QUADRO INFO TECHNOLOGIES PVT. LTD.,KOLKATA vs. I.T.O.,WARD-1(4), KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA {VIRTUAL COURT HEARING} (Before Shri P.M. Jagtap, Hon’ble Vice-President, KZ & Ms. Madhumita Roy, Hon’ble Judicial Member) ITA No. 2617/Kol/2019 Assessment Year: 2011-12 Quadro Info Technologies Pvt. Ltd...........................................................………………….............Appellant C/o. M/s. Salarpuria Jajodia & Co. 7, C.R. Avenue 3rd Floor Kolkata – 700 072 [PAN : AAACQ 1163 F] Vs. Income Tax Officer, Ward-1(4), Kolkata...........................................................………..…......Respondent Appearances by: Shri S. Jhajharia, A/R, appeared on behalf of the assessee. Shri Ranu Biswas, Addl. CIT, D/R, appearing on behalf of the Revenue. Date of concluding the hearing : August 24th, 2021 Date of pronouncing the order : August 27th, 2021 ORDER Per P.M. Jagtap, Vice-President, KZ :- This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals) - 1, Kolkata, (hereinafter the ‘ld. CIT(A)’), dt. 25/10/2019, passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’). 2. The first issue relating to the disallowance of Rs.3,85,596/- made by the Assessing Officer and confirmed by the ld. CIT(A) on account of the deduction claimed by the assessee u/s 80IA(4)(iii) of the Act, on interest income received is raised by the assessee in Ground No. 1 & 2, which read as follows:- “1. That on the facts and on the circumstances of the case, the Ld. CIT(A) had grossly erred in confirming the disallowance of Rs.3,85,596/- made by the AO u/s 80IA(4)(iii) on account of interest received and in view of the facts and in the circumstances of the case such action of the Ld. CIT(A) is without considering the material placed before him during the course of the appellate proceedings and it is prayed the same may kindly be allowed. 2. That on the facts and on the circumstances of the case, and without prejudice to Ground No. 1, above the interest earned of Rs.3,85,596/-, is liable to be netted off with interest paid and it may kindly be held accordingly.” 3. The assessee in the present case is a company engaged in the business of property development. The return of income for the year under consideration was filed by it on 19/09/2011, declaring book profit of Rs.7,45,54,677/- u/s. 115JB of the Act and total income at ‘Nil’ under the normal provisions of the Act, after claiming deduction u/s 80IA of the Act. During the course of assessment proceedings, the claim of the assessee u/s 80IA of the Act was examined by the Assessing Officer and on such examination, he found that deduction u/s 80IA was claimed by the assessee even in respect of interest of

2 ITA No. 2617/Kol/2019 Assessment Year: 2011-12 Quadro Info Technologies Pvt. Ltd Quadro Info Technologies Pvt. Ltd. Rs.2,29,193/- issued on bank fixed deposits and interest of Rs.1,56,403/ issued on bank fixed deposits and interest of Rs.1,56,403/ issued on bank fixed deposits and interest of Rs.1,56,403/- received on loan given to M/s. Salarpuria Properties Pvt. Ltd. According to the Assessing Officer, the loan given to M/s. Salarpuria Properties Pvt. Ltd. According to the Assessing Officer, the loan given to M/s. Salarpuria Properties Pvt. Ltd. According to the Assessing Officer, the said interest income aggregating to Rs.3,85,596/ nterest income aggregating to Rs.3,85,596/- did not constitute the profits of the did not constitute the profits of the assessee company derived from the business of operating and maintaining industrial assessee company derived from the business of operating and maintaining industrial assessee company derived from the business of operating and maintaining industrial park and the same, therefore, was not eligible for deduction u/s 80IA(4) park and the same, therefore, was not eligible for deduction u/s 80IA(4) park and the same, therefore, was not eligible for deduction u/s 80IA(4) of the Act. He accordingly disallowed the claim of the assessee u/s 80IA to that extent in the ordingly disallowed the claim of the assessee u/s 80IA to that extent in the ordingly disallowed the claim of the assessee u/s 80IA to that extent in the assessment completed u/s 143( assessment completed u/s 143(3) of the Act vide order dt. 28/03/2014. ) of the Act vide order dt. 28/03/2014. 4. The disallowance made by the Assessing Officer on account of its claim u/s The disallowance made by the Assessing Officer on account of its claim u/s The disallowance made by the Assessing Officer on account of its claim u/s 80IA(4) in respect of interest 80IA(4) in respect of interest income was challenged by the assessee in the appeal filed income was challenged by the assessee in the appeal filed before the ld. CIT(A). During the course of appellate proceedings before the ld. CIT(A), it before the ld. CIT(A). During the course of appellate proceedings before the ld. CIT(A), it before the ld. CIT(A). During the course of appellate proceedings before the ld. CIT(A), it was contended on behalf of the assessee company was contended on behalf of the assessee company interalia that interest from bank that interest from bank having been received in connection with its deposits made against overdraft facilities connection with its deposits made against overdraft facilities connection with its deposits made against overdraft facilities was related to its business and the same, therefore, was eligible for deduction u/s 80IA. was related to its business and the same, therefore, was eligible for deduction u/s 80IA. was related to its business and the same, therefore, was eligible for deduction u/s 80IA. It was also contended on behalf of the assessee company that the disallowance on It was also contended on behalf of the assessee company that the disallowance on It was also contended on behalf of the assessee company that the disallowance on account of interest income, even otherwise, should have been restricted to the net ncome, even otherwise, should have been restricted to the net ncome, even otherwise, should have been restricted to the net amount of interest. 