M/s. Surya International, Ahmedabad v. The Income tax Officer,Ward-10(4),, Ahmedabad

ITA 1533/AHD/2007 | 2003-2004
Pronouncement Date: 09-04-2010 | Result: Dismissed

Appeal Details

RSA Number 153320514 RSA 2007
Assessee PAN OFTHE1961A
Bench Ahmedabad
Appeal Number ITA 1533/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 22 day(s)
Appellant M/s. Surya International, Ahmedabad
Respondent The Income tax Officer,Ward-10(4),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 09-04-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 09-04-2010
Date Of Final Hearing 31-03-2010
Next Hearing Date 31-03-2010
Assessment Year 2003-2004
Appeal Filed On 17-04-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' [BEFORE SHRI MAHAVIR SINGH JM AND SHRI A N PAHUJA A M] ITA NO.1533/AHD/2007 (ASSESSMENT YEAR: 2003-04) M/S SURYA INTERNATIONAL A-401 SAMUDRA COMPLEX NAVRANGPURA AHMEDABAD [PAN:AAGFS5480A] V/S INCOME-TAX OFFICER WARD- 10(4) FIRST FLOOR NARAYAN CHAMBERS ASHRAM ROAD AHMEDABAD (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI S N DIVATIA AR REVENUE BY:- SMT. NEETA SHAH DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 18-01-2007 OF THE LD. CIT(APPEALS)-XVI AHMEDABAD RAISES THE FOLLOWING GROUNDS: 1. THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD IN LA W AND ERRONEOUS ON FACTS. YOUR APPELLANT SUBMITS THAT IT BE CANCELLED OR SUITABLY MODIFIED. IT IS SUBMITTED THAT IT BE SO HE LD NOW. 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION U/S 80IA ON DEPB RECEIPTS FOR RS.16 64 74 5/- ON THE GROUND THAT DEPB RECEIPTS ARE NOT PROFITS DERIVED F ROM INDUSTRIAL UNDERTAKING. YOUR APPELLANT SUBMITS THAT DEPB RECEI PTS AND DUTY DRAWBACK ARE SAME IN THE NATURE IN VIEW OF THE FACT THAT BOTH THE INCENTIVES REDUCES COST OF PRODUCTION OF THE UNDERT AKING AND THUS DIRECTLY RELATED TO INDUSTRIAL UNDERTAKING. THE LEA RNED CIT (A) HAS ERRED IN COMPARING THE DEPB RECEIPTS WITH CASH COMP ENSATORY SUPPORT. YOUR APPELLANT SUBMITS THAT DEPB CAN BE CO MPARED WITH DUTY DRAWBACK AND NOT WITH CCS AS DONE BY LEARNED COMMISSIONER. IN VIEW OF THE AFORESAID FACTS AND CI RCUMSTANCES YOUR APPELLANT SUBMITS THAT DEDUCTION U/S 80IA BE A LLOWED ON DEPB AS PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING . IT IS SUBMITTED THAT IT BE SO ALLOWED NOW. 3. THE LEARNED CIT(A) HAS ERRED IN REJECTING DED UCTION U/S 80IA ON INTEREST INCOME OF RS.3 01 290/- FOLLOWING DECISION OF SPECIAL BENCH OF JURISDICTIONAL ITAT IN THE CASE OF NIRMA INDUSTR IES LTD VS. ACIT 95 ITD 199 AND IN THE CASE OF KRIPA CHEMICALS P LTD VS. DCIT 88 ITD 200 (PUNE). YOUR APPELLANT SUBMITS THAT THE ABO VE DECISIONS ARE NOT APPLICABLE TO THE FACTS OF YOUR APPELLANT'S CASE. THE ABOVE DECISIONS WERE GIVEN WHILE DECIDING DEDUCTION U/S 8 0I WHEREAS IN ITA NO.1533/AHD/2007 2 THE CASE OF YOUR APPELLANT THE QUESTION IS DETERMI NING AMOUNT OF DEDUCTION U/S 80IA. IT IS SUBMITTED THAT THE SCOPE OF DEDUCTION U/S 80IA IS LARGER THAN SCOPE OF DEDUCTION U/S 801. FUR THER IN THE AFORESAID DECISIONS INTEREST INCOME WAS GENERATED OUT OF SURPLUS BUSINESS FUNDS WHEREAS IN THE CASE OF YOUR APPELLAN T THE FUNDS WERE KEPT WITH THE BANK OUT OF BUSINESS COMPULSION IN ORDER TO AVAIL OVERDRAFT AND CASH CREDIT FACILITIES. IN VIEW OF TH E AFORESAID FACT AND CIRCUMSTANCES YOUR APPELLANT SUBMITS THAT THE DECI SIONS CITED BY THE LEARNED COMMISSIONER ARE NOT APPLICABLE AND DIS TINGUISHABLE TO THE FACTS OF YOUR APPELLANT AND THEREFORE IT IS SUB MITTED THAT DEDUCTION U/S 80IA SHOULD BE ALLOWED ON THE INTERES T INCOME. IT IS SUBMITTED THAT IT BE SO ALLOWED NOW. WITHOUT PREJUDICE TO THE ABOVE YOUR APPELLANT FURT HER SUBMITS THAT THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED AND DEC IDED OUR ALTERNATIVE GROUND OF SETTING OF INTEREST PAID OF R S.17 52 102/- AGAINST INTEREST INCOME OF RS.3 01 290/- WHILE COMP UTING DEDUCTION U/S 80IA OF THE INCOME TAX ACT. YOUR APPELLANT SUBM ITS THAT EVEN IF IT IS HELD THAT INTEREST IS TO BE EXCLUDED WHILE CO MPUTING THE PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF DEDUCTION U/S 80IA IT IS 'NET' AMOUNT AND NOT 'GROSS' AMOUNT WHI CH CAN BE EXCLUDED. DURING THE ASSESSMENT YEAR YOUR APPELLAN T HAS PAID INTEREST OF RS.17 52 102/- WHICH HAS DIRECT NEXUS W ITH THE INTEREST INCOME. IF NET INTEREST IS TAKEN OUT IT WILL BE NE GATIVE INTEREST AND THEREFORE DEDUCTION U/S 80IA WILL GET INCREASE TO T HAT EXTENT. YOUR APPELLANT THEREFORE SUBMITS THAT ONLY 'NET' INTERES T BE DIRECTED TO BE EXCLUDED WHILE COMPUTING DEDUCTION U/S 80IA OF THE INCOME TAX ACT. IT IS SUBMITTED THAT IT BE SO DONE NOW. 4. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT 90% OF INTEREST INCOME OF RS.3 01 290/- BE DEDUCTED FROM PROFIT FOR COMPUTING DEDUCTION U/S 80HHC. YOUR APPELLANT SUBMITS THAT IN TEREST INCOME IS NOTHING BUT PART OF THE PROFITS OF THE BUSINESS AND THEREFORE OUGHT TO HAVE BEEN CONSIDERED FOR THE PURPOSE OF COMPUTIN G DEDUCTION U/S 80HHC OF THE INCOME TAX ACT. YOUR APPELLANT SUB MITS THAT IT HAS EARNED INTEREST INCOME OUT OF DEPOSITS AND MARG IN MONEY PUT WITH BANKS IN ORDER TO AVAIL OVERDRAFT AND CASH CRE DIT FACILITIES AND THEREFORE IT HAS DIRECT NEXUS WITH THE EXPORT BUSIN ESS OF THE APPELLANT. IN VIEW OF THE AFORESAID FACTS AND CIRCU MSTANCES YOUR APPELLANT SUBMITS THAT INTEREST BE CONSIDERED AS PA RT OF THE PROFITS OF THE EXPORT BUSINESS AND THEREFORE SHOULD BE INCL UDED WHILE COMPUTING PROFITS OF THE BUSINESS FOR THE PURPOSE O F DEDUCTION U/S 80HHC OF THE INCOME TAX ACT. IT IS SUBMITTED THAT I T BE SO HELD NOW. YOUR APPELLANT PRAYS FOR LEAVE TO ADD ALTER AMEND ALL OR ANY OTHER GROUNDS BEFORE FINAL HEARING OF APPEAL. 