2012 (7) TMI 362

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.... In brief, grievance of the assessee is that Learned CIT(Appeals) has erred in confirming the disallowance of deduction under sec. 80-IC of the Income-tax Act, 1961 on an amount of Rs.48,41,738 which is an interest income earned by the assessee. The revenue in its appeal has pleaded that the Learned CIT(Appeals) has erred in deleting a sum of Rs.50,000 from alleged total interest income on the ground that administrative expenses paid for earning gross interest income should be allowed as a deduction to the assessee and thereafter net interest income has to be disallowed from the eligible profit for computing deduction under sec. 80-IC of the Act. 2. Since both the grounds taken by the respective parties are interconnected to each other, ....

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....on this income as such income cannot be said to be derived from the business of the undertaking or enterprises. At the most, such income can be said to be attributable to the business of the undertaking or enterprise. Reliance is also placed upon the judgment of Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. vs. CIT 262 ITR 278 (Supreme Court) where it was held that interest earned by industrial undertaking on deposit with electricity board does not qualify for earlier u/s. 80-HH as it is not derived from the industrial undertaking. Accordingly, the claim for deduction u/s. 80-IC on this amount of Rs.48,41,738 is disallowed and added back to the total income declared". 4. On appeal, Learned CIT(Appeals), in principle, concur....

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....e earned by the assessee after deducting interest payments on borrowed funds should be taken into account despite the fact that only profits and gains from an industrial undertaking which manufactures articles was only allowable as per the said section?" 6. He pointed out that the Hon'ble High Court after putting reliance upon the judgment of the Hon'ble Delhi High Court in the case of Shri Ram Honda Power Equip (supra) as well as upon the decision of CIT Vs. Gokuldas Exports rendered by the Hon'ble Karnataka High Court in ITA No.25/23 has decided this issue in favour of the assessee and observed that only net interest expenses is to be excluded. 7. Learned DR on the other hand relied upon the order of the Assessing Officer and submit....