Presstress Wire Indsutries Vs. Department of Income Tax - Court Judgment

SooperKanoon Citationsooperkanoon.com/1150011
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided OnJan-31-2014
Case NumberI.T.A. No.8418/M of 2010, I.T.A. No.6312/M of 2011 C.O. No.138/M/2012 (Arising Out of I.T.A. No.8418/M of 2010 & I.T.A. No.6005/M of 2011
JudgeTHE HONOURABLE MR. D. KARUNAKARA RAO, AM & THE HONOURABLE DR. S.T.M. PAVALAN, JM
AppellantPresstress Wire Indsutries
RespondentDepartment of Income Tax
Excerpt:
d. karunakara rao, am: 1. there are four appeals under consideration. out of four appeals, there are cross appeals for the ay 2007-2008. ita no. 8418/m/2010 (2007-2008) and ita no.6312/m/2011 (ay 2008-2009) are filed by the revenue and ita no.6005/m/2011 (ay 2008-2009) and co no.138/m/2012 (ay 2007-2008) are filed by the assessee. since, the identical issues are involved in all these four appeals, therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. appeal wise and ground wise adjudication is given in the following paragraphs. 2. firstly we shall take-up the revenue appeal filed on 3.12.2010 vide ita no.8418/m/2010 for the ay 2007-2008 against the order of the cit (a)-23, mumbai dated 7.9.2010. in this appeal, revenue raised the following grounds which read as under: "1. on the facts and circumstances of the case and in law, the ld cit (a) erred in directing the ao to allow deduction u/s 80ib of rs. 8,50,23,349/- in respect of profits and gains of business of three new industrial undertaking i.e., unit ii, unit iii and falaudi unit without appreciating the fact that as the activities of these units do not constitute manufacture or production of any articles or things as specified in section 80-ib of the act. 2. the appellant prays that the order of the cit (a) on the above ground/s be set aside and that of the ao be restored." 3. at the outset, ld counsel for the assessee brought our attention to the above ground no.1 raised by the revenue and mentioned that an identical issue has been raised by the revenue before the tribunal in assessee's own case vide ita no.4451 and 4452/m/2008 for the ay 2004-2005 and 2005-06, dated 20.11.2009. in this regard, ld counsel read out the relevant para 4 to 9 of the said order of the tribunal (supra), wherein the tribunal had decided the issue in favour of the assessee by holding that the activity of the assessee is a manufacturing activity and consequently eligible for deduction u/s 80ia of the act. he further mentioned that, for the ays 1995-96 to 1998-99, the revenue was aggrieved with the similar decision of the tribunal and filed an appeal before the hon'ble high court of bombay, wherein the high court dismissed the appeal vide income tax appeal no. 4728 and 4729 of 2010, dated 14th september, 2011. he also mentioned that the tribunal has consistently been allowing the assessee's claim of deduction u/s 80ia of the act. 4. on the other hand, ld dr relied on the orders of the revenue authorities. 5. we have heard both the parties and perused the orders of the revenue authorities as well as the orders of the tribunal filed before us. on perusal of the said order of the tribunal dated 20.11.2009 (supra), we find para 9 is relevant in this regard and the same is reproduced here under: "9. we have considered the rival submissions made by both the sides, perused the orders of the ao and the cit (a) and paper book filed on behalf of the assessee. we have also considered the various decisions cited before us. the only dispute in the instant case is as to whether the activity of the assessee company amounts to manufacture or production of an article or thing so as to enable the assessee the benefit of deduction u/s 80ib of the act. we find the itat vide consolidated order dated 29.12.2006 for the ays 1995-1996 to 1998-1999 has held that the activity of the assessee is a manufacturing activity and consequently eligible for deduction u/s 80ia of the act. accordingly, the appeal filed by the revenue has been dismissed. similarly, we find the itat in the cross appeals vide ita nos.4737/mum/2006 ad 5260/mum/2006 order dated 29.10.2008 for the ay 2003-2004, where one of us (am) is party, has held that the activity of the assessee is that of manufacturing and the assessee is entitled to deduction u/s 80ib of the act. we find the decision of the hon'ble apex court in the case of techno weld industries (supra) and the decisions in the grounds of appeal are distinguishable and not applicable to the facts of the present case. we further find merit in the submission of the learned counsel for the assesse that when the itat granted relief in the initial year and subsequent years and since there is no compelling circumstances, to take a different view than the view taken by the itat consistently, therefore, the relief cannot be withdrawn and the proper forum for the revenue is to approach the hon'ble high court for this year also since they have approached the high court for the earlier years. since, the cit (a) has followed the orders of the itat for the earlier years. therefore, respectfully following the orders of the itat for the earlier years, we uphold the order of the cit (a) and the grounds raised by the revenue are dismissed." 