2 GROUND NO.1 BEING GENERAL IN NATURE DOES NOT REQ UIRE ANY SEPARATE ADJUDICATION AND IS THEREFORE DISMISSED. ITA NO.1533/AHD/2007 3 3 ADVERTING NOW TO GROUND NO.2 RELATING TO DEDUCTIO N U/S 80IA OF THE ACT ON DEPB RECEIPTS FACTS IN BRIEF AS PER RELEVANT ORD ERS ARE THAT RETURN DECLARING INCOME OF RS.4 02 310/- FILED ON 14.10.2003 BY THE ASSESSEE AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT 1961[HER EINAFTER REFERRED TO AS THE ACT] WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 12.7.2005. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT ASSESSEE CLAIMED DEDUCTION OF RS. RS.8 99 106/- U/S 80IA OF THE ACT. TO A QUERY BY TH E AO THE ASSESSEE EXPLAINED THAT DEPB RECEIPTS OF RS. 16 64 745/- HAVE DIRECT NEXUS WITH THE BUSINESS OF INDUSTRIAL UNDERT AKING AND ARE THEREFORE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE A CT. HOWEVER THE AO WAS OF THE OPINION THAT FOR THE PURPOSE OF DEDUC TION U/S 80IA OF THE ACT THE ASSESSEE HAS TO ESTABLISH THAT THE PRO FITS AND GAINS WERE DERIVED FROM THE BUSINESS OF INDUSTRIAL UNDERT AKING AND A MERE COMMERCIAL CONNECTION WAS NOT SUFFICIENT TO ESTABLI SH NEXUS BETWEEN PROFITS AND THE INDUSTRIAL UNDERTAKING. ACC ORDINGLY RELYING UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. STERLING FOODS PVT. LTD. 237 ITR 579 THE AO D ISALLOWED THE CLAIM. 4 ON APPEAL THE ASSESSEE CONTENDED THAT THE DEPB R ECEIPTS AMOUNTING TO RS.16 64 745/- ARE MANUFACTURING PROF ITS HAVING DIRECT NEXUS WITH THE INDUSTRIAL UNDERTAKING AND TH EREFORE HAS TO BE CONSIDERED AS PROFIT DERIVED FROM INDUSTRIAL UNDERT AKING. IT WAS POINTED OUT THAT THE DUTY DRAW BACK IS IN THE FORM OF REIMBURSEMENT OF EXCISE DUTY WHICH THE ASSESSEE HAS PAID ON RAW M ATERIAL AND REIMBURSEMENT OF EXCISE DUTY PAID ON THE MANUFACTUR ED GOODS IS THEREFORE DERIVED FROM INDUSTRIAL UNDERTAKING. WH ILE ARGUING THAT THE DECISION IN THE CASE OF STERLING FOODS PVT. LTD .(SUPRA) IS NOT APPLICABLE THE ASSESSEE PLACED RELIANCE ON THE DE CISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. INDIA GEL ATINE & CHEMICALS LTD. 275 ITR 284. HOWEVER THE LD. CIT(A ) UPHELD THE FINDINGS OF THE AO IN THE FOLLOWING TERMS: 7 I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER AND ARGUMENTS OF THE COUNSEL FOR T HE APPELLANT ITA NO.1533/AHD/2007 4 AND HAVE ALSO GONE THROUGH THE CASE-LAWS RELIED UPO N BY THE AO AS WELL AS BY THE APPELLANT. AS REGARDS THE FIRST PAR T OR NOT ADDING DEPRECIATION AS PER BOOKS OF ACCOUNT AMOUNTING TO R S.2 39 479/- FOR COMPUTING THE PROFIT FOR THE PURPOSE OF DEDUCTION U /S 80IA THE SAME IS REJECTED SINCE THIS PART OF THE GROUND WAS NOT P RESSED BY THE COUNSEL DURING THE APPELLATE PROCEEDINGS. AS REGARD S THE REDUCTION OF DEPB RECEIPTS AMOUNTING TO RS.16 64 745/- FROM T HE PROFIT FOR COMPUTING DEDUCTION U/S 80IA I DO NOT FIND ANY FOR CE IN THE ARGUMENT OF THE COUNSEL FOR THE APPELLANT THAT THE DEPB RECEIPT FORMS PART OF THE PROFIT OF INDUSTRIAL UNDERTAKING. THE COUNSEL FOR THE APPELLANT HAS WRONGLY PLACED RELIANCE ON THE DECISI ON OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. INDIA GELATINE & CHEMICALS LTD. 275 ITR 284. I HAVE GONE THROUGH THE CITED JUDGMENT . THE HON'BLE GUJARAT HIGH HAS HELD THAT DUTY DRAW BACK HAS TO BE TAKEN AS PART OF THE PROFIT OF INDUSTRIAL UNDERTAKING SINCE THE SAME REDUCES COST OF INPUT. HOWEVER THE HIGH COURT HAS HELD THAT DEDUCT ION U/S.80IB IS NOT ALLOWABLE ON CASH COMPENSATORY SUPPORT SINCE IT DOES NOT HAVE ANY DIRECT LINK WITH THE PROFIT DERIVED FROM THE IN DUSTRIAL ! UNDERTAKING. THE DEPB SCHEME IS AN EXPORT INCENTIV E SCHEME PROVIDED IN IMPORT AND EXPORT POLICY. THE OBJECTIVE OF THE SCHEME IS TO NEUTRALIZE THE INCIDENT OF BASIC CUSTOM DUTY ON THE IMPORT CONTENT OF THE EXPORT PRODUCT. THE EXPORTER IS ELIGIBLE TO CLAIM CREDIT AS A SPECIFIED PERCENTAGE OF VALUE OF EXPORTED PRODUCT A ND IS AVAILABLE AT A RATE OF EXPORTED PRODUCT AS MAY BE DETERMINED BY DGFT. THERE IS NO BAR FOR TRANSFERRING OF THIS CREDIT TO ANOTHER P ERSON AND FROM HIM TO ANOTHER PERSON I.E. THIS CREDIT AMOUNT IS FREELY TRADABLE. AS COMPARED TO THIS THE DUTY DRAW BACK SCHEME IS THE REFUND OF MONEY TO EXPORTER AND IS NOT AN INSTRUMENT WHICH CAN BE T RANSFERRED TO ANYBODY. THE DEPB SCHEME IS THEREFORE LIKE CASH C OMPENSATORY SUPPORT SINCE IT IS FREELY TRADABLE AND IS NOT DIRE CTLY RELATED TO THE PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING. IN VIEW OF THESE FACTS THE APPELLANT IS NOT ENTITLED TO DEDUCTION U /S.80IB SINCE THE DEPB SCHEME DOES NOT INFORM PART OF THE PROFIT DERI VED FROM INDUSTRIAL UNDERTAKING. THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF INDIA GELATINE & CHEMICALS LIM ITED IS NOT APPLICABLE. THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF CIT VS. STERLING FOODS LTD. 237 ITR 579 IS APPL IED. THIS PART OF THE GROUND IS THEREFORE REJECTED. 5. THE ASSESSEE IS NOW IN APPEAL AGAINST THE AFO RESAID FINDINGS OF THE LD. CIT(A). BEFORE US BOTH THE PARTIES AGREED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION DATED 31.8.2009 OF THE HONBLE APEX CO URT IN THE CASE OF M/S LIBERTY INDIA VS. CIT IN A CIVIL APPEAL ARISING OUT OF SLP NO. 5827 OF 2007 NOW REPORTED IN 317 ITR 218(SC). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE. ON A SIMILAR ISSUE AS TO WHETHER THE PROFIT FROM DUTY E NTITLEMENT PASSBOOK SCHEME ITA NO.1533/AHD/2007 5 (DEPB) AND DUTY DRAWBACK SCHEME ARE DERIVED FROM T HE BUSINESS OF THE INDUSTRIAL UNDERTAKING AND CONSEQUENTLY ELIGIBLE F OR DEDUCTION U/S 80-IB OF THE ACT THE HONBLE APEX COURT IN THE CASE OF M/S LIBE RTY INDIA (SUPRA) OBSERVED THAT THE ACT BROADLY PROVIDES FOR TWO TYPES OF TAX INCEN TIVES NAMELY INVESTMENT LINKED INCENTIVES AND PROFIT LINKED INCENTIVES. CHA PTER VI-A ESSENTIALLY BELONGS TO THE CATEGORY OF PROFIT LINKED INCENTIVES WHILE SS . 