TaxTMI 
TaxTMI 
2018 (3) TMI 468
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....ical composition of the ingredients. (iii) That the Ld. CIT(A) has erred in accepting that the process of preparation of poultry feeds amount to production of an article within the meaning of section 80IB. (iv) That the Ld. CIT(A) has erred in allowing the entire amount of Rs. 1,12,50,626/- 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 interest 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] 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 deduction u/s 80IB after netting off the interest income credited in the profit and loss account of the eligible undertaking ....
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.... 10 years u/s 801B(4) of the Act 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 production of an article and if poultry feed industry was considered eligible by the Central 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 production process explained by the Assessee, there was no change in chemical composition 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 conclusion. 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 relied o....
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....anufacture or production of an article, contemplated in Sec 801B (2) (iii) . 16. We also find on the identical facts the Bangalore Bench of ITAT in the case of Komrala Feeds --Vs- DCIT 74 ITD 65 held that activity of producing poultry feed amounts to manufacture and therefore eligible for deduction u/s 80 I. Sec 80I and Sec 80IB are parameteria because conditions 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 Ltd - -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 construed liberally and since a provision for promoting economic growth has to be interpreted liberally the restriction thereon too has to be construed so as to advance the objective of the provision and not to frustrate it. Conditions of Sec 801B (2) (iii) should be fulfilled by every new industrial undertaking claiming deduction either/under sub sec ....
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....al, the decision rendered by the Hyderabad Bench of ITAT in the case of Venkateswara Feeds -vs- ACIT 22 Taxmann.com 234 (Hyd.) was not properly considered and therefore the decision rendered in Assessee's own case requires reconsideration. In this regard it was submitted that the Tribunal in the 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 proportions and then ground to form a course powdered material which was called mash 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 then forced through a press containing small holes to convert the feed into small pellets. It was held that there was no change of composition in the mash feed and the pellet feed. Hence conversion of physical shape of the feed involves only processing and not manufacture. 12 . The learned DR filed before us a chart explaining the process carried out by the Assessee, which is as follows: ....
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....t manufacturing. The Tribunal held that the case of the assessee Amrit Feeds (supra) was entirely different. The assessee's eligible undertaking itself was independently carrying out the complete activity i.e. from mixing, grinding till the pelletisation. The raw materials once consumed could 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 decision rendered in the case of Amrit Feeds (supra). Respectfully following the decision 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 Revenue in all the appeals on this issue are dismissed. 10. It is not disputed before us that the facts and circumstances in the present AY are identical to facts and circumstances that prevailed in AY 2010-11 decide....
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....sions 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 eligible to claim deduction u/s 801B in respect of such net income. The AO shall accordingly re-compute the income of the eligible undertaking and re-compute the deduction is] s 80lB. Thus, assessee's appeal on grounds no 3 to 6 are allowed." 12. We are of the view that in the light of the admitted factual position that the income in question had direct nexus with the business of the assessee, the same was rightly held by CIT(A) to be eligible for the purpose of claiming deduction u/s 80IB(5) of the Act. We do not find any ground to interfere with the order of CIT(A). Consequently the grounds of appeal are dismissed. 13. As far as Gr.No.(vii) raised by the Revenue is concerned, the same relates to disallowance of expenses u/s.14A of the Act read with Rule 8D(2)(....
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....t 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 2013-14. The next question that arises is the quantum 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, disallowance 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 25,74,5001- 12,872/- 4.3 In view of the aforesaid paragraph, an amount of Rs. 12,872/- is disallowed u/s 14A read with Rule 8D. Hence, Disallowance added to the total income of assessee. Disallowance: Rs. 12,872/-" 14. Before CIT(A), the Assessee submitted that only dividend bearing investments should be reckoned for disallowance under Rule 8D(2)(iii) of the Rules and that strategic investments should be excluded. In this regard, the reliance placed by the ld AR on the decision of this tribunal in the case of REI Agro Ltd reported in 144 ITD 141 (Kol) wherein it was held that :- "8.1 Thus, not all investments become the subject-matter of consideration when computing disall....