The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has recently held that interest income derived from business advances and fixed deposits is eligible for profit and gains deduction under Section 80IB of the Income Tax Act, 1961.
Section 80IB of the Income Tax Act deals with deductions in respect of profit and gains from industrial undertakings of assessee.
Bandish Soparkar, Parin Shah and Dhrunal Bhatt, appeared for the assesssee. Vijay Kumar Jaiswal,
appeared for the reveneue.
Assesee-Adani Ports & Special Economic Zone Limited engaged in development/operation and maintenance of Ports and Special Economic Zones at Mundra, Gujarat apart from running other activities.
The return of income was filed by the assessee declaring total income of Rs.30,81,75,558. The Assessing Officer observed that the assessee has shown turnover of Rs.1934.83 crores on which a PBT of Rs.1076.88 Crores has been shown in the Profit and Loss Accounts.
Assessee computed the income from business and profession at Rs. 899,81,67,978/- and gross total income of Rs. 901,67,17,652/- after necessary adjustments and the factoring for depreciation as per Income Tax Rules of Rs. 869,23,22,327/- was claimed as deduction under Section 80IAB of the Income Tax Act, 1961 as a Developer of Mundra SEZ.
During the course of hearing, the assessee submitted a copy of annual report,audit report for deduction under Section 80IAB Income Tax Act.
After verifying these the assessing officer disallowed interest income derived from assessee’s business advances and derived on fixed deposits placed by the assessee for availing credit facility, performance guarantees, bank guarantees, bid bonds etc. Aggrieved assessee filed appeal before the CIT(A). The CIT(A) confirmed the disallowance made by the Assessing officer. Therefore, the assessee filed second appeal before tribunal.
Counsel for the assessee submitted that interest income derived from assessee’s business advances and derived on fixed deposits placed by the assessee for availing credit facility, performance guarantees, bank guarantees, bid bonds etc exclusively for the purpose of business in computing eligible profit and gains for deduction under Section 80IB of the Income Tax Act.
Further the counsel points out that issues related to net interest income should not be excluded from the computation of eligible business of income.
Counsel for the revenue submitted that the netting of interest falling under the income derived from business is a incidental income.
Therefore, the CIT A) and Assessing Officer have rightly disallowed the same.
The tribunal, while considering the contentions of the parties, observed that in the Assessment years 2008-09, 2009-10 and 2010-11 the issue related to interest income related to FD interest, interest from customer’s receipts and interest income from business advances, allowed by the tribunal.
Therefore the bench of Suchitra Kamble, Judicial Member and
Waseem Ahmed, Accountant Member allowed the appeal of the assessee .
Keywords: Adani Ports, ITAT, Interest Income, Business Advances, Fixed Deposits, Deduction
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