TaxTMI 
TaxTMI 
2020 (6) TMI 5
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....ion u/s. 80IA for interest on income tax refund. Ground II: Denial of deduction u/s. 80IA for interest on Fixed Deposit with bank: Rs. 8,67,66,538 2.1 The learned CIT(A) has erred in law and facts of the case in enhancing the assessment by denying the deduction u/s. 80IA for interest income from FDs with bank which was allowed by the AO. 2.2 The learned CIT(A) failed to appreciate that the monies were kept in FDs with bank for the business reason and hence such interest income should be considered as profits derived from the eligible business for calculating deduction u/s. 80IA. Ground III: Amortization / Depreciation claimed on Terminal Rights: Rs. 76,12,752 3.1 The learned CIT(A) has erred in law and facts of the case, in confirming the action of the AO, by upholding that the terminal right (which is accepted as an intangible assets) should be amortized over a period of thirty years even though the rate of depreciation prescribed under the Income tax Rule is 25%." 2. We have carefully heard the rival submissions, perused relevant material on record including judicial pronouncements as cited before us. Our adjudication to the grou....
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....sions prescribe for "computation of profits of the eligible business". It is evident that section 80-IB provides for allowing of deduction in respect of profits and gains derived from the eligible business. The words "derived from" is narrower in connotation as compared to the words "attributable to". In other words, by using the expression "derived from", Parliament intended to cover sources not beyond the first degree. In the present batch of cases, the controversy which arises for determination is: whether the DEPB credit/Duty drawback receipt comes within the first degree sources? According to the assessee(s), DEPB credit/duty drawback receipt reduces the value of purchases (cost neutralization), hence, it comes within first degree source as it increases the net profit proportionately. On the other hand, according to the Department, DEPB credit/duty drawback receipt do not come within first degree source as the said incentives flow from Incentive Schemes enacted by the Government of india or from section 75 of the Customs Act, 1962. Hence, according to the Department, in the present cases, the first degree source is the incentive scheme/provisions of the Customs Act. In this co....
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....td. (169 Taxman 283 19/02/2008), rendered in the context of deduction of duty drawback u/s 80-IB, noted the distinction between the expression profits and gains derived from an industrial undertaking and profits and gains derived from any business and held that in the case of latter, there need not necessarily be a direct nexus between the activity of an industrial undertaking and profits and gains. It was also found that duty drawback was in the nature of reimbursement of custom duty that an exporter has paid on imported goods, which are subject to a manufacturing process and then exported. In that sense, the export has direct nexus with the industrial undertaking itself. In the above background, the substantial ground raised by the revenue was not admitted. 4.4 The Hon'ble Bombay High Court in CIT V/s Jagdishprasad M. Joshi (318 ITR 420 25/11/2008), rendered in the context of deduction of interest income on fixed deposits and other interest income u/s 80-IA, relying upon the aforesaid decision of Hon'ble Delhi High Court in CIT V/s Eltek SGS (P) Ltd. (supra), refused to admit the substantial question of law raised by the revenue. This decision of CIT V/s Jagdishprasad M. Joshi....
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....he primary income of the assessee consisted only of leased income. The lease deposits received from tenants were parked as fixed deposits which generated interest income. It was noted that the assessee was required to keep part of lease deposits in fixed deposits out of business compulsion. Since the lease rental income was primary source for the assessee, the keeping of fixed deposits shall from integral part of the business of operations of IT parks and SEZ. Therefore, the action of Ld. CIT(A) in directing Ld. AO to net-off the same from interest expenditure was upheld. Further, the assessee's customers deducted TDS on leased rental which was stated to be beyond assessee's control and due to delay in getting nondeduction certificate from AO. Therefore, TDS deduction was held to be integral part connected with the receipt of lease income which could not be separated from assessee's activity. The coordinate bench equated the interest on TDS refund with delayed payment of business receipts and directed Ld. AO to net-off the same against interest expenditure for the purpose of computing profits and gains derived from the undertaking. 5. Keeping in mind the above settled lega....
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....also utilized for the purpose of its eligible business. It was further submitted that interest arose due to parking of funds in compliance of the orders of Hon'ble Bombay High Court in a tariff dispute between the assessee and the Tariff authorities of major port. 5.5 However assessee's submissions could not find favor with Ld. CIT(A) who opined that interest income derived / generated from surplus funds, parked with the bank, could not be considered as an income derived from the industrial undertaking as there was no direct nexus between income earned and the industrial undertaking. The relevant observations were as under: - 8.6 The above contention of the appellant has been considered and noticed that the case law relied upon by the assessee is not applicable to the facts of the appellant, hence not tenable. In the case of the appellant the issue is to be considered whether interest received from surplus fund parked with the bank can be constitute as income derived from industrial undertaking to make it eligible for deduction u/s 80IA of the Act or not?. From the facts of the case it is noticed that the appellant had claimed deduction u/s 80IA of the Act in respect of....
