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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’, NEW DELHI
Before: SH. BHAVNESH SAINI & SH. O.P. KANT
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘D’, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER Assessment Year: 2009-10 M/s. Kamakhaya Oil Company, Vs. CIT, Delhi-X, New Delhi C/o- M/s. RRA Taxindia, D-28, South Extension, Part-I, New Delhi. PAN : AAHFK3040R (Appellant) (Respondent) Appellant by Sh. R.S. Singhvi, CA Respondent by Sh. Vijay Verma, CIT(DR) Date of hearing 07.11.2017 Date of pronouncement 21.11.2017 ORDER PER O.P. KANT, A.M.:
This appeal by the assessee is directed against order dated 30/03/2014 passed the Commissioner of income tax, Delhi –X (in short ‘the CIT’ ) under section 263 of the Income-tax Act, 1961 (in short ‘the Act’) setting aside the order of the Assessing Officer for assessment year 2009-10. The grounds raised by the assessee in the appeal are as under:
1. That having regard to facts & circumstances of the case, Ld. CIT has erred in law and on facts in passing the impugned order u/s 263 which is barred by limitation, illegal, without jurisdiction and contrary to law and facts and deserves to be quashed.
2. That having regard to facts & circumstances of the case, Ld. CIT has erred in law and on facts in assuming jurisdiction u/s 263 and has further erred in holding as under: - • That there is no direct nexus between the borrowed funds and the purchase of fixed deposits. • That the interest income of Rs. 14,74,992/- cannot be allowed as deduction u/s 80IB of Income Tax Act, 1961. • That the interest income is not derived from the industrial undertaking. • That assessment order framed by Ld. AO is erroneous and prejudicial to the interest of revenue. • That the assessment is set aside to the file of assessing officer with the direction to re-compute the income.
3. That having regard to facts & circumstances of the case, Ld. CIT has erred in law as no adequate opportunity of hearing was granted and in framing the impugned the submission of the assessee and further erred in holding that assessment was erroneous and prejudicial to the interest of revenue.
4. That having regard to facts & circumstances of the case, Ld. CIT has erred in law and on facts in passing the impugned order u/s 263 which is not sustainable on various legal and factual grounds.
5. That the appellant craves the leave to add, amend, modify, delete any of the grounds of appeal before or at the time of hearing and all the above grounds are and on facts in passing the impugned order u/s 263 which is bad in law in as much order without considering the principles of natural justice and without considering without prejudice to each other.
2. Briefly stated facts of the case are that during relevant period the assessee firm was engaged in manufacturing and trading of sandalwood oil. The manufacturing unit of the assessee was located in state of Jammu and Kashmir. The assessee filed return of income for the year under consideration on 21/09/2009 declaring nil income after claiming deduction U/s 80IB of the Act. The case was selected for scrutiny and notice under section 143(2) of the Act was issued and complied with. The assessment under section 143(3) of the Act was completed on 30.12.2011 at nil income allowing the deduction u/s 80IB of the Act claimed by the assessee. 2.1 The Ld. CIT having jurisdiction over the case, called for the record of the case and examined the same. In view of the Ld. CIT, the assessee was having other income of Rs.14,74,992/-, which was not eligible for deduction under section 80IB of the Act, whereas the Assessing Officer has allowed deduction over the said other income also and therefore the assessment order framed was erroneous so far as to prejudicial to the interest of Revenue. Accordingly, he issued notice under section 263 of the Act on 05/08/2013 allowing opportunity of being heard in person or through Authorised Representative on 20/08/2013. The CIT has noted in the impugned order that the assessee was given due adjournment as asked for and in compliance Sh. Anil Aggarwal CA attended and filed written submission dated 20/08/2013 and a copy of order of the Tribunal in the case of M/s Arvind Footwear Private Limited versus DCIT Kanpur. 