6. from the above, the itat has been consistently granting relief to the assessee by holding that the activity of the assessee is a manufacturing activity and therefore, it is eligible for deduction u/s 80ia of the act. as well, no contrary material has been brought to our notice by the revenue to take a different view than that of the earlier views taken by the itat. therefore, in these circumstances, following the principle of consistency, we are of the considered opinion that the assessee should get relief and accordingly the grounds raised by the revenue are dismissed. 7. in the result, appeal of the revenue is dismissed. c.o. no.138/m/2012 (ay: 2007-2008) (by assessee) 8. this cross objection is filed by the assessee on 26.6.2012 against the order of cit (a)-23, mumbai dated 7.9.2010 for the ay 2007-2008. 9. in this cross objection, assessee raised the following grounds which read as under: "1. the ld cit (a) erred in holding that the ao has rightly brought to tax interest income of rs. 1,08,44,725/- as income from other sources and consequently denying deduction u/s 80ib of the act in respect thereof. your respondent submit that on the facts and in the circumstances of their case, the interest income is assessable as "profits and gains of business" derived from the industrial undertaking and consequently qualify for deduction u/s 80ib of the act. 2. without prejudice to the ground of cross objection no.1, it is submitted that the cit (a) erred in disregarding the ratio of the decision of the bombay high court on identical facts in favour of the assessee and consequently upholding the ao's action in denying deduction u/s 80ib of the act in respect of interest income of rs. 1,08,44,725/. 3. without prejudice to the grounds of cross objection nos. 1 and 2, it is submitted that the cit (a) failed to appreciate that there is no interest income after netting off of interest expenses of rs. 1,08,44,725/- so as to be assessed either as income from other sources or business income. 4. without prejudice to the ground of cross objection no.3, it is submitted that the respondents are entitled for deduction u/s 80ib of the act in respect of the following interest receipts. i) from customers for delayed payments rs.70,92,221/- ii) from fixed deposits kept in margin money for rs. 4,27,055/- bank guarantees iii) from loans and advances to staff rs. 30,089/- rs.75,49,365/-" 10. before us, at the outset, ld counsel for the assessee filed a chart giving details of ground wise remarks. bringing our attention to the grounds, ld counsel for the assessee mentioned that the only issue involved in this appeal is the treatment of interest incomeÿas income come from other sources against the assessee's claim of profit and gains of business' and revenue's denial of deduction u/s 80ib of the act in respect of such interest receipts of rs. 1,08,44,725/-. in this regard, ld counsel brought our attention to the breakup of interest receipts and submitted that the interest received from customers for delayed payments amounting to rs. 70,92,221/-should be regarded as sale consideration and therefore, the assessee should be entitled to deduction in respect of the same u/s 80-ib of the act. further, ld counsel submitted that the interest received from customers for delayed payments would qualify for deduction under section 80ib of the act. in support of his contention, ld counsel relied on the following decisions. i) cit vs. vidyut corporation 324 itr 221 (bom) ii) cit vs. advance detergents ltd 339 itr 81 (del) iii) nirma industries ltd vs. dy. cit 283 itr 402 (guj) iv) phatela cotgin industries pvt ltd vs. cit 303 itr 411 (p and h) v) cit vs. flander macneill gears ltd 150 itr 83 (cal) vi) tata sponge iron ltd vs. cit 292 itr 175 (ori) and vii) cit vs. indo matsushita cargbon co ltd 286 itr 201 (mad) 11. referring to the interest received from loans and advances to staff, which is earned from loans and advances provided to the employees of the eligible undertakings, ld counsel submitted that since, the said receipt is inextricable connected with the undertakings, it would qualify for deduction. 12. on the other hand, ld dr relied on the orders of the revenue authorities and reiterated the submissions made before the lower authorities. 