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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri P. M. Jagtap & Shri S.S. Viswanethra Ravi
ACIT, CC-2(1), Kolkata Appellant Vs M/s Amrit Feeds Ltd. Respondent [PAN:AACCA5571D] For the Appellant : Dr. Abani .K. Nayak, CIT-DR For the Respondent : Shri Akkal Dudhwewala, FCA Date of hearing : 17.07.2019 Date of pronouncement : 01.10.2019 ORDER Shri S.S. Viswanethra Ravi, JM:
This appeal by the Revenue against the order dated 27.09.2016 passed by the Commissioner of Income Tax (Appeals)-20, Kolkata [‘CIT(A)’] for Assessment Year 2013-14.
Ground Nos.1 to 4 raised by the Revenue questioning the action of CIT(A) in deleting the addition made on account of section 80-IB of the Act in the facts and circumstances of the case.
Heard both parties and persued the material available on record. We find the issue raised by the Revenue is covered by the consolidated order of this Tribunal in assessee’s own case for earlier years i.e. 2008-09, 2011-12 & 2012-13, which is placed on record. We find the Co-ordinate Bench of this Tribunal considering the order for A.Y. 2010-11 dated 05.04.2017 in assessee’s own case, wherein, it was held that the business of the assessee is eligible for deduction u/s 80-IB of the Act. The relevant portion at Para No.10 & 11 of the Page | 1 consolidated order for A.Ys. 2008-09, 2011-12 and 2012-13 is reproduced hereinbelow: 10. At the time of hearing before the Tribunal, the ld. representatives of both the sides have agreed that the common issue involved in Grounds No. 1 to 4 of the Revenue’s appeal for A.Y. 2011-12 relating to the eligibility of the business of the assessee for deduction under section 80IB is squarely covered in favour of the assessee by the decision of the Tribunal in assessee’s own case in IT(SS)A No. 129/KOL/2016 for A.Y. 2010-11 rendered vide its order dated 05.04.2017 (supra), wherein a similar issue was decided by the Tribunal in favour of the assessee vide paragraph no. 14 of its order, which reads as under:- “14. We have given a careful consideration to the rival submissions. In the case of Amrit Feeds (supra), the Tribunal considered the decision rendered in the case of Venkateswara Feeds (supra) and held that the assessee in that case had claimed deduction under section 80IB on the activity or merely converting poultry mash feed into pellet feed and therefore that Bench has held that there was no change In the basic component or new or different article came into existence, As such, conversion was processing activity not manufacturing. The Tribunal held that the case of the assessee Amrit Feeds (supra) was entirely different. The assessee's eligible undertaking itself was carrying out the complete activity i.e. from grinding till the pelletization. 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 Id, 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”.
11. As the issue involved in the year under consideration as well as the material facts relevant thereto are similar to A.Y. 2010-11, we respectfully follow the order of the Tribunal for A.Y. 2010-11 and uphold the impugned order of the ld. CIT(Appeals) holding the business of the assessee as eligible for deduction under section 80IB. Grounds No. 1 to 4 of the Revenue’s appeal are accordingly dismissed.
4. In the light of the above order, we uphold the order of CIT(A). Ground Nos. 1 to 4 raised by the Revenue are dismissed.
5. Ground Nos.5 & 6 raised challenging the action of CIT(A) on the issue relating to deletion of addition made on account of netting off the interest income.
6. Heard both parties and perused the material available on record. We find the issue is covered by the consolidated order of this Page | 2 Tribunal in assessee’s own case for Assessment Years 2008-09, 2011-12 & 2012-13 dated 04.01.2018. The relevant portion of the order is reproduced hereinbelow: “8. We have carefully gone through both these decisions cited by the ld. D.R. It is observed that the case of Spring Merchandisers Pvt. Limited (supra) decided by the Agra Bench of this Tribunal and cited by the ld. D.R. is distinguishable on facts, inasmuch as, the interest income earned on FDRs in the said case was held to be chargeable to tax under the head “income from other sources” while interest expenditure constituted the business expenditure of the assessee. In these facts and circumstances of the case, it was held by the Tribunal that netting of the income under one head of income against expenditure under the different head of income is not possible as per law. In the present case, interest income was offered by the assessee to tax as business income and even the interest expenditure was also claimed under the same head as business expenditure. As regards the case of Asian Cement Industries –vs.- ITAT (supra) cited by the ld. D.R., it is observed that even though the issue relating to the netting off interest was raised as question no. 3, the same apparently was not decided by the Hon’ble Jammu & Kashmir High Court specifically by giving any finding or conclusion. On the other hand, Hon’ble Calcutta High Court in the case of CIT –vs.- Warren Tea Limited (supra) relied upon by the ld. CIT(Appeals) in his impugned order has upheld the principle of netting off of interest income against interest expenditure and although the said decision of the Hon’ble jurisdictional High Court was rendered in the context of computing business income of the term manufacturing unit as per Rule 8, we are of the view that the same analogy can justifiably be applied even in the present case to hold that only net interest income after adjusting the interest expenditure is liable to be excluded while computing the profit eligible for deduction under section 80IB. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and upholding the same, we dismiss the appeal of the Revenue for Assessment Year 2008-09.”