2.2 Before the CIT, the assessee claimed that said other income was interest earned on fixed deposits with the bank. The said fixed deposits were made by the bank to issue bank guarantee for compliance by the assessee of the interim order of the Hon’ble High Court of Madras, wherein the assessee was directed to furnish bank guarantee in favour of ‘District Forest officer, Salem’ and ‘District Forest officer, Satyamangalam’ for Rs.80,28,960/- and Rs.10,85,942/- respectively for difference of sales tax at the rate of 12% and concessional sales tax at the rate of 4% against form C, till the disposal of the petition of the assessee. 2.3 In support of the claim of deduction the assessee submitted that the borrowed funds had been utilised for purchasing the fixed deposits and therefore the interest paid by the assessee should be set off against the interest earned on FDR. The Ld. CIT noted that the assessee failed to establish direct nexus between the borrowed funds and the purchase of fixed deposits. 2.4 According to the Ld. CIT, the deduction under section 80IB on the interest income was not allowable because the interest on fixed deposit was not derived from the industrial undertaking and there was no direct nexus between the interest income and the industrial activity carried out by the assessee. He placed reliance on following judgments: (i) In the case of India Leather Corporation P. Ltd. Vs CIT(SC) 227 ITR 552 it has been held that "The phrase "derived from" is different from "Attributable to" - It is no doubt true that the words 'attributable to' have a wider meaning than the words 'derived from' - But at the same time it cannot be ignored that normally the word 'attribute' implies that 'for a result to be attributable to anything' it must be wholly, or in material part, caused by that thing - In order that income can be said to be attributable to manufacture or processing of goods, the earning of the income must be directly connected with manufacture or processing goods. It is also necessary that material part of the said income should have been earned by that activity. " (ii) In the case of Pandian Chemicals Ltd. Vs CIT (SC) 262 ITR 278 it has been held that the "Interest on deposits with Electricity Board made out of statutory compulsion are not profit "derived from" industrial undertaking." (iii) In the case of CIT Vs N.S.C. Shoes (Mad) 258 ITR 749 it has been held that the; "Interest on amount deposited with bank as guarantee fund for opening the letters of credit for the purpose of import of material cannot be said to be income 'derived from' industrial undertaking - The direct and proximate link is with the deposit in the bank and not v/ith the industrial undertaking." (iv) In the case of Nirma Industries Ltd. Vs ACIT (ITAT, SB - Ahd) 95 ITD 199 it has been held that the "Interest from trade debtors not derived from the industrial undertaking - The sale proceeds has a direct or immediate nexus with the industrial undertaking; but the interest paid by the buyer for not paying the sale proceeds within the credit period allowed is not arising out of the manufacturing activity. The immediate and effective source of interest is the sale proceeds which remained unpaid for a stipulated credit period and not the industrial undertaking. " (v) In the case of Liberty India Vs CIT (SC) 317 ITR 218 it has been held that the "By using the expression 'derived from', Parliament intended to cover sources not beyond the first degree. - DEPB/Duty drawback are incentives which flow from the schemes framed by Central Govt, or Customs Act and hence they belongs to the category of ancillary profits of such undertaking and are not derived from the industrial undertaking. Further, they cannot be reduced from the cost of purchase of manufacture of goods and they should be treated as separate items of revenue or income and accounted accordingly." (vi) In the case of Indian Additives Ltd. Vs DCIT (Mad) 67 DIR 389 it has been held that the "Deduction u/s 80IB is not available in respect of service income, interest on deposits with banks, interest received from loan given to employees, commission received, compensation received from sundry debtors for delayed payments and profit from sale of imported material as such income is not derived from the eligible undertaking." 2.5 In view of the above finding, he set aside the assessment with the direction to re-compute the income as directed by him. 2.6 Aggrieved, the assessee is in appeal before the Tribunal challenging the direction of the Ld. CIT.
Before us, the Ld. counsel filed two paper books containing pages 1 to 145 and 1 to 22 respectively. He also filed a supplementary paper book containing pages 1 to 38.