13. we have heard both the parties and perused the orders of the revenue authorities as well as citations quoted before us. on hearing both the parties and on perusal of the decisions cited above, we are of the considered opinion that the matter should be remanded to the files of the ao for fresh adjudication in the light of the said decisions (supra). therefore, we direct the ao to examine the issues i.e., (i) whether the interest received from customers for delayed payments would qualify for deduction under section 80ib of the act or not and (ii) whether the interest received from loans and advances to staff would qualify for deduction u/s 80ib of the act in the light of the above cited decisions and in accordance with law in force. ao shall provide a reasonable opportunity of being heard to the assessee in the set aside proceedings. we order accordingly. 14. regarding the issue of interest received from fixed deposits kept as margin money for bank guarantees, ld counsel for the assessee mentioned that the temporary deployment of funds should be assessed as business income and not as income from other sources as treated by the assessing officer. in this regard, ld counsel relied on the following decisions. i) cit vs. vidyut steel ltd. 219 itr 30 (ap) ii) cit vs. koshika telecom ltd 287 itr 479 (del) iii) cit vs. karnal cooperative sugar mills ltd 243 itr 2 (sc) iv) cit vs. indo swiss jewells ltd 284 itr 389 (bom) 15. on the other hand, ld dr dutifully relied on the order of the ao. 16. we have heard both the parties and perused the orders of the revenue authorities as well as citations quoted by the ld counsel along with the relevant material placed before us. on perusal of the cited judgments of the higher judiciary, we find that they are relevant for the proposition that the there is no question of isolating the interest received on margin money paid for obtaining bank guarantee and assessing it as separate income under section 56. therefore, agree with the view of the tribunal that the income derived on the margin money for obtaining bank guarantee cannot be separately assessed under section 56. considering the binding judgments given by the hon'ble high courts as well as the hon'ble supreme court, we are of the opinion that the interest derived on margin money for the purpose of obtaining bank guarantee should be assessed as business incomeÿinstead of income from other sourcesÿ. accordingly, we decide this part of the ground in favour of the assessee. 17. regarding the issue raised in ground no.3 with regard to benefit of netting off of interest income against the expenditure and the same was raised without prejudice. in this regard, it was argued by the ld counsel that whether the impugned interest is assessed under the head business income or income from other sources, if it is held that the said receipts do not qualify for deduction u/s 80ib of the act, then the exclusion for the purposes of ascertaining the income qualifying for deduction has to be the net interest income and not the gross interest receiptÿ. in support of his contention, ld counsel relied on the judgment of the hon'ble supreme court in the case of acg associated capsules p. ltd vs. cit (343 itr 89). in this connection, both the parties stated that the said claim of the assessee needs to be considered in favour of the assessee in view of the binding judgment of the hon'ble apex court in the case of acg associated capsules p. ltd vs. cit (supra). accordingly, we direct the ao to apply the said judgment on considering the facts of the present case after reasonable opportunity of being heard to the assessee as per the principles of the natural justice. in substance, ground no.3 is treated as allowed in favour of the assessee. 18. in the result, cross objection of the assessee is partly allowed for statistical purposes. ita no.6312/m/2011 (ay 2008-2009) (by revenue) 19. this appeal filed by the revenue on 13.9.2011 is against the order of the cit (a)-23, mumbai dated 27.6.2011 for the assessment year 2008-2009. 20. in this appeal, revenue raised the following grounds which read as under: "1. on the facts and in the circumstances of the case and in law, the ld cit (a) erred in not appreciating the fact that converting unit-1 from stand along independent unit to that of job work unit and shifting its clientele to the so called new units 2 and 3, thereby reducing its profits by 90% is nothing but a plot of tax avoidance to continue to claim 100% deduction u/s 80ib (earlier 80ia) in the hands of units 2 and 3). 2. on the facts and in the circumstances of the case and in law, the ld cit (a) centralization, unified single control of administration maintenance of accounts, location, power connection, purchase bills and sale bills, single bank account, single industrial license etc. units 2 and 3 are not separate new units but only extension of unit-1 and hence the deduction u/s 80ib to be limited accordingly." 