7. In view of the above-mentioned decision of Coordinate Bench in assessee’s own case, we find no infirmity in the order of CIT(A). Thus Ground Nos.5 & 6 raised by the Revenue are dismissed.
8. Ground Nos.7 & 8 are relating to disallowance made u/s 14A r.w.r. 8D(2) of the Rules in the facts and circumstances of the case.
9. Heard both parties and perused the material available on record. The contention of the Ld. AR is that the assessee made investment in group companies which were for strategic business purposes and the said investments did not yield any exempt income during the year and without considering the same, the Assessing Officer disallowed the expenditure u/s 14A r.w.r 8D(2) of the Rules for an amount of Rs.1,74,685/- and Rs.1,86,766/- under the Rule 8D(2) totaling to 3,61,451/- vide its order dated 30.03.2015. The same contention was made before the CTI(A) that the assessee has made investments in group companies which were made for strategic business purposes, the investment did not yield any exempt income during the year and disallowance made by the Assessing Officer for the purpose u/s 14A is not maintainable. The CIT(A) considering the said submissions and by placing reliance orders of ITAT in in the case of Binani Industries Ltd. and held that no disallowance u/s 14A is warranted where the investments are made in associate and subsidiary companies for strategic business purposes and deleted the addition made by the Assessing Officer for reasons stated as under:
“I have considered the findings of the A.O and the written submissions filed by the AR during the appellate proceeding. I find that the assessee has made investments primarily in the group companies which are engaged in the same line of business. The investment in shares of the group associate companies has not produced tax-free dividend income in all cases. The jurisdictional Calcutta High Court in the case of CIT vs. REI Agro Ltd. (ITA No.220 of 2013) has held that no disallowance u/s 14A is permissible where the investments have not produced any tax free income during the relevant previous year. The same view has also been expressed by the Delhi High Court in the case of CIT vs. Holeim India Pvt. Ltd. (272 CTR 282), Gujarat High Court in the case of CIT vs. Cortech Energy Pvt. Ltd. (223 taxman 130) and Allahabad High Court in the case of CIT vs. Shivam Motors P Ltd. (230 Taxman 63). I further find that in some cases of this group the dividend was paid only by the associate companies. The investment in these shares was made for acquiring management control and not to earn tax free dividend. The ITAT, Kolkata in the case of DCIT vs. Binani Industries Ltd. (ITA No.443/kol/2013) has held that no disallowance u/s 14A is warranted where the investments are made in associate and subsidiary companies for strategic business purposes. Keeping in view the ratio decided by the jurisdictional Kolkata Bench of ITAT and other judicial authorities, assessee’s appeal on these grounds are allowed.”
On perusal of the impugned order the portion of which reproduced hereinabove, we find that no dividend was earned in the investments made in shares of the group associate companies in all cases but however the said issue is covered in favour of the Revenue by the decision of Hon’ble Supreme Court in the case of Maxopp Investments Ltd. in [2018] 91 taxmann.com 154 (SC). The ld. AR submits that the assessee has no objection in remanding the matter to the file of Assessing Officer for his fresh examination in terms of the judgment of Hon’ble Supreme Court in the case of Maxopp Investments Ltd. (supra). Therefore considering the submissions of ld. DR and AR, we deem it proper to remand the matter to the file of Assessing Officer for his verification in the facts and circumstances of the case in terms of judgment of Hon’ble Supreme Court in the case of Maxopp Investments Ltd. (supra) and pass orders accordingly. Thus Ground Nos.7 & 8 raised by the Revenue are allowed for statistical purposes.
In the result, the appeal of the Revenue is partly allowed for statistical purposes. Order pronounced in the open court on 01.10.2019.