2010 (11) TMI 767

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....stances of the appellant's case, the learned CIT(A) has grossly erred in upholding disallowance of deduction u/s. 80 - IB in respect of interest income of Rs.2,38,967 credited to the appellant's Profit and Loss Account. He ought to have appreciated, inter alia;   (b) that in any case, once the appellant had showed that all the interest income in question was earned on advances made out of borrowed funds (a fact about which the learned CIT(A) has himself recorded satisfaction in the impugned Appellate Order), the interest income in question was required to be set off against interest expenditure which was considerably larger and which had been taken into account in arriving at the appellant's income eligible to the deduction u/s. 80-....

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....e was earned from other sources.   5. The learned Counsel for the assessee submitted that the matter requires reconsideration at the level of the AO in view of the recent decision of ITAT Ahmedabad "D" Bench in the case of ITO vs Gujarat Paguthan Energy Corporation Ltd. in ITA No.1953 and 3458/Ahd/2007 along with CO No.317/Ahd/2007 (page 6 of the paper book) and the Tribunal vide order dated 12-11-2010 dismissed the departmental appeal on the similar ground. He has submitted that once interest income is assessed u/s 56 of the IT Act, the expenditure admissible u/s 57 (iii) of the IT Act being the expenditure wholly and exclusively incurred for the purpose of earning the interest income, except capital expenditure can be allowed as d....

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....otal income.   This ground of appeal is treated as partly allowed as mentioned above.   4.1 Ground No.4.1 and 4.2 are similar to ground relating to interest income as discussed in earlier paragraphs. The AO while computing deduction u/s 80IA has treated the interest income of Rs.2,54,45,336/- received by the appellant from GSPL as income from other sources and the same has not been set off against the interest expenditure incurred by the appellant for the purpose of its business. This has resulted in reducing the appellant's income under the head "Profits and gains of business or profession". This issue has also been considered by the ld. CIT(A) in appellant's own case for Asst. Year 2004-05. The ld. CIT(A) has decided the i....