21. at the outset, ld counsel for the assessee brought our attention to the grounds and mentioned that the identical issues are raised by the revenue before the tribunal in the earlier assessment years also. while adjudicating the similar issue in the assessee's own case vide appeal ita no. 4451 and 4452/m/2008 for the ay 2004-05 and 2005-06, dated 20.11.2009, the tribunal has decided the issue in favour of the assessee and dismissed the grounds raised by the assessee. para 10 to 16 of the said order of the tribunal (supra) is relevant in this regard. 22. on the other hand, ld dr relied on the orders of the revenue authorities. 23. we have heard both the parties and perused the orders of the revenue authorities as well as cited order of the tribunal dated 20.11.2009 (supra). on perusal of the said order of the tribunal, we find para 16 is relevant in this regard and the same reads as under: "16. we have considered the rival arguments and made both the sides, perused the orders of the assessing officer and the cit (a) and the paper book filed on behalf of the assessee. we have also considered the various decisions relied on by both the sides which are already incorporated in the body of the assessment order and in the order of the cit (a). we find all the three units were set up at a different point of time. we further find the cit (a) has given a categorical finding that the assessee has invested huge amounts for factory building, plant and machinery and electrical installations, etc., separately for the units 2 and 3, a fact which has not been controverted by the revenue. we further find nothing has been brought on record by the revenue authorities that the profits of unit 2 and 3 are inflated or the profits of the unit 1 are suppressed. nothing has been brought on record to show that machineries of unit 1 were transferred to unit 2 or unit 3. we further find the cit (a) has also given a finding that out of more than 250 clients only 17 clients are common between unit 1 and unit 2 and unit 1 and unit 3 and nothing contrary was brought to our notice by the ld dr against the above finding of the cit (a). in view of the above and in view of the detailed order passed by the cit (a) holding that units 2 and 3 are independent units and not extension of unit 1 and that the asessee has fulfilled the conditions prescribed u/s 80ib of the act, therefore, we do not find any infirmity in the order of the cit (a) and accordingly uphold the same. the grounds raised by the revenue are accordingly dismissed." 24. from the above, it is evident that the issues raised in the present appeal are exactly similar to that of the grounds adjudicated by the tribunal vide its order dated 20.11.2009 (supra). further, ld dr has not produced any contrary material to take a different view to that of the view taken by the tribunal. therefore, considering the above settled position of the issue as well as following the principle of consistency, we are of the opinion that the grounds raised by the revenue should be decided in favour of the assessee. accordingly, the revenue's grounds are dismissed. 25. in the result, appeal of the revenue is dismissed. ita no.6005/m/2011 (ay 2008-2009) (by assessee) 26. this appeal filed by the assessee on 29.8.2011 is against the order of the cit (a)-23, mumbai dated 27.6.2011 for the assessment year 2008-2009. 27. in this appeal, assessee raised the following gourds which read as under: "1. the ld cit (a) erred in holding that the ao has rightly brought to tax interest incomeÿof rs. 83,57,024/- as income from other sourcesÿand consequently denying deduction u/s 80ib of the act in respect thereof. your appellant submits that on the facts and in the circumstances of their case, the interest income is assessable as profits and gains of businessÿderived from the industrial undertaking and consequently qualify for deduction u/s 80ib of the act. 2. without prejudice to the ground of appeal no.1, it is submitted that the cit (a) erred in disregarding the ratio of the decision of the bombay high court on identical facts in favour of the assessee and consequently upholding the assessing officer's action in denying deduction u/s 80ib of the it act in respect of interest income of rs. 83,57,024/-." 28. in this appeal, the grounds raised by the assessee are exactly identical to that of the grounds raised by the assessee in cross objection no.138/m/2012 for the ay 2007-2008. while adjudicating the said cross objection of the assessee, we have heard both the parties and perused the relevant material placed before us and our finding is given vide paras 13 and 16 of this order. since, the facts and circumstances of the present appeal is identical to that of the cross objection, we the same adjudication applies here also and ex consequenti the appeal of the assessee is partly allowed for statistical purposes. 29. in the result, appeal of the assessee is partly allowed for statistical purposes.
Judgment:

