PREMIER NUTRACEUTICAL PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX 13(1)(2), MUMBAI

The present appeal has been preferred by the assessee against the order dated 05.06.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2012-13.

This appeal is barred by 31 days. During the course of hearing, the Ld. A.R. for the assessee has submitted that assessee has paid stamp duty on 15.12.17 and it is internal part of letter of authority signed on 15.12.17. Therefore, appeal is filed in time and the endorsement made by Registry is satisfied by the AR.

The short facts of the case are that assessee has filed the return of income showing total income at Nil. Assessee company is engaged in business of trading and manufacturing in pharmaceutical products. Assessee has shown Rs.3,65,475/- as income from business and Assessing Officer (hereinafter referred to as the AO) held that it is an income from other sources. Assessee has claimed deduction under 80IC on this amount but AO was of a view that this amount does not qualify for deduction under 80IC. Rs.2,27,290/- is the income of interest and Rs.1,38,185/- is income from sale of a scrap.

Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has partly allowed the appeal.

The Ld. A.R. submitted before me that assessee is engaged in business of pharmaceutical product for his own and for M/s. Lupin Limited. The assessee’s factory is situated at Dehradun. The assessee imported the raw material from Japan and letter of credit was issued by the bank. Against the letter of credit assessee was required to open a fixed deposit as margin money on which the interest income of Rs.2,27,290/- was earned. Therefore, it is a business income. He relied upon the decision of Hon’ble Gujarat High Court in the case of Empire Pumps (P.) Ltd. vs. ACIT (2015) 54 taxmann.com 317 (Gujarat) and he also relied upon the decision of Hon’ble Karnataka High Court (Full Bench) in the case of CIT vs. Hewlett Packard Global Soft Ltd. (87 taxmann.com 182). He also

The Ld. D.R. relied upon the Revenue Authorities.

I have heard the rival contentions of both the parties. Assessee is engaged in business of trading and manufacturing in pharmaceutical products. Assessee imported the raw material from Japan and letter of credit was issued by the bank. Against the letter of credit assessee was required to open a fixed deposit as margin money on which the interest income of Rs.2,27,290/- was earned. I find that similar issue had come up before the Hon’ble Gujarat High Court and the Hon’ble Gujarat High Court considering the decision of Hon’ble Supreme Court in the case of Liberty India vs. CIT (2009) 317 ITR 218/183 Taxman 349 (SC) has held as under: “II-Section 80-I of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings etc. after certain dates (Computation of) - Assessment years 1989-90 to 199293 - Whether where interest earned by assessee from 'B' had direct nexus with business, it was required to be considered as 'derived from' business for purpose of computing amount of deduction under section 80-I - Held, yes - Whether where assessee was compelled to park a part of its funds in fixed deposits under insistence of financial institutions, interest income received on said deposits was to be regarded as business income for purpose of computing amount of deduction under section 80-I - Held, yes [Paras 7,8 and 10][In favour of assessee]”

I find that similar issue was considered in respect of deduction under section 10A in the case of CIT vs. Hewlett Packard Global Soft Ltd. (87 taxmann.com 182) by the decision of Hon’ble Karnataka High Court (Full Bench). The issue before the High Court was with respect to disallowance of deduction under section 10A on 4 M/s. Premier Nutraceutical Pvt. Ltd. the interest of fixed deposit kept in ordinary course of business. After considering the decision of Hon’ble Supreme Court Liberty India vs. CIT (supra) the Hon’ble Gujarat High Court in the case of Empire Pumps (P.) Ltd. vs. ACIT (supra) has held that assessee is allowed deduction under section 10A on the said interest income earned by the assessee on the bank deposit kept in the ordinary course of business. Similarly, Hon’ble Jurisdictional High Court in the case of CIT vs. Jagdishprasad M. Joshi 318 ITR 420 has held that the interest income on fixed deposit with bank was eligible for deduction under section 80IA. Similarly, Tribunal of Delhi Bench in the case of Pioneer Industries vs. ITO in ITA No.250/Del/2015 dated 02.05.2016 wherein interest on fixed deposits kept as margin money against opening of letter of credit was held as eligible under section 80IC. Therefore, I am of the view that assessee is entitled for the same. Hence, we allow this appeal in favour of the assessee.

In the result, appeal of the assessee is partly allowed.