TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 1624
X X X X Extracts X X X X
X X X X Extracts X X X X
....no nexus between interest expenditure and interest on FDR; (iv) Holding that the interest on FDR is to be netted off against the interest payment expenses ignoring that any receipts not forming part of sale proceedings relating to export cannot be considered as business profits eligible for deduction u/s.80HHC; (v) Directing to treat interest income as business income without appreciating that financing is not the business of the appellant and the same cannot be netted off against the interest payments allowable as business expenditure u/s.36 of the Income Tax 1961; (vi) Directing to treat interest on FDR as business income eligible for deduction u/s.80HHC ignoring that interest income does not form part of sale proceedings relating to export for the purpose of deduction u/s.80HHC; (vii) Ignoring the jurisdictional High Court decisions in A.K. Doshi in 249 ITR 849 Kantila Chotalal in 246 ITR 439, Ravi Exports in 246 ITR 443 and Pravin M. Mehta in 246 ITR 445 holding that interest on FDR in income from other sources and not export income eligible for deduction u/s.80HHC; (viii) Directing to allow deduction u/s.80HHC without appreciating that the assessee has no positive in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2.21 of this order, but has also filed copies of orders of CIT(A)-XVII (A.Y.1992-93) dtd.28.04.1997, CIT(A)XLVII (A.Y.1997-98) dtd. 16.01.2001, CIT(A)- XVIII for A.Y.s 1998-99 & 1999-2000, dtd. 21.02.2002 & 26.06.2002, respectively wherein it has been uniformly held that in the facts and circumstances of the case, interest received is to be considered as income from business and also that interest received and interest paid will have to be netted off. Following the earlier decisions, with which I am in full agreement, I hold that the gross interest cannot be taxed by itself. The interest paid in this case is Rs. 59,29,103/-, which is much higher than the interest received. After netting off, the balance interest as debited to the P & L Account will have a normal effect on the profits of the business. The netting off method of taxation of interest will, therefore, come into play for computing the eligible deduction u/s.8HHC, if any. The A.O. is directed not to tax the Gross Interest. 3.1.1 Even on the merits of the case, I have examined the matter in the light of the decision of the Hon'ble ITAT Mumbai - 'C' Bench in the case of DCIT Vs. Diamond Creel (2001) (82 ITD 291), wherein ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d correctly which does not require to be interfere with at this appellate stage. ISSUE NO.8, 9 & 10:- 7. Issue no.8, 9 and 10 are interconnected therefore, are being taken up together for adjudication. Under these issues the matter of controversy is that whether the appellant is entitled to deduction u/s.80HHC of the Act in view of the finding of the Assessing Officer that the assessee has no positive income from the export of 90% of incentives and other income, are reduced from profit of the business. Before going further it is necessary to advert the finding of the CIT(A) on record:- "3.3 The next issue to be dealt with is whether the appellant is entitled to deduction u/s.80HHC at all in view of the finding of the A.O. that if the export incentives are excluded, there is a negative profit. In this regard, after careful consideration of the rival submissions, I am of the clear and firm opinion that the Assessing Officer has come to a wrong conclusion that the appellant firm has not derived any profits from the export business. While coming to this wrong conclusion, the A.O. has reduced the Gross export incentives of Rs. 1,23,88,256/- from the Net profit of Rs. 1,11,66,040/-. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t law and facts. The CIT(A) has passed the order on the basis of order passed by the ITAT, Mumbai 'H' Special Bench in the case of M/s. Surendra Engineering Corpn. (supra). Finding no contrary view taken by any other court of law, we are of the view that the CIT(A) has passed the order judiciously and correctly which does not require to be interfere with at this appellate stage. Accordingly, these issues are decided in favour of the assessee against the revenue. ISSUE NO.11 & 12:- 9. Under the above said issues the revenue has challenged the deletion of the addition to the tune of Rs. 2,37,57,005/- by holding that the purchases are fully explained in the books of account whereas the supplier were not traceable. The finding of the CIT(A) is hereby reproduced below. "5.1 I have duly considered the submissions and arguments of the ld. A.R. I am, however, unable to agree that there was some compulsion on the appellant in making the payments for the purchase of fabric in cash. After examining all aspects of the matter, I find that the aforesaid payments do not fall under any of the exemptions provided under fule6DD. I, therefore, hold that 20% of the aggregate cash payments of Rs. 2....