D. Karunakara Rao, AM:

1. There are four appeals under consideration. Out of four appeals, there are cross appeals for the AY 2007-2008. ITA No. 8418/M/2010 (2007-2008) and ITA No.6312/M/2011 (AY 2008-2009) are filed by the Revenue and ITA No.6005/M/2011 (AY 2008-2009) and CO No.138/M/2012 (AY 2007-2008) are filed by the assessee. Since, the identical issues are involved in all these four appeals, therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. Appeal wise and ground wise adjudication is given in the following paragraphs.

2. Firstly we shall take-up the Revenue appeal filed on 3.12.2010 vide ITA No.8418/M/2010 for the AY 2007-2008 against the order of the CIT (A)-23, Mumbai dated 7.9.2010. In this appeal, Revenue raised the following grounds which read as under:

"1. On the facts and circumstances of the case and in law, the Ld CIT (A) erred in directing the AO to allow deduction u/s 80IB of Rs. 8,50,23,349/- in respect of profits and gains of business of three new industrial undertaking i.e., Unit II, Unit III and Falaudi Unit without appreciating the fact that as the activities of these units do not constitute manufacture or production of any articles or things as specified in section 80-IB of the Act.

2. The appellant prays that the order of the CIT (A) on the above ground/s be set aside and that of the AO be restored."

3. At the outset, Ld Counsel for the assessee brought our attention to the above ground no.1 raised by the Revenue and mentioned that an identical issue has been raised by the Revenue before the Tribunal in assessee's own case vide ITA No.4451 and 4452/M/2008 for the AY 2004-2005 and 2005-06, dated 20.11.2009. In this regard, Ld Counsel read out the relevant para 4 to 9 of the said order of the Tribunal (supra), wherein the Tribunal had decided the issue in favour of the assessee by holding that the activity of the assessee is a manufacturing activity and consequently eligible for deduction u/s 80IA of the Act. He further mentioned that, for the AYs 1995-96 to 1998-99, the Revenue was aggrieved with the similar decision of the Tribunal and filed an appeal before the Hon'ble High Court of Bombay, wherein the High Court dismissed the appeal vide Income Tax Appeal No. 4728 and 4729 of 2010, dated 14th September, 2011. He also mentioned that the Tribunal has consistently been allowing the assessee's claim of deduction u/s 80IA of the Act.

4. On the other hand, Ld DR relied on the orders of the Revenue Authorities.

5. We have heard both the parties and perused the orders of the revenue authorities as well as the orders of the Tribunal filed before us. On perusal of the said order of the Tribunal dated 20.11.2009 (supra), we find para 9 is relevant in this regard and the same is reproduced here under:

"9. We have considered the rival submissions made by both the sides, perused the orders of the AO and the CIT (A) and paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. The only dispute in the instant case is as to whether the activity of the assessee company amounts to manufacture or production of an article or thing so as to enable the assessee the benefit of deduction u/s 80IB of the Act. We find the ITAT vide consolidated order dated 29.12.2006 for the AYs 1995-1996 to 1998-1999 has held that the activity of the assessee is a manufacturing activity and consequently eligible for deduction u/s 80IA of the Act. Accordingly, the appeal filed by the Revenue has been dismissed. Similarly, we find the ITAT in the cross appeals vide ITA Nos.4737/Mum/2006 ad 5260/Mum/2006 order dated 29.10.2008 for the AY 2003-2004, where one of us (AM) is party, has held that the activity of the assessee is that of manufacturing and the assessee is entitled to deduction u/s 80IB of the Act. We find the decision of the Hon'ble Apex Court in the case of Techno Weld Industries (supra) and the decisions in the grounds of appeal are distinguishable and not applicable to the facts of the present case. We further find merit in the submission of the learned counsel for the assesse that when the ITAT granted relief in the initial year and subsequent years and since there is no compelling circumstances, to take a different view than the view taken by the ITAT consistently, therefore, the relief cannot be withdrawn and the proper forum for the Revenue is to approach the Hon'ble High Court for this year also since they have approached the High Court for the earlier years. Since, the CIT (A) has followed the orders of the ITAT for the earlier years. Therefore, respectfully following the orders of the ITAT for the earlier years, we uphold the order of the CIT (A) and the grounds raised by the Revenue are dismissed."