5. The ld. CIT(A) did not find merit in the contentions raised on behalf of the The ld. CIT(A) did not find merit in the contentions raised on behalf of the The ld. CIT(A) did not find merit in the contentions raised on behalf of the assessee company on this issue and proceeded to confirm the disallowance made by the assessee company on this issue and proceeded to confirm the disallowance made by the assessee company on this issue and proceeded to confirm the disallowance made by the Assessing Officer on account of assessee’s claim for deduction u/s 80IA in respect of g Officer on account of assessee’s claim for deduction u/s 80IA in respect of g Officer on account of assessee’s claim for deduction u/s 80IA in respect of interest income for the following reasons given in paragraph 5.4. to 5.10. of his interest income for the following reasons given in paragraph 5.4. to 5.10. of his interest income for the following reasons given in paragraph 5.4. to 5.10. of his impugned order:- “5.4. A bare look at section 80 A bare look at section 80-IB(4) would reveal that reference made to ‘profits and gains 4) would reveal that reference made to ‘profits and gains derived from such industrial undertakings’ and not to ‘profit and gains derived from any business of derived from such industrial undertakings’ and not to ‘profit and gains derived from any business of derived from such industrial undertakings’ and not to ‘profit and gains derived from any business of the industrial undertaking’. A conjoint reading of Section 80 the industrial undertaking’. A conjoint reading of Section 80-IB(l) and 80-IB(4) would reveal tha IB(4) would reveal that the expression ‘profits and gains derived from any business’ is to be read as ‘profits and gains derived the expression ‘profits and gains derived from any business’ is to be read as ‘profits and gains derived the expression ‘profits and gains derived from any business’ is to be read as ‘profits and gains derived from the industrial undertaking’ and the scope and ambit of Section 80 from the industrial undertaking’ and the scope and ambit of Section 80-IB(l) is not in any manner IB(l) is not in any manner wider than that of 80- IB(4). A holistic view of Se IB(4). A holistic view of Section 80-IB would reveal that what is intended by IB would reveal that what is intended by the Law Makers to qualify for deduction is ‘profits and gains derived from the industrial the Law Makers to qualify for deduction is ‘profits and gains derived from the industrial the Law Makers to qualify for deduction is ‘profits and gains derived from the industrial undertaking’. There is, therefore, no reason to bring within the fold of ‘profits and gains derived from undertaking’. There is, therefore, no reason to bring within the fold of ‘profits and gains derived from undertaking’. There is, therefore, no reason to bring within the fold of ‘profits and gains derived from industrial undertakings’ any income beyond the activities of the industrial undertakings on the undertakings’ any income beyond the activities of the industrial undertakings on the undertakings’ any income beyond the activities of the industrial undertakings on the ground that the words ‘any business’ finds expression in 80 ground that the words ‘any business’ finds expression in 80-IB(1). The interest earned on the FDRs The interest earned on the FDRs cannot be said that interest income earned from manufacturing activities cannot be said that interest income earned from manufacturing activities cannot be said that interest income earned from manufacturing activities of the appellant. The interest income on FDRs cannot be said that it derived from manufacturing activity of The interest income on FDRs cannot be said that it derived from manufacturing activity of The interest income on FDRs cannot be said that it derived from manufacturing activity of the appellant. 5.5. The following judicial decisions throw enough light on the issue. The following judicial decisions throw enough light on the issue. 5.5.1 The Honorable Andhra Pradesh High Court in the case of CIT Vs. Raasi Cement Ltd., [232 The Honorable Andhra Pradesh High Court in the case of CIT Vs. Raasi Cement Ltd., [232 The Honorable Andhra Pradesh High Court in the case of CIT Vs. Raasi Cement Ltd., [232 ITR 554] has answered similar questions involved in favor of the Revenue.. The question before the ITR 554] has answered similar questions involved in favor of the Revenue.. The question before the ITR 554] has answered similar questions involved in favor of the Revenue.. The question before the Honorable High Court was whether the interest earned on surplus funds Honorable High Court was whether the interest earned on surplus funds deposited in the banks deposited in the banks during the installation of the company, the status of the company before commencement of the during the installation of the company, the status of the company before commencement of the during the installation of the company, the status of the company before commencement of the business. The Honorable High Court has held that such interest has to be separately treated as business. The Honorable High Court has held that such interest has to be separately treated as business. The Honorable High Court has held that such interest has to be separately treated as income from other sources and cannot be taken income from other sources and cannot be taken as part of the capital structure following the as part of the capital structure following the decision of the Honorable Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers decision of the Honorable Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers decision of the Honorable Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers

3 ITA No. 2617/Kol/2019 Assessment Year: 2011-12 Quadro Info Technologies Pvt. Ltd Quadro Info Technologies Pvt. Ltd. Ltd., Vs. CIT - [227 ITR 172] (SC). It was categorically held that interest earned on surplus funds [227 ITR 172] (SC). It was categorically held that interest earned on surplus funds [227 ITR 172] (SC). It was categorically held that interest earned on surplus funds deposited in banks during installation of company, prior to commencement of business, has to be in banks during installation of company, prior to commencement of business, has to be in banks during installation of company, prior to commencement of business, has to be brought to tax as ‘Income from Other Sources’ u/s. 57 of the Act. brought to tax as ‘Income from Other Sources’ u/s. 57 of the Act. 5.5.2 In K. Ravindranathan In K. Ravindranathan Nair v. Dy. CIT [2003] 262 ITR 669 / 129 Taxman 811 {Ker.), an Nair v. Dy. CIT [2003] 262 ITR 669 / 129 Taxman 811 {Ker.), an assessee who was engaged in export claimed relief under section 80HHC. The Assessing Officer assessee who was engaged in export claimed relief under section 80HHC. The Assessing Officer assessee who was engaged in export claimed relief under section 80HHC. The Assessing Officer treated the interest received on short treated the interest received on short-term deposits with banks as income from other sources. The term deposits with banks as income from other sources. The assessee contended that the short ssessee