80-IA/80-IB REFER TO PROFITS DERIVED FROM ELIGIBLE BUSINESS; IT IS NOT THE OWNER SHIP OF THAT BUSINESS WHICH ATTRACTS THE INCENTIVES BUT THE GENERATION OF PROFI TS (OPERATIONAL PROFITS) AND EACH OF THE ELIGIBLE BUSINESS IN SUB-SECTIONS (3) TO (11 A) CONSTITUTES A STAND-ALONE ITEM IN THE MATTER OF COMPUTATION OF PROFITS. IT WAS F URTHER HELD THAT SS. 80-IB/80-IA ARE A CODE BY THEMSELVES AS THEY CONTAIN BOTH SUBST ANTIVE AS WELL AS PROCEDURAL PROVISIONS. S. 80-IB ALLOWS DEDUCTION OF PROFITS AN D GAINS DERIVED FROM THE ELIGIBLE BUSINESS. THE WORDS DERIVED FROM IS NARROWER IN C ONNOTATION AS COMPARED TO THE WORDS ATTRIBUTABLE TO. BY USING THE EXPRESSIO N DERIVED FROM PARLIAMENT INTENDED TO COVER SOURCES NOT BEYOND THE FIRST DEGR EE. THOUGH THE OBJECT BEHIND DEPB ETC IS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY PAYMENT ON THE IMPORT CONTENT OF EXPORT PRODUCT DEPB CREDIT/DUTY DRAWBAC K RECEIPT DO NOT COME WITHIN THE FIRST DEGREE SOURCE AS THE SAID INCENTIVES FLOW FROM INCENTIVE SCHEMES ENACTED BY THE GOVERNMENT OR FROM S. 75 OF THE CUST OMS ACT. SUCH INCENTIVES PROFITS ARE NOT PROFITS DERIVED FROM THE ELIGIBLE B USINESS U/S 80-IB. THEY ARE ANCILLARY PROFITS OF SUCH UNDERTAKINGS AND EVEN A S PER AS-2 AND THE ICAI GUIDANCE NOTE DUTY DRAWBACK DEPB BENEFITS REBATE S ETC. CANNOT BE CREDITED AGAINST THE COST OF MANUFACTURE OF GOODS BUT HAVE T O BE SHOWN AS AN INDEPENDENT SOURCE OF INCOME BEYOND THE FIRST DEGRE E NEXUS BETWEEN PROFITS AND THE INDUSTRIAL UNDERTAKING. THE HONBLE APEX COURT THUS CONCLUDED THAT 16. DEPB IS AN INCENTIVE. IT IS GIVEN UNDER DUTY E XEMPTION REMISSION SCHEME. ESSENTIALLY IT IS AN EXPORT INCENTIVE. NO DOUBT T HE OBJECT BEHIND DEPB IS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY PAYMENT ON THE IMPORT CONTENT OF EXPORT PRODUCT. THIS NEUTRALIZATION IS PROVIDED FOR BY CRE DIT TO CUSTOMS DUTY AGAINST EXPORT PRODUCT. UNDER DEPB AN EXPORTER MAY APPLY F OR CREDIT AS PERCENTAGE OF FOB VALUE OF EXPORTS MADE IN FREELY CONVERTIBLE CU RRENCY. CREDIT IS AVAILABLE ONLY AGAINST THE EXPORT PRODUCT AND AT RATES SPECIF IED BY DGFT FOR IMPORT OF RAW MATERIALS COMPONENTS ETC.. DEPB CREDIT UNDER THE S CHEME HAS TO BE CALCULATED BY TAKING INTO ACCOUNT THE DEEMED IMPORT CONTENT OF THE EXPORT PRODUCT AS PER BASIC CUSTOMS DUTY AND SPECIAL ADDITIONAL DUTY PAYA BLE ON SUCH DEEMED IMPORTS. THEREFORE IN OUR VIEW DEPB/DUTY DRAWBACK ARE INCE NTIVES WHICH FLOW FROM THE SCHEMES FRAMED BY CENTRAL GOVERNMENT OR FROM SECTIO N 75 OF THE CUSTOMS ACT 1962 HENCE INCENTIVES PROFITS ARE NOT PROFITS DERIVED FROM THE ELIGIBLE ITA NO.1533/AHD/2007 6 BUSINESS UNDER SECTION 80-IB. THEY BELONG TO THE CA TEGORY OF ANCILLARYPROFITS OF SUCH UNDERTAKINGS. 17. THE NEXT QUESTION IS WHAT IS DUTY DRAWBACK? S ECTION 75 OF THE CUSTOMS ACT 1962 AND SECTION 37 OF THE CENTRAL EXCISE ACT 1944 EMPOWER GOVERNMENT OF INDIA TO PROVIDE FOR REPAYMENT OF CUSTOMS AND EX CISE DUTY PAID BY AN ASSESSEE. THE REFUND IS OF THE AVERAGE AMOUNT OF DU TY PAID ON MATERIALS OF ANY PARTICULAR CLASS OR DESCRIPTION OF GOODS USED IN TH E MANUFACTURE OF EXPORT GOODS OF SPECIFIED CLASS. THE RULES DO NOT ENVISAGE A REF UND OF AN AMOUNT ARITHMETICALLY EQUAL TO CUSTOMS DUTY OR CENTRAL EXC ISE DUTY ACTUALLY PAID BY AN INDIVIDUAL IMPORTER-CUM-MANUFACTURER. SUB-SECTION ( 2) OF SECTION 75 OF THE CUSTOMS ACT REQUIRES THE AMOUNT OF DRAWBACK TO BE D ETERMINED ON A CONSIDERATION OF ALL THE CIRCUMSTANCES PREVALENT IN A PARTICULAR TRADE AND ALSO BASED ON THE FACTS SITUATION RELEVANT IN RESPECT OF EACH OF VARIOUS CLASSES OF GOODS IMPORTED. BASICALLY THE SOURCE OF DUTY DRAWB ACK RECEIPT LIES IN SECTION 75 OF THE CUSTOMS ACT AND SECTION 37 OF THE CENTRAL EX CISE ACT. 18. ANALYSING THE CONCEPT OF REMISSION OF DUTY DRAW BACK AND DEPB WE ARE SATISFIED THAT THE REMISSION OF DUTY IS ON ACCOUNT OF THE STATUTORY/POLICY PROVISIONS IN THE CUSTOMS ACT/SCHEME(S) FRAMED BY THE GOVERNME NT OF INDIA. IN THE CIRCUMSTANCES WE HOLD THAT PROFITS DERIVED BY WAY OF SUCH INCENTIVES DO NOT FALL WITHIN THE EXPRESSION PROFITS DERIVED FROM INDUSTR IAL UNDERTAKING IN SECTION 80- IB. 19. SINCE RELIANCE WAS PLACED ON BEHALF OF THE ASSE SSEE(S) ON AS-2 WE NEED TO ANALYSE THE SAID STANDARD. 20. AS-2 DEALS WITH VALUATION OF INVENTORIES. INVEN TORIES ARE ASSETS HELD FOR SALE IN THE COURSE OF BUSINESS; IN THE PRODUCTION FOR SU CH SALE OR IN FORM OF MATERIALS OR SUPPLIES TO BE CONSUMED IN THE PRODUCTION. 21. INVENTORY SHOULD BE VALUED AT THE LOWER OF CO ST AND NET REALIZABLE VALUE (NRV). THE COST OF INVENTORY SHOULD COMPRISE ALL COSTS OF PURCHASE COSTS OF CONVERSION AND OTHER COSTS INCLUDING COSTS INCURRED IN BRINGING THE INVENTORY TO THEIR PRESENT LOCATION AND CONDITION. 22. THE COST OF PURCHASE INCLUDES DUTIES AND TAXES (OTHER THAN THOSE SUBSEQUENTLY RECOVERABLE BY THE ENTERPRISE FROM TAX ING AUTHORITIES) FREIGHT INWARDS AND OTHER EXPENDITURE DIRECTLY ATTRIBUTABLE TO THE ACQUISITION. HENCE TRADE DISCOUNTS REBATE DUTY DRAWBACK AND SUCH SIMILAR ITEMS ARE DEDUCTED IN DETERMINING THE COSTS OF PURCHASE. THEREFORE DUTY DRAWBACK REBATE ETC.SHOULD NOT BE TREATED AS ADJUSTMENT (CREDITED) TO COST OF PURCHASE OR MANUFACTURE OF GOODS. THEY SHOULD BE TREATED AS SEPARATE ITEMS OF REVENUE OR INCOME AND ACCOUNTED FOR ACCORDINGLY (SEE: PAGE 44 OF INDIAN A CCOUNTING STANDARDS & GAAP BY DOLPHY DSOUZA). THEREFORE FOR THE PURPOSES OF AS-2 CENVAT CREDITS SHOULD NOT BE INCLUDED IN THE COST OF PURCHASE OF INVENTOR IES. EVEN INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) HAS ISSUED GUIDANCE NOT E ON ACCOUNTING TREATMENT FOR CENVAT/MODVAT UNDER WHICH THE INPUTS CONSUMED A ND THE INVENTORY OF INPUTS SHOULD BE VALUED ON THE BASIS OF PURCHASE COST NET OF SPECIFIED DUTY ON INPUTS (I.E. DUTY RECOVERABLE FROM THE DEPARTMENT AT LATER STAGE) ARISING ON ACCOUNT OF REBATES DUTY DRAWBACK DEPB BENEFIT ETC. PROFIT GE NERATION COULD BE ON ACCOUNT ITA NO.1533/AHD/2007 7 OF COST CUTTING COST RATIONALIZATION BUSINESS RES TRUCTURING TAX PLANNING ON SUNDRY BALANCES BEING WRITTEN BACK LIQUIDATION OF CURRENT ASSETS ETC. THEREFORE WE ARE OF THE VIEW THAT DUTY DRAWBACK DEPB BENEFITS REBA TES ETC. CANNOT BE CREDITED AGAINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PROFIT & LOSS ACCOUNT FOR PURPOSES OF SECTIONS 80-IA/80-IB AS SUCH REMISSIONS (CREDITS) WOULD CONSTITUTE INDEPENDENT SOURCE OF INCOME BEYOND THE FIRST DEGRE E NEXUS BETWEEN PROFITS AND THE INDUSTRIAL UNDERTAKING. 