6. From the above, the ITAT has been consistently granting relief to the assessee by holding that the activity of the assessee is a manufacturing activity and therefore, it is eligible for deduction u/s 80IA of the Act. As well, no contrary material has been brought to our notice by the Revenue to take a different view than that of the earlier views taken by the ITAT. Therefore, in these circumstances, following the principle of consistency, we are of the considered opinion that the assessee should get relief and accordingly the grounds raised by the Revenue are dismissed.

7. In the result, appeal of the Revenue is dismissed.

C.O. No.138/M/2012 (AY: 2007-2008)

(By assessee)

8. This cross objection is filed by the assessee on 26.6.2012 against the order of CIT (A)-23, Mumbai dated 7.9.2010 for the AY 2007-2008.

9. In this Cross objection, assessee raised the following grounds which read as under:

"1. The Ld CIT (A) erred in holding that the AO has rightly brought to tax interest income of Rs. 1,08,44,725/- as income from other sources and consequently denying deduction u/s 80IB of the Act in respect thereof. Your respondent submit that on the facts and in the circumstances of their case, the interest income is assessable as "profits and gains of business" derived from the industrial undertaking and consequently qualify for deduction u/s 80IB of the Act.

2. Without prejudice to the ground of Cross Objection No.1, it is submitted that the CIT (A) erred in disregarding the ratio of the decision of the Bombay High Court on identical facts in favour of the assessee and consequently upholding the AO's action in denying deduction u/s 80IB of the Act in respect of interest income of Rs. 1,08,44,725/.

3. Without prejudice to the grounds of Cross Objection Nos. 1 and 2, it is submitted that the CIT (A) failed to appreciate that there is no interest income after netting off of interest expenses of Rs. 1,08,44,725/- so as to be assessed either as income from other sources or business income.

4. Without prejudice to the ground of Cross Objection No.3, it is submitted that the respondents are entitled for deduction u/s 80IB of the Act in respect of the following interest receipts.

i) From customers for delayed payments Rs.70,92,221/- ii) From fixed deposits kept in margin money for Rs. 4,27,055/- bank guarantees

iii) From loans and advances to staff Rs. 30,089/- Rs.75,49,365/-"

10. Before us, at the outset, Ld Counsel for the assessee filed a chart giving details of ground wise remarks. Bringing our attention to the grounds, ld Counsel for the assessee mentioned that the only issue involved in this appeal is the treatment of interest incomeŸas income come from other sources against the assessee's claim of profit and gains of business' and Revenue's denial of deduction u/s 80IB of the Act in respect of such interest receipts of Rs. 1,08,44,725/-. In this regard, Ld Counsel brought our attention to the breakup of interest receipts and submitted that the interest received from customers for delayed payments amounting to Rs. 70,92,221/-should be regarded as sale consideration and therefore, the assessee should be entitled to deduction in respect of the same u/s 80-IB of the Act. Further, Ld Counsel submitted that the interest received from customers for delayed payments would qualify for deduction under section 80IB of the Act. In support of his contention, Ld Counsel relied on the following decisions. i) CIT vs. Vidyut Corporation 324 ITR 221 (Bom)

ii) CIT vs. Advance Detergents Ltd 339 ITR 81 (Del) iii) Nirma Industries Ltd vs. Dy. CIT 283 ITR 402 (Guj) iv) Phatela Cotgin Industries Pvt Ltd vs. CIT 303 ITR 411 (P and H) v) CIT vs. Flander Macneill Gears Ltd 150 ITR 83 (Cal) vi) Tata Sponge Iron Ltd vs. CIT 292 ITR 175 (Ori) and vii) CIT vs. Indo Matsushita Cargbon Co Ltd 286 ITR 201 (Mad)

11. Referring to the interest received from loans and advances to staff, which is earned from loans and advances provided to the employees of the eligible undertakings, Ld Counsel submitted that since, the said receipt is inextricable connected with the undertakings, it would qualify for deduction.

12. On the other hand, Ld DR relied on the orders of the Revenue Authorities and reiterated the submissions made before the lower authorities.