contended that the short-term deposits were effected as a condition precedent for the bank term deposits were effected as a condition precedent for the bank to open a letter of credit and to grant facilities necessary to enable the assessee to export goods. The to open a letter of credit and to grant facilities necessary to enable the assessee to export goods. The to open a letter of credit and to grant facilities necessary to enable the assessee to export goods. The Division Bench held that the expression “derived fro Division Bench held that the expression “derived from” in section 80HHC must be understood as m” in section 80HHC must be understood as profit directly arising from export activities. The interest received by the assessee from short profit directly arising from export activities. The interest received by the assessee from short profit directly arising from export activities. The interest received by the assessee from short-term deposits was not a direct result of an export of goods or merchandise. Hence, the court held that the deposits was not a direct result of an export of goods or merchandise. Hence, the court held that the deposits was not a direct result of an export of goods or merchandise. Hence, the court held that the interest received from short eceived from short-term deposits could not be classified as business income. The same view term deposits could not be classified as business income. The same view has been reiterated by the Kerala High Court in Southern Cashew Exporters v. Dy. CIT [2003] 130 has been reiterated by the Kerala High Court in Southern Cashew Exporters v. Dy. CIT [2003] 130 has been reiterated by the Kerala High Court in Southern Cashew Exporters v. Dy. CIT [2003] 130 Taxman 203 and in Urban Stanislaus Co. v. CIT [2003] 263 ITR 10/ 130 Taxman 203 and in Urban Stanislaus Co. v. CIT [2003] 263 ITR 10/ 130 Taxman 244. Taxman 244. 5.5.3 The Delhi High Court has held in CIT v. Shri The Delhi High Court has held in CIT v. Shri Ram Honda Power Equip [2007] 289 ITR 475/ Ram Honda Power Equip [2007] 289 ITR 475/ 158 Taxman 474 that where surplus funds are parked with a bank and interest is earned thereon, it 158 Taxman 474 that where surplus funds are parked with a bank and interest is earned thereon, it 158 Taxman 474 that where surplus funds are parked with a bank and interest is earned thereon, it can only be categorized as income from other sources. Such a receipt merits separate treatment can only be categorized as income from other sources. Such a receipt merits separate treatment can only be categorized as income from other sources. Such a receipt merits separate treatment under section 56, which is outside the ring of profits and gains of business or profession. Hence, the ich is outside the ring of profits and gains of business or profession. Hence, the ich is outside the ring of profits and gains of business or profession. Hence, the view of the Delhi High Court is that such a receipt would be out of the reckoning for the purposes of view of the Delhi High Court is that such a receipt would be out of the reckoning for the purposes of view of the Delhi High Court is that such a receipt would be out of the reckoning for the purposes of section 80HHC. A similar view has been taken by the Delhi High Court in section 80HHC. A similar view has been taken by the Delhi High Court in CIT v. Goldtex Furnishing CIT v. Goldtex Furnishing Industries [2008] 174 Taxman 187 and CIT v. Cosmos International [2009] 318 ITR 314/ 177 Industries [2008] 174 Taxman 187 and CIT v. Cosmos International [2009] 318 ITR 314/ 177 Industries [2008] 174 Taxman 187 and CIT v. Cosmos International [2009] 318 ITR 314/ 177 Taxman 363. 5.5.4. In Kashmir Arts v. CIT [2008] 166 Taxman 237 the Delhi High Court held that the interest In Kashmir Arts v. CIT [2008] 166 Taxman 237 the Delhi High Court held that the interest In Kashmir Arts v. CIT [2008] 166 Taxman 237 the Delhi High Court held that the interest earned by an assessee who is an earned by an assessee who is an exporter on FDRs kept with a bank as margin money as a condition exporter on FDRs kept with a bank as margin money as a condition for availing of credit facilities could not be termed as business income but income from other for availing of credit facilities could not be termed as business income but income from other for availing of credit facilities could not be termed as business income but income from other sources. Such income could not be included in the profits and gains of business in terms of the sources. Such income could not be included in the profits and gains of business in terms of the sources. Such income could not be included in the profits and gains of business in terms of the Explanation (baa) (I) to sub Explanation (baa) (I) to sub-section (4A) of section 80HHC. For completing the narration this line of section (4A) of section 80HHC. For completing the narration this line of authority on section 80HHC, it would be necessary to re authority on section 80HHC, it would be necessary to refer to the judgment of a Divisi fer to the judgment of a Division Bench of this court in CIT v. Ravi Ratna Exports (P.) Ltd. [2000 this court in CIT v. Ravi Ratna Exports (P.) Ltd. [2000] 246 ITR 443 / 112 Taxman 577 , where it has ] 246 ITR 443 / 112 Taxman 577 , where it has been held that interest on fixed deposits received by the assessee was correctly classified by the been held that interest on fixed deposits received by the assessee was correctly classified by the been held that interest on fixed deposits received by the assessee was correctly classified by the Assessing Officer as being taxable as income from other sources and that consequently such income Assessing Officer as being taxable as income from other sources and that consequently such income Assessing Officer as being taxable as income from other sources and that consequently such income could not fall under the head of profits and gains of business or profession. The Division Bench held l under the head of profits and gains of business or profession. The Division Bench held l under the head of profits and gains of business or profession. The Division Bench held that as a result such income co that as a result such income could not be included in the business profits for the purposes o ded in the business profits for the purposes of the formula under section 80HHC. 80HHC. 5.5.5. In Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278/ 129 Taxman 539 the Supreme Court Chemicals Ltd. v. CIT [2003] 262 ITR 278/ 129 Taxman 539 the Supreme Court Chemicals Ltd. v. CIT [2003] 262 ITR 278/ 129 Taxman 539 the Supreme Court construed the