24. IN THE CIRCUMSTANCES WE HOLD THAT DUTY DRAWBAC K RECEIPT/DEPB BENEFITS DO NOT FORM PART OF THE NET PROFITS OF ELIGIBLE INDUST RIAL UNDERTAKING FOR THE PURPOSES OF SECTIONS 80I/80-IA/80-IB OF THE 1961 ACT . 6.1. IN THE LIGHT OF AFORESAID DECISION OF T HE HONBLE APEX COURT WE HOLD THAT DEPB BENEFITS DO NOT FORM PART OF THE NET PROFITS O F ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF SECTION 80-IA OF THE ACT. THER EFORE WE HAVE NO OPTION BUT TO DISMISS GROUND NO.2 IN THE APPEAL. 7. GROUND NO. 3 RELATES TO DEDUCTION U/S 80 IA OF THE ACT ON THE INTEREST INCOME OF RS. 3 01 290/- AND THE ALTERNATE CLAIM OF SETTING OFF OF INTEREST PAID AGAINST THE INTEREST INCOME. T HE AO DISALLOWED THE CLAIM FOR DEDUCTION U/S 80IA OF THE ACT ON THE AFORESAID INTEREST INCOME ON THE GROUND THAT FOR THE PURPOSE OF DEDUC TION U/S 80IA OF THE ACT THE ASSESSEE IS REQUIRED TO ESTABLISH THAT THE PROFITS AND GAINS WERE DERIVED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING AND A MERE COMMERCIAL CONNECTION WAS NOT SUFFICIENT TO ESTABLISH NEXUS BETWEEN PROFITS AND THE INDUSTRIAL UNDERTAKING. ACC ORDINGLY RELYING UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. STERLING FOODS PVT. LTD. 237 ITR 579 THE AO D ISALLOWED THE CLAIM 8. ON APPEAL THE ASSESSEE CONTENDED THAT INTEREST HAS BEEN RECEIVED ON DEPOSIT MADE WITH THE BANK IN ORDER TO GET THE CASH CREDIT FACILITIES FROM THE BANKER FOR BUSINESS PURP OSES. THE ASSESSEE HAD TO PLACE DEPOSITS WITH THE BANK OUT OF BUSINESS COMPULSION AND NOT FOR EARNING ANY INTEREST INCOME. THE INTEREST ON BANK DEPOSITS IS EXCLUSIVE FOR EXPORT BUSINESS AND TO IMPORT THE RAW-MATERIAL AND IS THEREFORE PROFIT DERIVED FROM THE INDUSTRIAL UNDERTAKING. INTER ALIA THE ASSESSEE PLACED RELIAN CE ON THE DECISION OF ITAT PUNE IN THE CASE OF DCIT VS. JAGDISH ELECT RONICS 66 ITD ITA NO.1533/AHD/2007 8 542 AND ON THE DECISION OF HONBLE GUJARAT HIGH COU RT IN THE CASE OF CIT VS. GUJARAT MINERAL DEVELOPMENT CORPORATION 13 2 ITR 377.HOWEVER THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO HOLDING AS UNDER: 8. THE LAST OF THIS GROUND IS REGARDING THE DISALL OWANCE OF DEDUCTION U/S 80IA ON INTEREST INCOME OF RS.3 01 29 0/-. THE APPELLANT IS NOT ENTITLED TO DEDUCTION U/S. 80IA ON THIS INCOME IN VIEW OF THE DECISION OF SPECIAL BENCH OF JURISDICTI ONAL ITAT IN THE CASE OF NIRMA INDUSTRIES LTD. VS. ACIT 95 ITD 109 IN WHICH IT HAS BEEN HELD THAT THE INTEREST ON FDR DOES NOT QUALIFY FOR DEDUCTION U/S 80IB. IT HAS BEEN HELD SO IN THE CASE OF KRIPA CHEM ICALS PVT. LTD. VS. DCIT 88 ITD 200 (ITAT PUNE). THE SAME VIEW HA S BEEN EXPRESSED BY THE ITAT AHMEDABAD IN THE CASE OF DCI T VS. MEERA INDUSTRIES 87 ITD 475. THUS IN VIEW OF THE SPECIA L BENCH'S DECISION OF ITAT AHMEDABAD IN THE CASE OF NIRMA INDUSTRIES IT IS HELD THAT THE APPELLANT IS NOT ENTITLED TO DEDUCTION U/S.80IA ON INTEREST INCOME. THE DISALLOWANCE MADE BY THE AO IS UPHELD. THIS GROUND OF APPEAL IS THEREFORE REJECTED. 9. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGA INST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR ON BEHALF OF THE ASSESSEE WHILE REITERATING THEIR SUBMISSIONS BEFORE THE LD. CIT(A) CONTENDED THAT THE LD. CIT(A) HAS NOT ADJUDICATED THEIR ALTERNATE CLAIM OF SETTING OFF INTEREST PAID OF RS.17 52 102/- AGAINST THE INTERES T INCOME. ON THE OTHER HAND THE LD. DR SUPPORTED THE FINDINGS OF TH E LD. CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE FACTS OF THE CASE. AS REGARDS EXCLUSION OF INTEREST OF RS.3 01 290/- FRO M THE ELIGIBLE PROFITS FOR THE PURPOSE OF DEDUCTION U/S 80IA OF THE ACT THE LEADI NG DECISION IS THAT OF THE HON'BLE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. [1997] 227 ITR 172 WHICH HOLDS THAT INTEREST EARNED ON DEPOSITS PLACE D FOR THE PURPOSES OF OBTAINING LOANS FOR BUSINESS CANNOT BE TREATED AS BUSINESS INCOME BUT ONLY AS INCOME FROM OTHER SOURCES. IT WAS FURTHER HELD THAT THE ASSESSEE CANNOT CLAIM ADJUSTMENT OF EXPENDITURE AGAINST INT EREST ASSESSABLE UNDER SECTION 56. SECTION 57 OF THE ACT SETS OUT IN ITS C LAUSES (I) TO (III) THE EXPENDITURES WHICH ARE ALLOWABLE AS DEDUCTION FROM INCOME ASSESS ABLE UNDER SECTION 56. IT IS NOT THE CASE OF THE ASSESSEE THAT THE INTEREST PAYA BLE BY IT ON TERM LOANS IS ALLOWABLE AS DEDUCTION UNDER SECTION 57 OF THE ACT. THE DECISION IN TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. [1997] 227 ITR 172 WHICH WAS RENDERED IN ITA NO.1533/AHD/2007 9 THE CONTEXT OF SECTIONS 56 AND 57 HAS BEEN FOLLOWE D IN CIT V. AUTOKAST LTD. [2001] 248 ITR 110 (SC). LIKEWISE IN CIT V. DR. V. P. GOPINATHAN [20 01] 248 ITR 449 (SC) INTEREST ON FIXED DEPOSITS WAS HELD NOT TO QU ALIFY FOR SETTING OFF AGAINST INTEREST ON LOANS BORROWED. THE OTHER DECISIONS ON THE SAME LINES IN THE CONTEXT OF SECTION 80HHC ARE CIT V. STERLING FOODS [1999] 237 ITR 579 (SC) AND PANDIAN CHEMICALS LTD. V. CIT [2003] 262 ITR 278 (SC). IN THESE DECISIONS THE HON'BLE SUPREME COURT REITERATED THE NEXUS THEORY A ND DECLINED TO TREAT SUCH INTEREST EARNED AS BUSINESS INCOME. THE DECISION OF THE MADRAS HIGH COURT IN SOUTH INDIA SHIPPING CORPORATION LTD. V. CIT [1999] 240 ITR 24 WAS ALSO RENDERED IN THE CONTEXT OF TREATING CERTAIN RECEIPT S NOT AS BUSINESS INCOME BUT INCOME FROM OTHER SOURCES FOR THE PURPOSES OF SECTI ON 56 READ WITH SECTION 57(III) OF THE ACT. IN CASES WHERE THE ASSESSEE IS REQUIRED TO MANDATORILY KEEP MONIES IN FIXED DEPOSIT IN ORDER TO AVAIL OF CREDIT FACILI TY THE ARGUMENT ON BEHALF OF THE ASSESSEE IS THAT BUT FOR SUCH A STIPULATION BY THE BANK THERE WAS NO NEED FOR THE ASSESSEE TO KEEP THE MONEY IN FIXED DEPOSIT AND THE REFORE THE INCOME EARNED FROM SUCH FIXED DEPOSITS BEARS A DIRECT NEXUS TO TH E BUSINESS ACTIVITY ITSELF. GIVEN THE REPEATED AFFIRMATION BY THE HON'BLE SUPREME COU RT IN THE VARIOUS CASES WE ARE OF THE OPINION THAT INTEREST EARNED FROM THE BA NK DOES NOT HAVE AN IMMEDIATE NEXUS WITH THE BUSINESS OF THE INDUSTRIA L UNDERTAKING AND THEREFORE CAN NOT BE SAID TO BE DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING . 