysis:1. The assessee, a 100% export-oriented unit, filed its return of income for the assessment year 2008-09, declaring total income and book profit. The Assessing Officer allowed exemption under section 10A for a certain amount but disallowed it on an interest income amount. The assessee appealed this decision before the learned Commissioner (Appeals).2. During the appeal, the assessee argued that the interest income was part of its business income and eligible for exemption under section 10A. The assessee had excluded the interest income while computing the exemption but explained the reason for doing so. The learned Commissioner (Appeals) relied on a decision of the Hon'ble Madras High Court and held that as the interest income was not derived from an industrial undertaking, it was not eligible for deduction under section 10A.3. The assessee's Senior Counsel argued that the issue was covered by previous Tribunal decisions in the assessee's own case and in the case of its sister concern. The Tribunal had previously allowed deduction under section 10A for interest income related to the business of the industrial undertaking. The Departmental Representative agreed that the issue was covered by the Tribunal's previous decision in the assessee's case.4. The Tribunal considered the submissions and previous orders. It found that a similar issue had arisen in the case of the assessee's sister concern, where the Tribunal had allowed deduction under section 10A for interest income related to the business. Following the previous decisions, the Tribunal allowed the assessee's claim of deduction under section 10A for the interest income, directing the Assessing Officer to verify the exact amount of interest income.5. The Tribunal noted that no material difference for the impugned assessment year had been brought to its notice. Therefore, it allowed the assessee's claim of deduction under section 10A. The appeal was allowed, and the Assessing Officer was directed to verify the exact amount of interest income and allow the exemption accordingly.In conclusion, the Tribunal upheld the assessee's claim for deduction under section 10A for the interest income earned, following previous decisions in the assessee's case and its sister concern. The Tribunal directed the Assessing Officer to verify the exact amount of interest income and allow the exemption accordingly.