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....ould qualify for deduction and the Legislature has apparently not intended to give the benefit of deduction to all business income. In the case of Liberty India (317 ITR 218) the Hon'ble Supreme Court had clearly held that one may find that sections 80-IB and 80-IA arc the codes by themselves as they contain both substantive as well as procedural provisions. It is further held that it is evident that section 80-IB provides for allowing of deduction in respect of profits and gains derived from the eligible business and accordingly it is held that the words 'derived from' are narrower in connotation to the words 'attributable to^1. In this regard, I would like to quote the relevant part of the provision of Section 80IA of the Act which inter-alia read as under: "80-1 A. (l) Where the gross total income of an assesses includes any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assesse,....
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....35,18,687/- made by the AO is sustained. It is further held that income of the appellant is also enhanced by Rs. 8,67,66,538/-, in respect of interest income received from bank, which is not eligible for deduction u/s 801A of the Act. The penalty u/s 271(1)(c) of the Act is initiated for filing of inaccurate particulars in respect of this enhanced income. This ground of appeal is decided accordingly. It is evident that Ld. CIT(A) noted the ratio of decision in Liberty India (317 ITR 218) and took a view that the words 'derived from' are narrower in connotation to the words 'attributable to' and therefore upheld the stand of Ld. AO qua interest on Income Tax Refund as well as enhancement on account of interest on FDRs with Bank. Aggrieved as aforesaid, the assessee is under further appeal before us. 6. The perusal of documents on record would reveal that the assessee is joint venture between APM Terminals Mauritius Ltd., Mauritius and Container Corporation of India Ltd. It entered into a comprehensive License Agreement dated 10/08/2004 with Jawaharlal Nehru Port Trust (JNPT) to build as well as operate a container terminal at JNPT on Build, Operate and Transfer ....
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....uction of interest is allowed to the assessee as per the mandate of Sec. 36(1)(iii) only. The TDS is also deducted as per statutory mandate only and the same is applicable to each type of assessee under certain conditions. Therefore, the said argument, in our opinion, would not materially alter the basic fact that interest on Income Tax refund would bear no nexus with the eligible activities being carried out by the assessee. Going by the ratio of Liberty India (supra), we confirm the stand of Ld. CIT(A) in the impugned order. This ground stand dismissed. 9. Similar analogy would apply to interest on fixed deposits since the accrual / source of interest would be traced to investment made by the assessee with the Banks in the shape of FDRs notwithstanding the motive which led to make those investments. The assessee's only source of income may be the earnings from eligible business but the accrual of interest could not be said to have any nexus with the eligible business rather the same would be traced to investments made by the assessee with the Bank. The words derived from would not cover sources of income beyond first degree. Therefore, the action of Ld. CIT(A) in bringing t....
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....ended by the bench on the ground of exceptional and extraordinary circumstances. However, the extended period shall notordinarily exceed a period of 30 days. 12.2 The record would show that a draft of the present order was prepared and sent through postal authorities vide receipt no. EM045083040IN dated 20/03/2020 for approval of Hon'ble Judicial Member at Ahmedabad. The package containing the draft orders was delivered at destination on 23/03/2020. It is quite evident that the order was well drafted before the expiry of 90 days and sent for approval of the other member immediately. However, unfortunately, on 24/03/2020, a nationwide lockdown was imposed by the Government of India in view of adverse circumstances created by pandemic covid-19 in the country. The lockdown was extended from time to time which crippled the functioning of most the government departments including Income Tax Appellate Tribunal (ITAT). The situation led to unprecedented disruption of judicial work all over the country and the draft order could not reach Hon'ble Judicial Member for approval despite lapse of considerable period of time. The situation created by pandemic covid-19 could be termed as unprec....
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....'ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that "We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment". In the ruled so framed, as a result of these directions, the expression "ordinarily" has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any "ext....
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.... the due procedure...". The term 'force majeure' has been defined in Black's Law Dictionary, as 'an event or effect that can be neither anticipated nor controlled' When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an "ordinary" period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so ass....