ambit of the expression “derived from” in section 80HH. The assessee had earned construed the ambit of the expression “derived from” in section 80HH. The assessee had earned construed the ambit of the expression “derived from” in section 80HH. The assessee had earned interest on a deposit placed with the Electricity Board for the supply of electricity. interest on a deposit placed with the Electricity Board for the supply of electricity. interest on a deposit placed with the Electricity Board for the supply of electricity. The contention of the assessee was that this should be treated as income derived from the industrial undertaking the assessee was that this should be treated as income derived from the industrial undertaking the assessee was that this should be treated as income derived from the industrial undertaking under section 80HH because, without electric supply, the undertaking could not be run. The under section 80HH because, without electric supply, the undertaking could not be run. The under section 80HH because, without electric supply, the undertaking could not be run. The Supreme Court held that the expression “derived fro Supreme Court held that the expression “derived from” should be “understood as something which m” should be “understood as something which has direct or immediate nexus” with the industrial undertaking. Though electricity may be required has direct or immediate nexus” with the industrial undertaking. Though electricity may be required has direct or immediate nexus” with the industrial undertaking. Though electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed for the purposes of the industrial undertaking, the deposit required for its supply is a step removed for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking. The derivation of profits on the deposit made with siness of the industrial undertaking. The derivation of profits on the deposit made with siness of the industrial undertaking. The derivation of profits on the deposit made with the Electricity Board “cannot be said to flow directly from the industrial undertaking itself’ (pages the Electricity Board “cannot be said to flow directly from the industrial undertaking itself’ (pages the Electricity Board “cannot be said to flow directly from the industrial undertaking itself’ (pages 280, 281). 5.5.6. In case of Asian Cement Industries Vs Income T Asian Cement Industries Vs Income Tax Appellate Tribunal (Jammu And ax Appellate Tribunal (Jammu And Kashmir) the Hon’ble High Court) Kashmir) the Hon’ble High Court) held that Interest income from FRDS cannot be said to be an held that Interest income from FRDS cannot be said to be an income flowing from the business activity of industrial Undertaking, thus, cannot be computed for income flowing from the business activity of industrial Undertaking, thus, cannot be computed for income flowing from the business activity of industrial Undertaking, thus, cannot be computed for deduction u/s 80-IB of the IB of the Act.The controversy relates to the assessment years 2003 Act.The controversy relates to the assessment years 2003-2004 and 2004- 2005. The assessee claimed deduction under section 80 2005. The assessee claimed deduction under section 80-IB of I.T. Act by including interest IB of I.T. Act by including interest amounting- to Rs.2,21,845/ to Rs.2,21,845/- and Rs.2,86,486/- on FDRs for the aforesaid two assessment years on FDRs for the aforesaid two assessment years respectively declaring it as income of an industrial undertaking before Assessing Officer (for short espectively declaring it as income of an industrial undertaking before Assessing Officer (for short espectively declaring it as income of an industrial undertaking before Assessing Officer (for short ‘A.O.’) on the plea that the said FDRs were kept as guarantee with the Electricity Department and ‘A.O.’) on the plea that the said FDRs were kept as guarantee with the Electricity Department and ‘A.O.’) on the plea that the said FDRs were kept as guarantee with the Electricity Department and the Banks for securing credit facilities. It was contended the Banks for securing credit facilities. It was contended that the interest part was part of business that the interest part was part of business income of an Industrial Undertaking and therefore, eligible for deduction under Section 80 income of an Industrial Undertaking and therefore, eligible for deduction under Section 80 income of an Industrial Undertaking and therefore, eligible for deduction under Section 80-IB. A.O., however, disallowed the deduction and treated it as ‘Income from other sources’. Aggrieved thereof, however, disallowed the deduction and treated it as ‘Income from other sources’. Aggrieved thereof, however, disallowed the deduction and treated it as ‘Income from other sources’. Aggrieved thereof,

4 ITA No. 2617/Kol/2019 Assessment Year: 2011-12 Quadro Info Technologies Pvt. Ltd Quadro Info Technologies Pvt. Ltd. the Assessee filed two separate appeals before C.I.T(A) reiterating the same stand, but to no relief. ee filed two separate appeals before C.I.T(A) reiterating the same stand, but to no relief. ee filed two separate appeals before C.I.T(A) reiterating the same stand, but to no relief. Thereafter, two statutory appeals before ITAT (Amritsar Bench), also faced dismissal. The Hon’ble Thereafter, two statutory appeals before ITAT (Amritsar Bench), also faced dismissal. The Hon’ble Thereafter, two statutory appeals before ITAT (Amritsar Bench), also faced dismissal. The Hon’ble High court after discussing the language and wordings of the secti High court after discussing the language and wordings of the section 80 IB and various case laws on 80 IB and various case laws held that interest income from FDRs is not allowable for computing as deduction under section 80IB held that interest income from FDRs is not allowable for computing as deduction under section 80IB held that interest income from FDRs is not allowable for computing as deduction under section 80IB of the Act. 5.5.7 The Hon’ble ITAT, Delhi in case of DCIT Vs. SM The Hon’ble ITAT, Delhi in case of DCIT Vs. SM-S Paryavaran (P) Ltd. (ITAT Delhi) in ITA S Paryavaran (P) Ltd. (ITAT Delhi) in ITA No. 205/DEL/2013 Date of Judgement/Order: 05/06/2018 for Assessment Year : 2009 Date of Judgement/Order: 05/06/2018 for Assessment Year : 2009 Date of Judgement/Order: 05/06/2018 for Assessment Year : 2009-10 held that interest earned on FDR maintained with the interest earned on FDR maintained with the bank for obtaining bank guarantee for btaining bank guarantee for performance of any business activity even if performance of any business