10.1 BEFORE THE AO THE ASSESSEE CLAIMED THA T INTEREST FROM BANK WAS DERIVED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING . HOWEVER THE AO AND THE LD. CIT(A) RELIED UPON CERTAIN DECISIONS OF HONBLE SUPREME COURT AND DECLINED TO ALLOW DEDUCTION U/S 80IA OF THE ACT . THERE IS NO M ATERIAL BEFORE US SUGGESTING THAT INTEREST RECEIVED FROM THE BANK WAS DERIVED FR OM THE BUSINESS OF INDUSTRIAL UNDERTAKING. IN THE CASE OF CIT V. STERLING FOODS [1999] 237 ITR 579 THE ASSESSEE ENGAGED IN PROCESSING PRAWNS AND OTHER SEA FOOD WHICH WAS EXPORTED EARNED SOME INCOME FROM THE IMPORT ENTITL EMENTS GRANTED BY THE CENTRAL GOVERNMENT UNDER THE EXPORT PROMOTION SCHEM E. THE ASSESSEE WAS ENTITLED TO USE THE IMPORT ENTITLEMENTS ITSELF OR S ELL THE SAME TO OTHERS. THE ASSESSEE CLAIMED RELIEF UNDER SECTION 80HH IN RESPE CT OF THE SALE PROCEEDS OF THE IMPORT ENTITLEMENTS. THE TRIBUNAL HELD THAT THE RELIEF COULD NOT BE GRANTED. THE HON'BLE APEX COURT REVERSING THE DECISION OF TH E HIGH COURT WHILE INTERPRETING THE WORDS 'DERIVED FROM' HELD THAT TH ERE MUST BE FOR THE APPLICATION ITA NO.1533/AHD/2007 10 OF THE WORDS 'DERIVED FROM' A DIRECT NEXUS BETWEEN THE PROFITS AND GAINS AND THE INDUSTRIAL UNDERTAKING. AS THE NEXUS WAS ONLY INCID ENTAL AND NOT DIRECT THE RECEIPTS FROM THE SALE OF IMPORT ENTITLEMENTS COULD NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING THE RE LIEF UNDER SECTION 80HH OF THE ACT. SIMILAR VIEWS WERE EXPRESSED BY THE HON'BL E APEX COURT IN THE CASE OF PANDIAN CHEMICALS LTD. V. CIT [2003] 262 ITR 278 . AND RECENTLY IN THE CASE OF M/S LIBERTY INDIA VS. CIT IN A CIVIL APPEAL ARISING OUT OF SLP NO. 5827 OF 2007. 10.2 IN THIS CONTEXT IN THE CASE OF AHMEDABAD MA NUFACTURING AND CALICO PRINTING CO. LTD. VS.CIT 137 ITR 616(GUJ) HONBLE J URISDICTIONAL HIGH COURT HELD WE ARE IN FULL AGREEMENT WITH THE VIEW TAKEN BY TH E BOMBAY HIGH COURT AND TO SOME EXTENT WITH THE VIEW TAKEN BY THE KERALA HIGH COURT. PROFITS AND GAINS CAN BE SAID TO HAVE BEEN ' DERIVED ' FROM AN ACTIVITY C ARRIED ON BY A PERSON ONLY IF THE SAID ACTIVITY IS AN IMMEDIATE AND EFFECTIVE SOURCE OF THE SAID PROFIT OR GAIN. THERE MUST BE A DIRECT NEXUS BETWEEN THE ACTIVITY AND THE EARNING OF THE PROFITS AND GAINS. IN OTHER WORDS WHAT WE HAVE TO CONSIDER IS THE PROXIMATE SOURCE AND NOT THE SOURCE TO WHICH THE PROFIT OR GAIN MAY IN A REM OTE INDIRECT WAY BE REFERABLE. THE VIEW TO THIS EFFECT OF THE PRIVY COUNCIL IN CIT V. KAMAKHYA NARAYAN SINGH [1948] 16 ITR 325 WAS APPROVED BY THE SUPREME COURT IN MRS. BACHA F. GUZDAR V. CIT [1955] 27 ITR 1 AND FOLLOWED BY THE KERALA HIGH COURT IN COCHIN CO MPANY V. CIT [1978] 114 ITR 822 AND BY THE BOMBAY HIGH COURT IN HINDUSTAN LEVER LTD. V. CIT [1980] 121 ITR 951 . IN OUR OPINION THE WORD ' DERIVE ' TO BE FOUND I N S. 2(5)(A)(I) OF THE RELEVANT FINANCE ACT WILL HAVE TO BE GIVEN A MEANING CONSISTENT WITH WHAT WAS DECIDED IN THE ABOVE DECIS IONS. THE WORDS 'DERIVED FROM EXPORTS' CANNOT BE ACCEPTED AS EQUIVALENT TO ' REFERABLE TO EXPORTS ' OR EVEN INDIRECTLY OR REMOTELY CONNECTED WITH THE EXPORTS B Y A NEBULOUS LINK. 10.3 HONBLE PUNJAB AND HARYANA HIGH COURT IN T HE CASE OF NAHAR EXPORTS VS. CIT 288 ITR 494 UPHELD DISALLOWANCE OF CLAIM FOR DE DUCTION U/S 80IB OF THE ACT ON THE INTEREST INCOME IN THE LIGHT OF AFORESAID DECISIONS OF THE APEX COURT . 10.4 FOR THE PURPOSE OF CLAIMING DEDUCTION UNDE R S. 80-IA OF THE ACT THE ASSESSEE IS NOT ONLY REQUIRED TO ESTABLISH THAT IT WAS BUSINESS PROFIT OF THE INDUSTRIAL UNDERTAKING BUT ALSO TO ESTABLISH THAT THIS WAS A PROFIT 'DERIVED FROM' THE BUSINESS ACTIVITY OF AN INDUSTRIAL UNDERTAKING WH ICH MEANS A DIRECT NEXUS BETWEEN THE PROFITS AND INDUSTRIAL UNDERTAKING. THE MERE FACT THAT SUCH INCOME WAS A BUSINESS INCOME WOULD NOT ENTITLE THE ASSESSE E FOR DEDUCTION UNDER S. 80- IA OF THE ACT. THOUGH THE ASSESSEE MAY NECESSARILY HAVE TO MAKE TH E DEPOSIT ITA NO.1533/AHD/2007 11 WITH THE BANK FOR CERTAIN GUARANTEES OR WARRANTIE S THE INCOME ON ACCOUNT OF INTEREST FROM SUCH DEPOSITS WITH THE BANK CANNOT B E SAID TO HAVE BEEN DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. TH E IMMEDIATE SOURCE OF INTEREST IS THE DEPOSIT ITSELF AND THE EFFECTIVE SOURCE OF THE GENEALOGY OF THE SOURCE OF THE INTEREST INCOME IS THE DEPOSIT AND NOT BUSINESS AS THE INDUSTRIAL UNDERTAKING IS REMOVED BY ONE STEP FROM THE SOURCE OF INCOME FOR T HE INTEREST. IN OTHER WORDS THE IMMEDIATE AND EFFECTIVE SOURCE OF THE INTEREST IS THE DEPOSIT AND NOT THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. AS HELD BY THE HONBLE SUPREME COURT IN CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [ 1978] 113 ITR 84 THE PROFITS OR GAINS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT MUST BE DERIVED FROM THE ACTUAL CONDUCT OF THE BUSINESS AND UNLESS THE PROFITS OR GAINS ARE DERIVED FROM THE ACTUAL CONDUCT OF THE BUSINESS IT CANNOT BE STATED THAT THE INTEREST IS DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTA KING. IN OTHER WORDS THE INDUSTRIAL UNDERTAKING MUST DIRECTLY YIELD THE PROF IT AND IT CANNOT BE THE MEANS TO YIELD THE INCOME. THE DEPOSIT MIGHT BE AN INCIDENTA L INVESTMENT WITH THE BUSINESS OF THE INDUSTRIAL UNDERTAKING AND THAT WOU LD NOT BE SUFFICIENT TO RENDER THE INTEREST INCOME AS PROFITS AND GAINS DERIVED FR OM THE INDUSTRIAL UNDERTAKING. THE FACT THAT THE AMOUNT WAS ASSESSED AS BUSINESS I NCOME ITSELF WOULD NOT BE SUFFICIENT TO HOLD THAT THE INTEREST INCOME WAS DER IVED