The Ld. counsel referred to page 32 and 33 of the supplementary paper book and submitted that the interest of Rs.14,05,554/- during the year was earned on fixed deposits of Rs.91,15,000/-. He submitted that said fixed deposits were made out of the funds borrowed in financial year 2005-06 and the interest of Rs.59,06,522/- was paid during the year towards such funds borrowed. 4.1 The Ld. counsel referred to pages 1 to 4 of the paper book containing 22 pages and submitted that issue in dispute of nexus between the borrowed money and money utilized for the purpose of earning interest income is covered in favour of the assessee by the order of Tribunal in the case of the assessee for subsequent assessment year i.e. 2010-11 and consequential order of the Assessing Officer pursuant to the direction of the Tribunal, available on page 18 to 21 of the paper book having 22 pages. He submitted that issue has been examined by the ITAT and already allowed by the Assessing Officer. In view of the above facts, the learned counsel submitted that order of the Assessing Officer was not erroneous. In support of his contention, the learned counsel relied on the decision of the Tribunal in the case of Axind Software Development Services Private Limited versus CIT-II, Chandigarh in and decision of the Hon’ble Delhi High Court in the case of CIT Vs. Jaypee DSC ventures Ltd (2011) 335 ITR 132 (Delhi). 4.2 The Ld. counsel submitted that in the year under consideration, the facts relating to interest received and interest paid are same as in assessment year 2010-11. He provided the detail of the other income of Rs.14,74,992/- and submitted that interest expenses of Rs.59,06,522/-, which being higher than the interest income, there was no case of any income on account of the interest and consequential denial of deduction under section 80IB of the Act. 4.3 He further submitted that even otherwise, during the original assessment and the rectification order under section 154 of the Act dated 17/04/2013, the claim of deduction on interest income was duly examined and the proposed action by the CIT under section 263 is merely on the basis of change of opinion and there is no legal justification for invoking provision of section 263 of the Act as it is not a case of lack of enquiry. In support of his contention, he relied on the decision of the Hon’ble Delhi High Court in the case of Commissioner of Income Tax Vs. Sunil Kumar Sharma, 335 ITR 83(DEL) and CIT Vs. Sunbeam Auto Ltd. (2011) 332 ITR 167(Delhi). 4.4 The Ld. CIT(DR), on the other hand, submitted that in the original assessment, no inquiry was carried out by the Assessing Officer on the issue of allowability of deduction under section 80IB of the Act on the other income including interest earned on fixed deposits. He referred to the assessment order and submitted that it is a one-page order having two paragraphs only. He also referred to the page No. 21A of the paper book of the assessee having 145 pages and submitted that in the query letter issued also the Assessing Officer has not made any enquiry in respect of the allowability of deduction on interest income. According to him, it is a case of no enquiry on the issue of allowability of deduction under section 80IB on interest by the Assessing Officer, and therefore , the decisions of the Hon’ble Delhi High Court relied upon by the assessee, were not applicable in the facts of the case. 4.5 He further submitted that the Ld. CIT has held the order of the Assessing Officer erroneous mainly on the ground that the other income including interest income was not derived from the business of manufacturing of eligible product and there was no direct nexus between the interest income and the industrial activity carried out by the assessee. He further submitted that the Tribunal in subsequent assessment year, 2010-11 has also upheld the disallowance of deduction under section 80IB of the Act in respect of interest income from fixed deposits. 4.6 He submitted that in assessment year 2010–11, the Tribunal restored the matter to the Assessing Officer only for verifying netting of interest paid against interest income i.e. nexus of borrowed money and money utilized for earning interest income and not the issue that interest income from FDR was not eligible for deduction under section 80IB of the Act. 4.7 He further submitted that the Assessing Officer in proceedings under section 143(3)/254 of the Act for AY 2010-11, pursuant to the direction of the Tribunal, has merely relied on the submission of the assessee without giving any finding how the borrowed money was utilized in purchase of fixed deposits. According to the Ld. CIT(DR), the Assessing Officer was required to examine the balance sheet and bank statement from assessment year 2006-07 onwards, which he did not. 4.8 According to him, the decision of the Tribunal in assessment year 2010-11 on the issue of allowability of deduction on interest income is in favour of the Revenue and therefore, in the year under consideration, the learned CIT is correct in holding that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue due to allowing deduction on interest income without any enquiry. 4.9 In the rejoinder, the Ld. counsel submitted that deduction under section 80IB of the Act on such other income including the interest income has been allowed in preceding years and therefore, in view of the Rule of Consistency, such deduction has been rightly allowed by the Assessing Officer. In support, he placed reliance on the decision of the Hon’ble Supreme Court in the case of CIT Vs. Excel Industries Ltd. [2013] 358 ITR 295 (SC) 4.10 We have heard the rival submission and perused the relevant material on record. In the grounds raised except ground No. 3 all the grounds are in respect of challenging the jurisdiction under section under 263 of the Act. In ground No. 3 the assessee has raised that the assessee was not provided adequate opportunity of being heard by the CIT. This ground was not pressed specifically by the Ld. counsel before us. However, from the impugned order we find that the assessee was given due adjournment by the CIT and thereafter, Sh. Anil Agrawal, CA attended on behalf of the assessee and filed written submission before the CIT. Thus, the Ld. CIT has allowed the due opportunity of being heard to the assessee and we do not find any violation of natural Justice for not allowing opportunity of being heard to the assessee. Thus, ground No. 3 of the appeal is dismissed accordingly.