activity even if related to any government infrastructure related to any government infrastructure project can’t override the basic structure of Sec 80IA which intends to provide deduction only override the basic structure of Sec 80IA which intends to provide deduction only override the basic structure of Sec 80IA which intends to provide deduction only in respect of activities directly related to the process of providing infrastructure facilities. in respect of activities directly related to the process of providing infrastructure facilities. in respect of activities directly related to the process of providing infrastructure facilities. Income cannot be said to be derived from an activity merely by reason of the Income cannot be said to be derived from an activity merely by reason of the Income cannot be said to be derived from an activity merely by reason of the fact that activity was performed to earn the said income in an indirect, incidental or remote manner. activity was performed to earn the said income in an indirect, incidental or remote manner. activity was performed to earn the said income in an indirect, incidental or remote manner. The assessee company was engaged in the business of Developing, Maintaining and Operating of The assessee company was engaged in the business of Developing, Maintaining and Operating of The assessee company was engaged in the business of Developing, Maintaining and Operating of Infrastructure Facilities. The Assessing Officer held that in Infrastructure Facilities. The Assessing Officer held that in view of the ratio of the decisions and view of the ratio of the decisions and particularly of the Hon’ble Madras High Court decision in the case of Pandian Chemicals Ltd (in particularly of the Hon’ble Madras High Court decision in the case of Pandian Chemicals Ltd (in particularly of the Hon’ble Madras High Court decision in the case of Pandian Chemicals Ltd (in which SLP rejected), and of ITAT, Pune Bench in the case of “Kirpa Chemicals (P) Ltd. Vs. Deputy which SLP rejected), and of ITAT, Pune Bench in the case of “Kirpa Chemicals (P) Ltd. Vs. Deputy which SLP rejected), and of ITAT, Pune Bench in the case of “Kirpa Chemicals (P) Ltd. Vs. Deputy Commissioner of Income-tax’ (88 ITD 200),the interest income and miscellaneous Income cannot be tax’ (88 ITD 200),the interest income and miscellaneous Income cannot be tax’ (88 ITD 200),the interest income and miscellaneous Income cannot be held to be derived from the business of providing infrastructural facilities as there is no direct nexus held to be derived from the business of providing infrastructural facilities as there is no direct nexus held to be derived from the business of providing infrastructural facilities as there is no direct nexus between the interest earned arid the business of providing infrastructural fac between the interest earned arid the business of providing infrastructural fac between the interest earned arid the business of providing infrastructural facilities. The Assessing Officer further observed that income can be said to be derived from an activity if the said activity is Officer further observed that income can be said to be derived from an activity if the said activity is Officer further observed that income can be said to be derived from an activity if the said activity is immediate and effective source of the said income. Income cannot be said to be derived from an immediate and effective source of the said income. Income cannot be said to be derived from an immediate and effective source of the said income. Income cannot be said to be derived from an activity merely by reason of the f activity merely by reason of the fact that activity was performed to earn the said income in an act that activity was performed to earn the said income in an indirect, incidental or remote manner. Thus, the Assessing Officer held that the interest income indirect, incidental or remote manner. Thus, the Assessing Officer held that the interest income indirect, incidental or remote manner. Thus, the Assessing Officer held that the interest income earned on FDRs and misc. income cannot be considered as profit derived from the business of earned on FDRs and misc. income cannot be considered as profit derived from the business of earned on FDRs and misc. income cannot be considered as profit derived from the business of developing, operating or maintaining infrastructural facilities and thereby not eligible for oping, operating or maintaining infrastructural facilities and thereby not eligible for oping, operating or maintaining infrastructural facilities and thereby not eligible for deduction u/s 80IA of the Act, 1961. Interest income was held to be assessable under the head deduction u/s 80IA of the Act, 1961. Interest income was held to be assessable under the head deduction u/s 80IA of the Act, 1961. Interest income was held to be assessable under the head ‘Income from Other Sources” along with the miscellaneous income on which 8 ‘Income from Other Sources” along with the miscellaneous income on which 8 ‘Income from Other Sources” along with the miscellaneous income on which 80IA deduction is not eligible. The Ld. AR made an alternative plea that Section 37 of the Income Tax Act lays down that eligible. The Ld. AR made an alternative plea that Section 37 of the Income Tax Act lays down that eligible. The Ld. AR made an alternative plea that Section 37 of the Income Tax Act lays down that expenses incurred and income should be set off against that particular income. The Ld. AR further expenses incurred and income should be set off against that particular income. The Ld. AR further expenses incurred and income should be set off against that particular income. The Ld. AR further submitted that in the present case, th submitted that in the present case, the assessee company had only a negative bank balance/bank e assessee company had only a negative bank balance/bank over draft and the FDRs made by them only out of such over draft bank balances. The bank interest over draft and the FDRs made by them only out of such over draft bank balances. The bank interest over draft and the FDRs made by them only out of such over draft bank balances. The bank interest on such over draft is generally 2% to 4% more than bank interest on FDRs meaning thereby that no on such over draft is generally 2% to 4% more than bank interest on FDRs meaning thereby that no on such over draft is generally 2% to 4% more than bank interest on FDRs meaning thereby that no surplus income can results under this head. Therefore, the Ld. AR prayed that the order of the CIT(A) lus income can results under this head. Therefore, the Ld. AR prayed that the order of the CIT(A) lus income can results under this head. Therefore, the Ld. AR prayed that the order of the CIT(A) is just and proper and the appeal of the Revenue be dismissed. is just and proper and the appeal of the Revenue be dismissed. 