FROM THE ACTUAL CONDUCT OF THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. IN OTHE R WORDS IT IS NOT ALL BUSINESS RECEIPTS THAT WOULD QUALIFY FOR THE DEDUCTION AND T HE LEGISLATURE HAS APPARENTLY NOT INTENDED TO GIVE THE BENEFIT OF DEDUCTION TO AL L BUSINESS INCOME. IF THE INTENTION OF THE LEGISLATURE WAS TO GRANT RELIEF TO ALL BUSINESS INCOME IT COULD HAVE USED THE EXPRESSION 'PROFITS AND GAINS OF IND USTRIAL UNDERTAKING' THE FACT THAT THE LEGISLATURE HAS USED THE EXPRESSION 'PROFI TS AND GAINS DERIVED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING' HAS SOME SIGNI FICANCE AND IT CONNOTES THAT THE IMMEDIATE AND EFFECTIVE SOURCE OF INCOME ELIGIB LE FOR GRANT OF RELIEF UNDER SECTION 80IA/IB OF THE ACT MUST BE THE INDUSTRIAL U NDERTAKING ITSELF AND NOT ANY OTHER SOURCE. THE MANDATE OF LAW IS THAT UNLESS THE SOURCE OF THE PROFIT IS THE UNDERTAKING THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA/IB OF THE ACT. MERE COMMERCIAL CONNECTION BETWEEN THE INCOME AND THE INDUSTRIAL UNDERTAKING WOULD NOT BE SUFFICIENT. THE DERIVATION OF THE INCOME MUST BE DIRECTLY CONNECTED WITH THE BUSINESS IN THE SENSE THAT THE I NCOME IS GENERATED BY THE BUSINESS. IT WOULD NOT BE SUFFICIENT IF IT IS GENER ATED BY THE EXPLOITATION OF A BUSINESS ASSET. ITA NO.1533/AHD/2007 12 10.5 HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS.GASKETS AND RADIATORS DISTRIBUTORS 296 ITR 440(GUJ) IN THE CON TEXT OF DEDUCTION U/S 80HHC OF THE ACT IN RESPECT OF INCOME ON ACCOUNT OF INTER EST ON FIXED DEPOSITS HELD IDENTICAL QUESTION CAME TO BE CONSIDERED BY THE HO N'BLE SUPREME COURT IN PANDIAN CHEMICALS LTD. V. CIT [2003] 262 ITR 278 AND THE QUESTION WHICH WAS POSED FOR CONSIDERATION BEFORE THE APEX COURT WAS W HETHER THE INTEREST ON DEPOSITS WITH THE TAMIL NADU ELECTRICITY BOARD SHOU LD BE TREATED AS INCOME DERIVED BY THE INDUSTRIAL UNDERTAKING FOR THE PURPO SE OF SECTION 80HH OR NOT AND THE HON'BLE SUPREME COURT HAS OBSERVED THAT SECTION 80HH OF THE INCOME-TAX ACT GRANTS DEDUCTION IN RESPECT OF PROFITS AND GAIN S 'DERIVED FROM' AN INDUSTRIAL UNDERTAKING AND THE WORDS 'DERIVED FROM' IN SECTION 80HH OF THE INCOME-TAX ACT 1961 MUST BE UNDERSTOOD AS SOMETHING WHICH HAS A D IRECT OR IMMEDIATE NEXUS WITH THE ASSESSEE'S INDUSTRIAL UNDERTAKING. THE SUP REME COURT HELD THAT INTEREST DERIVED BY THE INDUSTRIAL UNDERTAKING OF THE ASSESS EE ON DEPOSITS MADE WITH THE TAMIL NADU ELECTRICITY BOARD FOR THE SUPPLY OF ELEC TRICITY 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 UNDERTA KING FOR THE PURPOSE OF THE SAID DEDUCTION UNDER SECTION 80HH. IN G.T.N. TEXTIL ES LTD. V. DY. CIT [2005] 279 ITR 72 THE KERALA HIGH COURT HELD THAT INTEREST ON BANK DEPOSITS WAS NOT PROFIT DERIVED FROM EXPORT OF GOODS. THE KERALA HIGH COURT HAS FURTHER HELD THAT THE INTEREST EARNED BY THE ASSESSEE ON FIXED DEPOSITS COMMISSION RECEIVED ON SALE OF MACHINERY ETC. WERE NOT BUSINESS INCOME AND CO NSEQUENTLY THE ASSESSEE WAS NOT ENTITLED TO COMPUTATION OF ELIGIBLE DEDUCTI ON UNDER SECTION 80HHC OF THE ACT BY INCLUDING THOSE RECEIPTS UNDER BUSINESS INCO ME. THEREFORE CONSIDERING THE AFORESAID TWO DECISIONS WE MUST HOLD THAT THE TRIBUNAL AS WELL AS THE COMMISSIONER OF INCOME-TAX (APPEALS) BOTH COMMITTE D AN ERROR IN TREATING THE INTEREST ON DEPOSITS AS 'BUSINESS INCOME' AND GRANT ING THE ASSESSEE THE DEDUCTION UNDER SECTION 80HHC OF THE ACT.. 11. IN VIEW OF THE FOREGOING ESPECIALLY WHEN THERE IS NOTHING TO ESTABLISH THE NEXUS OF EARNING OF INTEREST INCOME WITH THE ACTIVI TIES OF THE INDUSTRIAL UNDERTAKING AND THE EXPORT BUSINESS OF THE ASSESSE IN THE LIGH T OF THE AFORESAID JUDICIAL PRONOUNCEMENTS INCLUDING THE JUDGMENTS IN CAMBAY E LECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978] 113 ITR 84 (SC) CIT V. COCHIN REFINERIES LTD. [1982] 135 ITR 278 (KER.) AND PANDIAN CHEMICALS LTD. V. CIT [2003] 262 ITR 278 (SC) AS ALSO OF JURISDICTIONAL HIGH COURT IN THE CASE OF GA SKETS AND RADIATORS DISTRIBUTORS(SUPRA) WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE CONCLUSION OF THE LD. CIT(A). 11.1 AS REGARDS ALTERNATE PLEA ON BEHALF OF THE ASSESSEE FOR SETTING OFF INTEREST EXPENDITURE AGAINST INTEREST INCOME AND EXCLUSION O F NET INTEREST INCOME WHILE COMPUTING DEDUCTION U/S 80IA OF THE ACT THERE IS NO DISCUSSION ON THIS ASPECT IN ITA NO.1533/AHD/2007 13 THE ASSESSMENT ORDER NOR THE ASSESSEE RAISED ANY SU CH GROUND OR ALTERNATE PLEA BEFORE THE LD. CIT(A). CONSEQUENTLY THERE ARE NO F INDINGS ON THIS ASPECT IN THE IMPUGNED ORDER. THOUGH THE LD. AR ON BEHALF OF THE ASSESSEE PLEADED THAT THEIR CLAIM FOR SET OFF OF THE EXPENDITURE ON ACCOUNT OF INTEREST AGAINST INTEREST INCOME HAS NOT BEEN CONSIDERED BY THE LD. CIT(A) NOT AN I OTA OF EVIDENCE SEEMS TO HAVE BEEN PLACED BEFORE THE LOWER AUTHORITIES AND EVEN B EFORE US THAT ANY SUCH PLEA WAS RAISED BEFORE THE LD. CIT(A) NOR WE FIND ANY S UCH MENTION IN THE GROUNDS OF APPEAL. IN THE ABSENCE OF ANY EVIDENCE ESTABLISHING NEXUS OF EXPENDITURE ON ACCOUNT INTEREST WITH THE INTEREST INCOME WE ARE NOT INCLINED TO ACCEPT EVEN THE ALTERNATE GROUND. THUS GROUND NO. 3 IN THE APPEAL IS DISMISSED. 