Remaining grounds of the appeal except general ground No. 5, are connected with the issue of proceedings u/s. 263 of the Act and thus, were heard together. In the facts of the case, following issues arises for our consideration in the grounds raised:
1. Whether any enquiry was conducted by the Assessing Officer on the issue of allowability of deduction in respect of interest income earned on fixed deposits in assessment proceedings?
2. Whether the Assessing Officer committed any error in the assessment completed ?
6. As regard the first issue, the learned counsel has relied on the decision of the Commissioner of Income-tax Vs. Sunil Kumar Sharma (supra) and CIT Vs. Sunbeam Auto Ltd. (supra). The Hon’ble High Court in the cases has held that there is a distinction between “lack of enquiry” and “inadequate inquiry” and if there was any enquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. The Ld. counsel submitted that the instant case is also of the case of “inadequate Inquiry” by the Assessing Officer. The Ld. counsel referred to the assessment order and submitted that the assessee had filed Audit Report in Form No. 10CCB and other document in support of its claim of deduction under section 80IB of the Act. The Ld. counsel submitted that this sentence of the assessment order shows that the Assessing Officer has carried out enquiries, howsoever, insufficient it might be. It is relevant to reproduce the relevant part of impugned assessment order as under: “Return declaring Nil income filed on 21.09.2009. The same was processed u/s. 143(1) of the Income Tax Act, 1961. Thereafter, the same was selected for scrutiny under CASS and accordingly notice u/s. 143(2) of the Income Tax Act, 1961 was issued on 18.08 2010 fixing the case for hearing on 27.08.2010. Thereafter, notices u/s. 142(1) alongwith a questionnaire was issued In response thereto, Sh. Surender Jha, Manager (F&A) attended the proceedings from time to time, filed the details*and the case was discussed with him. The assessee firm is engaged in the manufacturing and trading of sandal wood oil. For manufacturing a plant is set up at Lane No.3, Phase-I, SIDCO Industrial Complex. Bari Brahmana, Jammu for extraction of Sandal Wood Oil from Sandal Wood by hydro distillation process. The assessee has claimed deduction u/s. 80-IB amounting to Rs.75,58,250/-. During the year under consideration the assessee has shown turnover of Rs. 17,76,62,378/- on which gross profit of Rs.75,58,250/- has been shown giving GP Rate of 4 25%% in the current year as against GP of 3.40% on sales of Rs.5,58,85,479/-in the preceding year, The assessee has filed Auditor Report in Form No. lOCCB and documents in support of its claim of deduction u/s 80-IB. With these remarks, assessment is framed at declared income of Rs. Nil.”
6.1 It is evident from the above that nowhere the Assessing Officer has mentioned about making any enquiry in respect of allowability of deduction on interest income. Merely, submitting Audit Report etc. in support of claim of deduction, it cannot be justified that the Assessing Officer carried out inquiry in respect of the claim and particularly in respect of the other income consisting of interest on FDR . 6.2 We have also perused the query letter issued by the Assessing Officer dated 12/10/2011 during the original assessment proceeding, which is available on page No. 21A of the paper book of the assessee containing 145 pages, but we do not find any such query raised by the Assessing Officer. No other query letter raising query related to allowability of deduction under section 80IB of the Act on interest income, has been produced before us by the Ld. counsel of the assessee.
6.3 The Ld. counsel referred to page 34 to 38 of the supplementary paper book and submitted that assessee has given detailed explanation in respect of allowability of deduction on interest income in the proceeding under section 154 of the Act. We have perused the said rectification proceeding under section 154 of the Act. We find that these rectification proceedings were initiated on 28/03/2013, whereas the assessment order in question was passed by the Assessing Officer on 30/12/2011. In our opinion, raising enquiry relating to deduction on interest income in proceedings under section 154 of the Act subsequent to the completion of the assessment proceedings is not relevant as far as proceeding under section 263 of the Act is concerned. 6.4 In such circumstances, we hold that no enquiry has been made by the Assessing Officer on the issue in dispute and it is not a case of inadequate Inquiry by the Assessing Officer. Thus, the cases relied upon by the assessee are of no assistance to it.