13. We have heard both the parties and perused the orders of the Revenue Authorities as well as citations quoted before us. On hearing both the parties and on perusal of the decisions cited above, we are of the considered opinion that the matter should be remanded to the files of the AO for fresh adjudication in the light of the said decisions (supra). Therefore, we direct the AO to examine the issues i.e., (i) whether the interest received from customers for delayed payments would qualify for deduction under section 80IB of the Act or not and (ii) whether the interest received from loans and advances to staff would qualify for deduction u/s 80IB of the Act in the light of the above cited decisions and in accordance with law in force. AO shall provide a reasonable opportunity of being heard to the assessee in the set aside proceedings. We order accordingly.

14. Regarding the issue of interest received from fixed deposits kept as margin money for bank guarantees, Ld Counsel for the assessee mentioned that the temporary deployment of funds should be assessed as business income and not as income from other sources as treated by the Assessing Officer. In this regard, Ld Counsel relied on the following decisions.

i) CIT vs. Vidyut Steel Ltd. 219 ITR 30 (AP)

ii) CIT vs. Koshika Telecom Ltd 287 ITR 479 (Del) iii) CIT vs. Karnal Cooperative Sugar Mills Ltd 243 ITR 2 (SC) iv) CIT vs. Indo Swiss Jewells Ltd 284 ITR 389 (Bom)

15. On the other hand, Ld DR dutifully relied on the order of the AO.

16. We have heard both the parties and perused the orders of the Revenue Authorities as well as citations quoted by the Ld Counsel along with the relevant material placed before us. On perusal of the cited judgments of the higher judiciary, we find that they are relevant for the proposition that the there is no question of isolating the interest received on margin money paid for obtaining bank guarantee and assessing it as separate income under section 56. Therefore, agree with the view of the Tribunal that the income derived on the margin money for obtaining bank guarantee cannot be separately assessed under section 56. Considering the binding judgments given by the Hon'ble High Courts as well as the Hon'ble Supreme Court, we are of the opinion that the interest derived on margin money for the purpose of obtaining bank guarantee should be assessed as business incomeŸinstead of income from other sourcesŸ. Accordingly, we decide this part of the ground in favour of the assessee.

17. Regarding the issue raised in ground no.3 with regard to benefit of netting off of interest income against the expenditure and the same was raised without prejudice. In this regard, it was argued by the Ld Counsel that whether the impugned interest is assessed under the head business income or income from other sources, if it is held that the said receipts do not qualify for deduction u/s 80IB of the Act, then the exclusion for the purposes of ascertaining the income qualifying for deduction has to be the net interest income and not the gross interest receiptŸ. In support of his contention, Ld Counsel relied on the judgment of the Hon'ble Supreme Court in the case of ACG Associated Capsules P. Ltd vs. CIT (343 ITR 89). In this connection, both the parties stated that the said claim of the assessee needs to be considered in favour of the assessee in view of the binding judgment of the Hon'ble Apex Court in the case of ACG Associated Capsules P. Ltd vs. CIT (supra). Accordingly, we direct the AO to apply the said judgment on considering the facts of the present case after reasonable opportunity of being heard to the assessee as per the principles of the natural justice. In substance, ground no.3 is treated as allowed in favour of the assessee.

18. In the result, Cross Objection of the assessee is partly allowed for statistical purposes.

ITA No.6312/M/2011 (AY 2008-2009)

(By Revenue)

19. This appeal filed by the Revenue on 13.9.2011 is against the order of the CIT (A)-23, Mumbai dated 27.6.2011 for the assessment year 2008-2009.

20. In this appeal, Revenue raised the following grounds which read as under: "1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in not appreciating the fact that converting Unit-1 from stand along independent unit to that of job work unit and shifting its clientele to the so called new units 2 and 3, thereby reducing its profits by 90% is nothing but a plot of Tax Avoidance to continue to claim 100% deduction u/s 80IB (earlier 80IA) in the hands of Units 2 and 3).

2. On the facts and in the circumstances of the case and in law, the Ld CIT (A) centralization, unified single control of administration maintenance of accounts, location, power connection, purchase bills and sale bills, single bank account, single industrial license etc. Units 2 and 3 are not separate new units but only extension of Unit-1 and hence the deduction u/s 80IB to be limited accordingly."