12. NEXT GROUND NO.4 RELATES TO EXCLUSION OF 90% OF INTEREST INCOME FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF DEDUCTIO N U/S 80HHC OF THE ACT. THE AO EXCLUDED THE GROSS INTEREST INCOME OF RS.3 01 79 0/- FROM THE PROFITS OF THE BUSINESS WHILE DETERMINING DEDUCTION U/S 80HHC OF T HE ACT ON THE GROUND THAT INTEREST INCOME WAS NOT DERIVED FROM THE EXPORT BUS INESS RELYING INTER ALIA ON THE DECISION OF THE HOBLE SUPREME COURT IN THE CAS E OF CIT VS. STERLING FOODS 237 ITR 579(SC). ON APPEAL THE LD. CIT(A) UP HELD THE FINDINGS OF THE AO IN THE FOLLOWING TERMS: 12 AS REGARDS THE DEDUCTION OF INTEREST INCOME FRO M THE PROFIT FOR COMPUTING THE DEDUCTION U/S 80HHC I DO NOT FIND AN Y FORCE IN THE ARGUMENTS OF THE COUNSEL FOR THE APPELLANT THE HON BLE MADRAS HIGH COURT IN THE CASE OF C1T VS. CHINA PANDI 282 ITR 3 89 HAS CLEARLY HELD THAT WHILE COMPUTING THE PROFIT OF BUSINESS FO R THE PURPOSE OF SECTION U/S. 80HHC 90% OF THE GROSS INTEREST RECEI VED BY THE ASSESSEE WITHOUT DEDUCTING THERE FROM THE INTEREST PAID BY THE ASSESSEE IS TO BE REDUCED. THE HON'BLE MADRAS HIGH COURT HAS FOLLOWED THE DECISION OF THE HON'BLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF RANI PALIWAL VS. CIT 268 ITR 220. THUS IN VIEW OF THE DIRECT JUDGMENTS OF THE HON'BLE JMADRAS HIGH COURT & PUNJAB & HARYANA HIGH COURT IT IS HELD THAT 90% OF THE INTE REST INCOME SHOULD BE REDUCED FROM THE PROFIT FOR COMPUTING DED UCTION U/S.80HHC. THE AO IS DIRECTED TO REDUCE 90% OF THE INTEREST INCOME FROM THE PROFIT FOR COMPUTING THE DEDUCTION U/S. 80 HHC. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 13. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGA INST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSEE REITERATED THEIR SUBMISSIONS BEFORE THE LD . CIT(A) WHILE THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A) . ITA NO.1533/AHD/2007 14 14. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THOUGH THE AO EXCLUDED ENTIRE INTERES T INCOME WHILE DETERMINING PROFITS OF THE BUSINESS FOR THE PURPOSE OF DEDUCTI ON U/S 80HHC OF THE ACT ON THE GROUND THAT THE SAID INTEREST INCOME WAS NOT DERIVE D FROM EXPORT BUSINESS OF THE ASSESSEE THE LD. CIT(A) FOLLOWING THE DECISIONS O F THE HONBLE MADRAS HIGH COURT IN CHINA PANDI(SUPRA) AND OF THE HONBLE PUNJ AB & HARYANA HIGH COURT IN RANI PALIWAL(SUPA) DIRECTED THE AO TO EXCLUDED 90% OF THE INTEREST INCOME FROM THE PROFITS OF THE BUSINESS. THERE IS NOTHING TO SU GGEST AS TO WHETHER OR NOT THE RECEIPTS ON ACCOUNT INTEREST ON DEPOSITS AND MARGIN MONEY KEPT WITH BANK IN ORDER TO AVAIL OVERDRAFT AND CASH CREDIT FACILITIES HAD ANY RELATION WITH EXPORTS MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDER ATION. 14.1 A BARE PERUSAL OF PROVISIONS OF SEC. 80HHC OF THE ACT REVEALS THAT THE INCOME WHICH IS UNDERSTOOD TO BE COMPUTED UNDER THI S PROVISION MUST HAVE BEEN DERIVED BY THE ASSESSEE FROM THE EXPORT OF SUCH GOO DS OR MERCHANDISE. ADMITTEDLY THE INTEREST INCOME WAS NOT DERIVED BY E XPORT OF GOODS OR MERCHANDISE. A DIVISION BENCH OF THE HONBLE KERALA HIGH COURT IN NANJI TOPANBHAI AND CO. V. ASST. CIT [2000] 243 ITR 192 WAS CONSIDERING THE QUESTION AS TO WHETHER THE INTEREST EARNED ON FIXED DEPOSIT WAS INCOME ARISING OUT OF EXPORT OR INCOME FROM OTHER SOURCES. THE HON BLE HIGH COURT HELD (HEADNOTE): 'UNDER SECTION 80HHC OF THE INCOME-TAX ACT 1961 T HE ASSESSEE WHO IS ENGAGED IN EXPORT BUSINESS IS ALLOWED IN COMPUTING THE TOTAL INCOME A DEDUCTION OUT OF THE INCOME DERIVED FROM THE EXPORT OF SUCH GOODS. UNLESS THE ASSESSEE IS ABLE TO SHOW THAT THE INCOME RECEIVED B Y WAY OF INTEREST FROM THE FIXED DEPOSIT IS DERIVED FROM THE EXPORT BUSINESS IT WILL NOT BE ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80HHC IN RESPECT OF IT'. 14.2 IN ANOTHER JUDGMENT REPORTED IN CIT V. COCHI N REFINERIES LTD. [1985] 154 ITR 345 HONBLE KERALA HIGH COURT HELD: 'PROFITS AND GAINS ARE WELL UNDERSTOOD TO MEAN ONLY THE BUSINESS INCOME AND NOT ANY OTHER INCOME. SO LONG AS THE COMPANY HAS NO BUSINESS OF LENDING MONEY AND SO LONG AS THE ADMITTED CASE OF THE COMP ANY IS THAT THE INCOME DERIVED IS ONLY ON ACCOUNT OF THE PECULIAR SITUATIO N ARISING FROM THE TIME SCHEDULE FOR REPAYMENT OF THE LOANS IT CANNOT BE STATED THA T THE INCOME YIELDED BY THE DEPOSITS OR INVESTMENTS WAS RECEIVED IN THE COURSE OF THE COMPANY'S BUSINESS SO AS TO BE TREATED AS A BUSINESS PROFIT' ITA NO.1533/AHD/2007 15 14.3 WE FIND THAT IN URBAN STANISLAUS CO. [2003] 263 ITR 10 (KER) WHERE THE ASSESSEE HAD CONTENDED THAT AS A CONDITION FOR OBTA INING A LOAN FROM THE BANK 29 PER CENT. OF THE SALE RECEIPTS HAD TO BE DEPOSIT ED BY WAY OF SECURITY AND IT WAS CLAIMED THAT THE INTEREST EARNED ON SUCH DEPOSI T WAS BUSINESS INCOME FOR THE PURPOSE OF SECTION 80HHC THE HONBLE KERALA HI GH COURT NEGATIVED THE CLAIM BY OBSERVING THAT: 'THE ASSESSEE CAN CLAIM DEDUCTION IN RESPECT OF THE PROFITS DERIVED FROM THE EXPORT OF GOODS ONLY WHEN IT IS ESTABLISHED THAT TH E INCOME IS SOLELY RELATED TO THE EXPORT. THE OBVIOUS INTENTION BEHIND THE PROVISION IN SECTION 80HHC IS TO PROMOTE EXPORTS. HOWEVER THE INCOME EARNED BY WAY OF INTEREST FROM FIXED DEPOSIT IS NOT AN INCOME FROM EXPORTS. THUS IT WAS RIGHTLY TAKEN INTO ACCOUNT AS INCOME FROM OTHER SOURCES'. 14.4 THIS DECISION HAS BEEN AFFIRMED BY THE HON'B LE SUPREME COURT BY THE DISMISSAL OF THE SPECIAL LEAVE PETITION. IN K. RAVI NDRANATHAN NAIR [2003] 262 ITR 669 (KER) IN DEALING WITH A SIMILAR ISSUE THE HONBL E KERALA HIGH COURT HELD: 'THE INTEREST FROM SHORT-TERM DEPOSITS RECEIVED BY THE APPELLANT IS NOT THE DIRECT RESULT OF ANY EXPORT OF ANY GOODS OR MERCHANDISE. T HE FIXED DEPOSIT WAS MADE ONLY FOR THE PURPOSE OF OPENING LETTERS OF CREDIT A ND FOR GETTING OTHER BENEFITS WHICH ARE NECESSARY REQUIREMENTS TO ENABLE THE APPE LLANT TO MAKE THE EXPORT. FROM THE ABOVE IT IS CLEAR THAT THE INTEREST INCOME RECEIVED ON THE SHORT-TERM DEPOSITS THOUGH IT CAN BE ATTRIBUTED TO THE EXPORT BUSINESS CANNOT BE TREATED AS INCOME WHICH IS DERIVED FROM THE EXPORT BUSINESS. I N THE ABOVE CIRCUMSTANCES EVEN ASSUMING THAT THE BANK HAS INSISTED FOR MAKING SHORTTERM DEPOSITS FOR OPENING LETTERS OF CREDIT AND FOR OTHER FACILITIES IT CANNOT BE SAID THAT THE INCOME IS DERIVED FROM THE EXPORT BUSINESS.' 