The second issue of dispute before us is whether there is error in the order of the Assessing. In synopsis filed during the course of hearing, the learned counsel has provided details of the other income of Rs.14,74,992/- and total amount of interest expenses of Rs.59,06,522/- as under: Other Incomes: a. Interest on loan Rs. 59,626/- b. Interest on TDS Rs. 1,641/- c. Profit on sale of office equipment Rs. 8,171/- d. Interest income from FDR Rs.14,05,554/- Rs.14,74,992/- Total interest expenses Rs.59,06,522/- 7.1 The contention of the Ld. CIT(DR) is that the Assessing Officer allowed the deduction on interest income from FDR and the CIT held this action of the Assessing Officer as erroneous because said interest income was not derived from the business of the undertaking eligible for deduction under section 80IB of the Act. He emphasized that the Ld. CIT held the non-allowability of the deduction under section 80IB of the Act on such interest income of FDR in view of the various decisions of Hon’ble Apex Court and Hon’ble High Courts relied upon by him in the impugned order under section 263 of the Act. According to him, not following the law laid down by the Hon’ble Supreme Court is an error of law, which has rendered the assessment order erroneous. He further submitted that the Tribunal in the case of the assessee for assessment year 2010-11 has also given same finding that the deduction under section 80IB of the Act was not allowable on the interest income from FDR, and restored the issue of the netting of interest income only to the Assessing Officer. He further submitted that in assessment year 2010- 11, the Assessing Officer in assessment proceeding consequent to the order of the Tribunal has not examined the issue of netting of interest paid against interest income and simply relied on the submission of the assessee and allowed the issue in favour of the assessee. According to him, the Assessing Officer in assessment year 2010-11, he has considered only fact that interest paid, was more than the interest income and therefore there was no interest income. 7.2 Whereas, the learned counsel submitted that in assessment year 2010-11, the issue of netting of interest was restored back to the file of the Assessing Officer by the Tribunal and in the assessment order passed consequent to the order of the Tribunal, the Assessing Officer has allowed netting of interest paid against the interest income. According to him, in the year under consideration the interest paid being more than the interest earned, no disallowance under section 80IB could have been made on interest income. 7.3 In our opinion, the disallowability of deduction on interest income from fixed deposit and netting of interest paid against interest earned are two different issues altogether. The netting of interest can only be allowed, if the interest-bearing borrowed money has been utilized for investment in interest earning fixed deposits. And, if in the process of netting, if there is net interest income, then allowability of deduction on said income under section 80IB of the Act comes into picture. We find that during proceedings under 263 of the Act before the Ld. CIT, the assessee failed to establish a direct nexus between the borrowed funds and the purchase of fixed deposits and thus, he disallowed the interest income as deduction under section 80IB of the Act. For disallowing the said deduction, he recorded that interest on fixed deposit was not derived from the industrial undertaking and therefore, there was no nexus between the interest income and the industrial operations. 7.4 The Tribunal in the order for assessment year 2010-11 in the case of the assessee in has decided the issue as under: “4. We have heard the arguments of both the sides and perused relevant material placed before us. So far as the question whether the interest income is eligible for deduction under Section 80IB or not is concerned, the said issue is settled in favour of the Revenue by the decision of Hon'ble Apex Court in the case of Pandian Chemicals Ltd. Vs. CIT [2003] 262 ITR 278, wherein their Lordships held as under:- “The words “derived from” in section 80HH of the Income-tax Act, 1961, must be understood as something which has a direct or immediate nexus with the assessee's industrial undertaking. Although electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking.
Held accordingly, that interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking itself and was not profits or gains derived by the undertaking for the purpose of the special deduction under section 80HH."