5.6. The observations of the Hon’ble ITAT are extracted as under: The observations of the Hon’ble ITAT are extracted as under: "We have heard both the parties and perused the material available on The basic structure "We have heard both the parties and perused the material available on The basic structure "We have heard both the parties and perused the material available on The basic structure of the Section 80HH, 80IC, 80IA is in respect of exemption/benefit' claimed by the assessee. of the Section 80HH, 80IC, 80IA is in respect of exemption/benefit' claimed by the assessee. of the Section 80HH, 80IC, 80IA is in respect of exemption/benefit' claimed by the assessee. The Hon’ble Supreme Court has taken cognizance about all the aspects rega The Hon’ble Supreme Court has taken cognizance about all the aspects rega The Hon’ble Supreme Court has taken cognizance about all the aspects regarding the interest earned on fixed deposits for the performances of bank guarantee for carrying on interest earned on fixed deposits for the performances of bank guarantee for carrying on interest earned on fixed deposits for the performances of bank guarantee for carrying on the business for providing performance guarantee. The Hon’ble Supreme Court in case of the business for providing performance guarantee. The Hon’ble Supreme Court in case of the business for providing performance guarantee. The Hon’ble Supreme Court in case of Conventional Fastners vs. CIT (2018 Conventional Fastners vs. CIT (2018-TIOL-2002-SC- IT Judgment dated 16 IT Judgment dated 16thMay 2018) made it clear that guarantee is not derived from business, hence not entitle to deduction. made it clear that guarantee is not derived from business, hence not entitle to deduction. made it clear that guarantee is not derived from business, hence not entitle to deduction. The decision of the Apex Court is applicable in the present case which also considered the The decision of the Apex Court is applicable in the present case which also considered the The decision of the Apex Court is applicable in the present case which also considered the decision relied by the Ld. AR i.e. Pandian Chemicals. The deci decision relied by the Ld. AR i.e. Pandian Chemicals. The decision relied upon by the Ld. AR sion relied upon by the Ld. AR are factually different and are not applicable in the present case while the decision of the are factually different and are not applicable in the present case while the decision of the are factually different and are not applicable in the present case while the decision of the Apex Court passed on 16.05.20 18 (Conventional Fastners) is more apt in the present case. Apex Court passed on 16.05.20 18 (Conventional Fastners) is more apt in the present case. Apex Court passed on 16.05.20 18 (Conventional Fastners) is more apt in the present case. Therefore, the order of the CIT(A) is set Therefore, the order of the CIT(A) is set aside and appeal of the Revenue is allowed". aside and appeal of the Revenue is allowed". 5.7. The Hon’ble High Court of Uttarakhand in the case of Conventional Fastners vs. CIT, The Hon’ble High Court of Uttarakhand in the case of Conventional Fastners vs. CIT, The Hon’ble High Court of Uttarakhand in the case of Conventional Fastners vs. CIT, Dehradun (2017) 88 taxmann.com taxmann.com 163 (Uttarakhand) in which it was held as under: ) in which it was held as under: “Since interest income earned from fixed deposits reserves kept as security and as a business “Since interest income earned from fixed deposits reserves kept as security and as a business “Since interest income earned from fixed deposits reserves kept as security and as a business pre-requisite had nothing to do with carrying on assessee’s business of manufacture and requisite had nothing to do with carrying on assessee’s business of manufacture and requisite had nothing to do with carrying on assessee’s business of manufacture and

5 ITA No. 2617/Kol/2019 Assessment Year: 2011-12 Quadro Info Technologies Pvt. Ltd Quadro Info Technologies Pvt. Ltd. sale of electric meters, same would not be entitled to benefit of deductio sale of electric meters, same would not be entitled to benefit of deductio sale of electric meters, same would not be entitled to benefit of deduction under section 80- IC.” 5.8. Hon’ble ITAT, Delhi in case of Hon’ble ITAT, Delhi in case of Conventional Fastners Vs ITO in ITA.No.6016/Del./2017, ITA.No.6016/Del./2017, date of Order : 18/05/2018 for Assessment Year : 2013 date of Order : 18/05/2018 for Assessment Year : 2013-2014 held as under:- 10. I have considered the rival submissions. It is not in dispute that assessee earned, interest 10. I have considered the rival submissions. It is not in dispute that assessee earned, interest 10. I have considered the rival submissions. It is not in dispute that assessee earned, interest on FDRs which was deposited with the concerned authorities for taking tender/contracts. on FDRs which was deposited with the concerned authorities for taking tender/contracts. on FDRs which was deposited with the concerned authorities for taking tender/contracts. Similar issue was considered Similar issue was considered in earlier year as well as in subsequent y subsequent years and the authorities below have admittedly denied deduction under section 80IC to the assessee on authorities below have admittedly denied deduction under section 80IC to the assessee on authorities below have admittedly denied deduction under section 80IC to the assessee on same set of facts. In A.Y. 2009 same set of facts. In A.Y. 2009-2010 the assessee preferred appeal before ITAT, Delhi Bench 2010 the assessee preferred appeal before ITAT, Delhi Bench which was dismissed by the Tribunal vide order dated 25.01.201 which was dismissed by the Tribunal vide order dated 25.01.2017 (supra). Copy of the 7 (supra). Copy of the order of the Tribunal is placed on record. In this year also, similar facts have been recorded order of the Tribunal is placed on record. In this year also, similar facts have been recorded order of the Tribunal is placed on record. In this year also, similar facts have been recorded that the assessee in this year has earned interest income on FDRs which was pledged as that the assessee in this year has earned interest income on FDRs which was pledged as that the assessee in this year has earned