14.5 THE ABOVE DECISION IN K. RAVINDRANATHAN NA IR [2003] 262 ITR 669 (KER) HAS BEEN AFFIRMED BY THE HON'BLE SUPREME COURT BY T HE DISMISSAL OF THE SPECIAL LEAVE PETITION. TO THE SAME EFFECT IS THE JUDGMENT OF THE SAME HIGH COURT IN SOUTHERN CASHEW EXPORTERS V. DEPUTY CIT [2003] 130 TAXMAN 203 (KER) WHICH HAS BEEN AFFIRMED BY THE HON'BLE SUPREME COURT ON A CCOUNT OF THE DISMISSAL OF THE SPECIAL LEAVE PETITION. THE RESULTANT POSITION IS THAT ON THREE OCCASIONS THE HON'BLE SUPREME COURT HAS AFFIRMED THE JUDGMENTS OF THE KERALA HIGH COURT THAT HAS CONSISTENTLY HELD THAT INTEREST EARNED ON FIXED DEPOSITS FOR THE PURPOSES OF AVAILING OF CREDIT FACILITIES FROM THE BANK DOES N OT HAVE AN IMMEDIATE NEXUS WITH THE EXPORT BUSINESS AND THEREFORE HAS TO NECESSARI LY BE TREATED AS INCOME FROM OTHER SOURCES AND NOT AS BUSINESS INCOME. IN CIT V. STERLING FOODS [1999] 237 ITR 579 (SC) AND PANDIAN CHEMICALS LTD. V. CIT [2003] 262 ITR 278 (SC) THE ITA NO.1533/AHD/2007 16 HON'BLE SUPREME COURT REITERATED THE NEXUS THEORY A ND DECLINED TO TREAT SUCH INTEREST EARNED AS BUSINESS INCOME. AN ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF EXPORTS AND INVESTS THE SURPLUS FUNDS I N FIXED DEPOSITS WILL NOT BE ABLE TO TREAT THE INTEREST EARNED THEREON AS BUSINE SS INCOME SINCE IT DOES NOT BEAR ANY DIRECT NEXUS WITH THE EXPORT BUSINESS OF T HE ASSESSEE. HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GA SKETS & RADIATORS DISTRIBUTORS 296 ITR 440(GUJ) RELYING INTER ALIA ON THE DECISION OF THE HONBLE SUPREME COURT IN PANDIAN CHEMICALS LTD . V. CIT [2003] 262 ITR 278 HELD THAT RECEIPTS ON ACCOUNT OF INTEREST ON DEPOS ITS ARE NOT REQUIRED TO BE CONSIDERED FOR DEDUCTION U/S 80HHC O F THE ACT. 14.6 IN CIT VS. RAKESH RAKHEJA 166 TAXMAN 50 (DELHI) HONBLE HIGH COURT HELD THAT THE INCOME EARNED BY THE ASSESSEE FROM FD RS IS REQUIRED TO BE ASSESSED AS INCOME FROM OTHER SOURCES. THE SAID INC OME IS THEREFORE OUTSIDE THE PURVIEW OF SECTION 80HHC OF THE ACT AND 100 PER CENT OF THE INTEREST IS REQUIRED TO BE EXCLUDED FROM THE PROFITS OF THE BUS INESS IN TERMS OF EXPLANATION ( BAA ) TO SECTION 80HHC OF THE ACT. 14.7 IN CIT VS. KRAFT LAND INDIA 162 TAXMAN 123 (DEL) HONBLE DELHI HIGH COURT HELD THAT INTEREST RECEIVED ON FDR S PLEDGED FOR SHIPPING LOAN/DEPOSITORY LOAN WAS NOT BUSINESS INC OME AND THEREFORE INTEREST PAID BY THE ASSESSEE COULD NOT BE REDUCED FROM THE INTEREST RECEIVED WHILE CALCULATING DEDUCTION U /S 80HHC READ WITH EXPLANATION (BAA) THERETO. 14.8 IN CIT VS. MALWA COTTON SPINNING MILLS LTD. 166 TAXMAN 457(PB. & HARYANA) HONBLE HIGH COURT HELD THAT 6. CLAUSE (BAA) AS REFERRED TO ABOVE TALKS OF PROCEDURES AS TO HOW PROFITS OF BUSINESS ARE TO BE COMPUTED. IT PROVIDES THAT IN CA SE INCOMES OF THE KIND INCLUDING INTEREST ARE INCLUDED IN THE PROFITS OF B USINESS 90 PER CENT THEREOF SHALL BE REDUCED THEREFROM. IT DOES NOT MAKE ANY DISTINCT ION BETWEEN THE INTEREST EARNED FROM SOURCE 'A' OR SOURCE 'B'. INTEREST FROM WHEREVER IT IS EARNED RETAINS THE CHARACTER OF INTEREST. BE IT AN INTEREST FROM T HE CUSTOMER ON DELAYED PAYMENT OF DUES. 15. DURING THE COURSE OF HEARING OF THE AP PEAL THE LD. AR WAS POINTED OUT A RECENT DECISION DATED 18/19/3/2010 OF THE HONBLE B OMBAY HIGH COURT IN THE ITA NO.1533/AHD/2007 17 CASE OF CIT VS. ASIAN STAR CO. LTD. IN ITA NO. 200 OF 2009 WHEREIN IT WAS HELD THAT EXPLANATION (BAA) TO S. 80HHC REQUIRES THAT N INETY PER CENT OF RECEIPTS BY WAY OF BROKERAGE COMMISSION INTEREST RENT CHARG ES OR ANY OTHER RECEIPT OF A SIMILAR NATURE HAVE TO BE REDUCED FROM THE PROFITS. THE REASON WHY ITEMS LIKE BROKERAGE ETC HAVE TO BE EXCLUDED IS BECAUSE THEY D O NOT POSSESS ANY NEXUS WITH EXPORT TURNOVER AND THEIR INCLUSION IN PROFITS WOULD RESULT IN A DISTORTION OF THE FIGURE OF EXPORT PROFITS. HOWEVER AS SOME EXPENDIT URE MIGHT HAVE BEEN INCURRED IN EARNING THESE INCOMES AN ADHOC DEDUCTION OF TEN PER CENT FROM SUCH INCOME IS ALLOWED. IT WAS FURTHER OBSERVED BY THE HONBLE HIGH COURT THAT ONCE PARLIAMENT HAS LEGISLATED BOTH IN REGARD TO THE NAT URE OF THE EXCLUSION AND THE EXTENT OF THE EXCLUSION IT WOULD NOT BE OPEN TO TH E COURT TO ORDER OTHERWISE BY REWRITING THE LEGISLATIVE PROVISION. THE TASK OF IN TERPRETATION IS TO FIND OUT THE TRUE INTENT OF A LEGISLATIVE PROVISION AND IT IS CLEARLY NOT OPEN TO THE COURT TO LEGISLATE BY SUBSTITUTING A FORMULA OR PROVISION OTHER THAN W HAT HAS BEEN LEGISLATED BY PARLIAMENT. IT IS NOT OPEN TO SAY THAT SOMETHING MO RE THAN THE 10% STATUTORILY PROVIDED SHOULD ALSO BE ALLOWED. HONBLE HIGH COURT FURTHER HELD THAT IN SHRI RAM HONDA POWER EQUIP 289 ITR 475 THE DELHI HIGH COURT HAS NOT ADEQUAT ELY EMPHASIZED THE ENTIRE RATIONALE FOR CONFINING THE D EDUCTION ONLY TO THE EXTENT OF NINETY PER CENT OF THE EXCLUDIBLE RECEIPTS AND IT C ANNOT BE FOLLOWED; AS REGARDS THE JUDGEMENT OF THE SPECIAL BENCH IN LALSONS ENTERPRISES HONBLE HIGH COURT HELD THAT WE ARE AFFIRMATIVELY OF THE VIEW THAT THE TRIBU NAL HAS TRANSGRESSED THE LIMITATIONS ON THE EXERCISE OF JUD ICIAL POWER AND . HAS IN EFFECT LEGISLATED BY PROVIDING A DEDUCTION ON THE GROUND O F EXPENSES OTHER THAN IN THE TERMS WHICH HAVE BEEN ALLOWED BY PARLIAMENT. THAT I S IMPERMISSIBLE. 16. IN VIEW OF THE FOREGOING ESPECIALLY WHEN THE AFORESAID RECEIPTS ON ACCOUNT OF BANK INTEREST ARE INDEPENDENT INCOMES WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THES E RECEIPTS HAVE NO RELATION WITH EXPORTS MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THERE IS NO MATERIAL BEFORE US THAT ANY EXPENDITURE HAS BEEN IN CURRED FOR EARNING THE AFORESAID RECEIPTS NOR SUCH AN ISSUE SEEMS TO HAVE BEEN RAISED BEFORE THE LD. CIT(A).THEREFORE GROUND NO. 4 IS DISMISSED. . 17. NO ADDITIONAL GROUND HAVING BEEN RAISED IN T ERMS OF THE RESIDUARY GROUND ACCORDINGLY THIS GROUND IS DISMI SSED.. ITA NO.1533/AHD/2007 18 18 IN THE RESULT APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9-04-2010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 9 -04-2010 COPY OF THE ORDER FORWARDED TO : 1. M/S SURYA INTERNATIONAL A-401 SAMUDRA COMPLEX NAVRANGPURA AHMEDABAD 2. THE ITO WARD-10(4) AHMEDABAD 3. THE CIT CONCERNED 4. THE CIT(A)-XVI AHMEDABAD 5. THE DR ITAT D BENCH AHMEDABAD 6. GUARD FILE BY ORDER DY.R/AR ITAT AHMEDABAD