5. The issue whether while excluding the interest from the profits and gains of business for the purpose of computing eligible profit of the industrial undertaking is considered, the same is decided by Hon'ble Jurisdictional High Court in the case of CIT Vs. Shri Ram Honda Power Equip - [2007] 289 ITR 475 (Delhi). Of course, in that case, the question was of computation of eligible profit for the purpose of Section 80HHC. However, the ratio laid down therein would be squarely applicable for the purpose of computing profit for the purpose of Section 80IB also. That their Lordships of the Hon'ble Jurisdictional High Court in the case of Shri Ram Honda Power Equip (supra) held as under:- "The word "interest" in clause (baa) of the Explanation connotes "net interest" and not "gross interest". Therefore, in deducting such interest, the Assessing Officer will take into account the net interest, i.e., gross interest as reduced by expenditure incurred for earning such interest, (ix) Where, as a result of the computation of profits and gains of business and profession, the Assessing Officer treats the interest receipt as business income, then deduction should be permissible, in terms of Explanation (baa) of the net interest i.e., the gross interest less the expenditure incurred for the purposes of earning such interest. The nexus between obtaining the loan and paying interest thereon (laying out the expenditure by way of interest) for the purpose of earning the interest on the fixed deposit, to draw an analogy from section 37, will require to be shown by the assessee for application of the netting principle.”
From the above, it is evident that while computing the eligible profit of the business (in the case of industrial undertaking), only net interest is to be excluded but not the gross interest. Net interest would be gross interest reduced by expenditure incurred for earning such interest. Therefore, there has to be nexus between the payment of interest and earning of interest. We find that learned CIT(A) only compared between the interest received and interest payment. He has not at all considered whether there was any nexus between the borrowed money and the money utilized for the purpose of earning interest income. We, therefore, set aside the orders of authorities below on this point and restore the matter to the file of the Assessing Officer. We direct him to examine the nexus between the borrowed money and money utilized for the purpose of earning interest income. He will work-out the net interest in the light of the decision of Hon'ble Jurisdictional High Court in the -case of Shri Ram Honda Power Equip (supra) and will exclude from the eligible profit only the net interest. Needless to mention that the Assessing Officer will allow adequate opportunity of being heard to the assessee while giving effect to this order.”
7.5 The issue in dispute of the allowability of net interest income has been allowed in favour of the Revenue by the Tribunal, in view of the decision of the Hon’ble Supreme Court in the case of Pandian Chemicals Ltd. Vs. CIT (2000) 262 ITR 278. Thus, law on the issue in dispute was settled and not following of the law settled by the Hon’ble Supreme Court by the Assessing Officer has certainly rendered the order of the Assessing Officer as erroneous. 7.6 In view of the clear finding, the reliance placed by the assessee on the decision of the Tribunal in the case of Axind Software Development Services Private Limited (supra) is of no assistance. Further, in the said case of Axind Software Development Services Private Limited (supra), the Tribunal held inadequate Inquiry would not be a ground to set aside the assessment order. We have already dealt the issue of “lack of enquiry” versus “inadequate Inquiry”. Further, relying on the Rule of Consistency is of no assistance to the assessee due to the reason that no evidences of stand taken by the Revenue in earlier year have been brought on record before us. Further, in view of the decision of Hon’ble Supreme Court in the case of Distributors (Baroda) Pvt. Ltd. Vs. UOI, 155 ITR 120 wherein, it was held that “to perpetuate an error is no heroism and to ratify it is the compulsion of judicial conscience”, we don’t find that the action of the ld. CIT is contrary to the law. Moreover, no such argument was taken before the ld. CIT by the assessee.
7.7 In view of our discussion above, we conclude that no enquiry of any kind was carried out by the Assessing Officer on the issue of availability of deduction on interest income and it is a case of complete “lack of Inquiry” by the Assessing Officer. Before Ld. CIT, the assessee failed to establish direct nexus between the borrowed funds and the purchase of fixed deposits, and thus, he is correct in holding that interest on fixed deposit was not derived from the industrial undertaking. The Assessing Officer committed error in allowing deduction on such interest income without carrying out any enquiry. In view of the facts and circumstances of the case, we do not find any error in the order of the Ld. CIT. Accordingly, we uphold the finding of the Ld. CIT in setting aside the order of the Assessing Officer and directing to re-compute the income. The grounds No. 1, 2 and 4 of the appeal are accordingly dismissed.
The ground No. 5 being general in nature, we are not required to adjudicate upon and dismissed as infructuous.
In the result, appeal of the assessee is dismissed. The decision is pronounced in the open court on 21st Nov., 2017.