interest income on FDRs which was pledged as performance guarantee in terms of contract awarded performance guarantee in terms of contract awarded by UPCL for manufacture of by UPCL for manufacture of electronic meters. The issue before the Tribunal was, Whether such interest income is electronic meters. The issue before the Tribunal was, Whether such interest income is electronic meters. The issue before the Tribunal was, Whether such interest income is eligible for deduction under section 80IC of the IT. Act ? The Tribunal followed its own eligible for deduction under section 80IC of the IT. Act ? The Tribunal followed its own eligible for deduction under section 80IC of the IT. Act ? The Tribunal followed its own order in the case of same assessee in ITA.No.2556/Del. order in the case of same assessee in ITA.No.2556/Del./2013 for the very same assessment /2013 for the very same assessment year under section 263 of the I.T. Act whereby similar claim of year under section 263 of the I.T. Act whereby similar claim of assessee have been denied. assessee have been denied. The Tribunal following, The Tribunal following, its own decision in the case of the same assessee dismissed the the same assessee dismissed the appeal of assessee. Learned Counsel for th appeal of assessee. Learned Counsel for the Assessee, therefore, fairly submitted that the e Assessee, therefore, fairly submitted that the order of the Tribunal have been confirmed by the order of the Tribunal have been confirmed by the Hon’ble High Court of Uttarakhand in Hon’ble High Court of Uttarakhand in the case of the assessee Conventional Fastners vs. CIT, Dehradun (2017) 88 the case of the assessee Conventional Fastners vs. CIT, Dehradun (2017) 88 the case of the assessee Conventional Fastners vs. CIT, Dehradun (2017) 88 163 (Uttarakhand) in which it was held as under: taxmann.com 163 (Uttarakhand) “Since interest income earned from fixed deposits reserves kept as security and as a “Since interest income earned from fixed deposits reserves kept as security and as a “Since interest income earned from fixed deposits reserves kept as security and as a business pre-requisite had nothing to do with carrying on assessee’s business of requisite had nothing to do with carrying on assessee’s business of requisite had nothing to do with carrying on assessee’s business of manufacture and sale of electric meters, same would not be entitled to bene manufacture and sale of electric meters, same would not be entitled to bene manufacture and sale of electric meters, same would not be entitled to benefit of deduction under section 80 deduction under section 80-IC.” 10.1. The issue is, therefore, covered in favour of the Revenue by the Judgment of the 10.1. The issue is, therefore, covered in favour of the Revenue by the Judgment of the 10.1. The issue is, therefore, covered in favour of the Revenue by the Judgment of the Tribunal as well as the Judgment of the Jurisdictional Uttarakhand High Court. The Hon’ble Tribunal as well as the Judgment of the Jurisdictional Uttarakhand High Court. The Hon’ble Tribunal as well as the Judgment of the Jurisdictional Uttarakhand High Court. The Hon’ble Uttarakhand High Court in the case of Uttarakhand High Court in the case of assessee held that interest income had nothing to do assessee held that interest income had nothing to do with the carrying on assessee’s business of manufacture and sale of electric meters, same with the carrying on assessee’s business of manufacture and sale of electric meters, same with the carrying on assessee’s business of manufacture and sale of electric meters, same would not be entitled to benefit of deduction under section 80IC of the I.T. Act.” would not be entitled to benefit of deduction under section 80IC of the I.T. Act.” would not be entitled to benefit of deduction under section 80IC of the I.T. Act.” 5.9. In view of the above, re In view of the above, respectfully following the High Court judgements as supported by the spectfully following the High Court judgements as supported by the principles laid down by the Honorable Supreme Court in the case of Tuticorin Alkali Chemicals and principles laid down by the Honorable Supreme Court in the case of Tuticorin Alkali Chemicals and principles laid down by the Honorable Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd., [227 ITR 172] (SC), Bongaigaon Refinery 8s Petrochemicals Ltd., [251 ITR Fertilizers Ltd., [227 ITR 172] (SC), Bongaigaon Refinery 8s Petrochemicals Ltd., [251 ITR Fertilizers Ltd., [227 ITR 172] (SC), Bongaigaon Refinery 8s Petrochemicals Ltd., [251 ITR 329] (SC) and CIT Vs.-Autokast Ltd., [248 ITR 110] (SC) the order of the AO in disallowing Rs.3,85,596 Autokast Ltd., [248 ITR 110] (SC) the order of the AO in disallowing Rs.3,85,596 Autokast Ltd., [248 ITR 110] (SC) the order of the AO in disallowing Rs.3,85,596- of interest income earned on Fixed Deposits and adding back to the total income of the appellant is interest income earned on Fixed Deposits and adding back to the total income of the appellant is interest income earned on Fixed Deposits and adding back to the total income of the appellant is upheld. 5.10 As regards alternate plea taken by the appellant that the interest income should be allowed to As regards alternate plea taken by the appellant that the interest income should be allowed to As regards alternate plea taken by the appellant that the interest income should be allowed to set off against the interest paid is also not available in view of the decision of Hon’ble Apex Court in set off against the interest paid is also not available in view of the decision of Hon’ble Apex Court in set off against the interest paid is also not available in view of the decision of Hon’ble Apex Court in case CITv. Dr. V.P. Gcpinathan CITv. Dr. V.P. Gcpinathan [2001] 116 Taxman 489 (SC). The Apex court held that the The Apex court held that the interest paid by the assessee as interest on overdraft facility cannot be set off against the interest interest paid by the assessee as interest on overdraft facility cannot be set off against the interest interest paid by the assessee as interest on overdraft facility cannot be set off against the interest received on the FDRs pledged by him with the Bank so as to avail any deduction under the head received on the FDRs pledged by him with the Bank so as to avail any deduction under the head received on the FDRs pledged by him with the Bank so as to avail any deduction under the head Hence, the ground no 3 on this issue is dismissed.” “Income frcm other sources’ “Income frcm other sources’. Hence, the ground no 3 on this issue is dismissed.