21. At the outset, Ld Counsel for the assessee brought our attention to the grounds and mentioned that the identical issues are raised by the Revenue before the Tribunal in the earlier assessment years also. While adjudicating the similar issue in the assessee's own case vide appeal ITA No. 4451 and 4452/M/2008 for the AY 2004-05 and 2005-06, dated 20.11.2009, the Tribunal has decided the issue in favour of the assessee and dismissed the grounds raised by the assessee. Para 10 to 16 of the said order of the Tribunal (supra) is relevant in this regard.

22. On the other hand, Ld DR relied on the orders of the Revenue Authorities.

23. We have heard both the parties and perused the orders of the Revenue Authorities as well as cited order of the Tribunal dated 20.11.2009 (supra). On perusal of the said order of the Tribunal, we find para 16 is relevant in this regard and the same reads as under:

"16. We have considered the rival arguments and made both the sides, perused the orders of the Assessing Officer and the CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions relied on by both the sides which are already incorporated in the body of the assessment order and in the order of the CIT (A). We find all the three units were set up at a different point of time. We further find the CIT (A) has given a categorical finding that the assessee has invested huge amounts for factory building, plant and machinery and electrical installations, etc., separately for the units 2 and 3, a fact which has not been controverted by the Revenue. We further find nothing has been brought on record by the revenue authorities that the profits of Unit 2 and 3 are inflated or the profits of the unit 1 are suppressed. Nothing has been brought on record to show that machineries of Unit 1 were transferred to Unit 2 or unit 3. We further find the CIT (A) has also given a finding that out of more than 250 clients only 17 clients are common between unit 1 and unit 2 and unit 1 and unit 3 and nothing contrary was brought to our notice by the Ld DR against the above finding of the CIT (A). In view of the above and in view of the detailed order passed by the CIT (A) holding that units 2 and 3 are independent units and not extension of unit 1 and that the asessee has fulfilled the conditions prescribed u/s 80IB of the Act, therefore, we do not find any infirmity in the order of the CIT (A) and accordingly uphold the same. The grounds raised by the Revenue are accordingly dismissed."

24. From the above, it is evident that the issues raised in the present appeal are exactly similar to that of the grounds adjudicated by the Tribunal vide its order dated 20.11.2009 (supra). Further, Ld DR has not produced any contrary material to take a different view to that of the view taken by the Tribunal. Therefore, considering the above settled position of the issue as well as following the principle of consistency, we are of the opinion that the grounds raised by the Revenue should be decided in favour of the assessee. Accordingly, the Revenue's grounds are dismissed.

25. In the result, appeal of the Revenue is dismissed.

ITA No.6005/M/2011 (AY 2008-2009)

(By Assessee)

26. This appeal filed by the assessee on 29.8.2011 is against the order of the CIT (A)-23, Mumbai dated 27.6.2011 for the assessment year 2008-2009.

27. In this appeal, assessee raised the following gourds which read as under: "1. The Ld CIT (A) erred in holding that the AO has rightly brought to tax interest incomeŸof Rs. 83,57,024/- as income from other sourcesŸand consequently denying deduction u/s 80IB of the Act in respect thereof.

Your appellant submits that on the facts and in the circumstances of their case, the interest income is assessable as profits and gains of businessŸderived from the industrial undertaking and consequently qualify for deduction u/s 80IB of the Act.

2. Without prejudice to the ground of appeal no.1, it is submitted that the CIT (A) erred in disregarding the ratio of the decision of the Bombay High Court on identical facts in favour of the assessee and consequently upholding the Assessing Officer's action in denying deduction u/s 80IB of the IT Act in respect of interest income of Rs. 83,57,024/-."

28. In this appeal, the grounds raised by the assessee are exactly identical to that of the grounds raised by the assessee in Cross Objection No.138/M/2012 for the AY 2007-2008. While adjudicating the said Cross Objection of the assessee, we have heard both the parties and perused the relevant material placed before us and our finding is given vide paras 13 and 16 of this order. Since, the facts and circumstances of the present appeal is identical to that of the Cross objection, we the same adjudication applies here also and ex consequenti the appeal of the assessee is partly allowed for statistical purposes.

29. In the result, appeal of the assessee is partly allowed for statistical purposes.