6 ITA No. 2617/Kol/2019 Assessment Year: 2011-12 Quadro Info Technologies Pvt. Ltd Quadro Info Technologies Pvt. Ltd. Salarpuria Properties Pvt. Ltd. and although this factual position was clearly mentioned Salarpuria Properties Pvt. Ltd. and although this factual position was clearly mentioned Salarpuria Properties Pvt. Ltd. and although this factual position was clearly mentioned by the Assessing Officer on page no. 2 of the assessment order, he considered the same as ficer on page no. 2 of the assessment order, he considered the same as ficer on page no. 2 of the assessment order, he considered the same as the interest received by the assessee for the purpose of making disallowance u/s 80IA(4). the interest received by the assessee for the purpose of making disallowance u/s 80IA(4). the interest received by the assessee for the purpose of making disallowance u/s 80IA(4). In this regard, he has invited our attention to paragraph no. 4.2. of the impugned order of In this regard, he has invited our attention to paragraph no. 4.2. of the impugned order of In this regard, he has invited our attention to paragraph no. 4.2. of the impugned order of the ld. CIT(A) wherein this fact was accepted by the ld. CIT(A) but while deciding the issue ld. CIT(A) wherein this fact was accepted by the ld. CIT(A) but while deciding the issue ld. CIT(A) wherein this fact was accepted by the ld. CIT(A) but while deciding the issue related to the disallowance u/s 80IA, the same was ignored/overlooked by. After taking related to the disallowance u/s 80IA, the same was ignored/overlooked by. After taking related to the disallowance u/s 80IA, the same was ignored/overlooked by. After taking into consideration, the finding recorded by the Assessing Officer on page 2 of into consideration, the finding recorded by the Assessing Officer on page 2 of into consideration, the finding recorded by the Assessing Officer on page 2 of the assessment order, as well as by the ld. CIT(A) at para 4.2. of his impugned assessment order, as well as by the ld. CIT(A) at para 4.2. of his impugned assessment order, as well as by the ld. CIT(A) at para 4.2. of his impugned order, we accept the contention raised by the ld. Counsel for the assessee and direct the Assessing raised by the ld. Counsel for the assessee and direct the Assessing raised by the ld. Counsel for the assessee and direct the Assessing Officer to consider only the amount of interest received by the assessee company on bank Officer to consider only the amount of interest received by the assessee company on bank Officer to consider only the amount of interest received by the assessee company on bank fixed deposits of Rs.2,29,193/ fixed deposits of Rs.2,29,193/- for making disallowance u/s 80IA of the Act. for making disallowance u/s 80IA of the Act.

7 ITA No. 2617/Kol/2019 Assessment Year: 2011-12 Quadro Info Technologies Pvt. Ltd Quadro Info Technologies Pvt. Ltd. earned by the assessee and earned by the assessee and the corresponding interest paid. Since the authorities below the corresponding interest paid. Since the authorities below have not verified this aspect, we restore this issue to the file of the Assessing Officer for have not verified this aspect, we restore this issue to the file of the Assessing Officer for have not verified this aspect, we restore this issue to the file of the Assessing Officer for the limited purpose of verifying as to whether there is any inexplicable link between the the limited purpose of verifying as to whether there is any inexplicable link between the the limited purpose of verifying as to whether there is any inexplicable link between the interest paid and the interest earned by the assessee on bank deposits and recompute the aid and the interest earned by the assessee on bank deposits and recompute the aid and the interest earned by the assessee on bank deposits and recompute the disallowance accordingly on such verification, in accordance with law. disallowance accordingly on such verification, in accordance with law. disallowance accordingly on such verification, in accordance with law. Ground No. 1 & 2 of the assessee’s appeal are thus partly allowed. of the assessee’s appeal are thus partly allowed.

8 ITA No. 2617/Kol/2019 Assessment Year: 2011-12 Quadro Info Technologies Pvt. Ltd Quadro Info Technologies Pvt. Ltd.

Kolkata, the Kolkata, the 27th day of August, 2021.

Sd/- Sd/- P.M. Jagtap] [Madhumita Roy] [P.M. Jagtap Judicial Member Judicial Member Vice Vice-President Dated: 27.08.2021 {SC SPS}

9 ITA No. 2617/Kol/2019 Assessment Year: 2011-12 Quadro Info Technologies Pvt. Ltd Quadro Info Technologies Pvt. Ltd.

Copy of the order forwarded to: 1. Quadro Info Technologies Pvt. Ltd Info Technologies Pvt. Ltd C/o. M/s. Salarpuria Jajodia & Co. C/o. M/s. Salarpuria Jajodia & Co. 7, C.R. Avenue 3rd Floor Kolkata – 700 072