The Income Tax Appellate Tribunal (ITAT), Delhi Bench in a relief to Havells India allowed the deduction under section 80IC on the interest income.
The assessee, Havells India is a company stated to be engaged in the business of manufacturing of switchgears, energy meters etc. Assessee electronically filed its return of income declaring total income of Rs.2,73,93,854 under the normal provisions and Rs.1,67,73,82,769 under the MAT provisions. The case was selected for scrutiny and notice was issued and served on the assessee.
The AO noticed that assessee had credited Rs.16,725 and Rs.6,334 on account of interest income. The assessee was asked to show cause as to why the deduction under section 80IC not be disallowed on such interest income as it was not derived from the business activity of the industrial undertaking. Assessee made the submissions which were not found acceptable to AO.
The AO was of the view that as per the provisions of Section 80IC, deduction is available only on income derived from business activity of industrial undertaking and since interest has been derived from fixed deposits, the interest was not eligible for deduction and AO denied the claim of deduction under section 80IC on such interest income.
The assessee contended that interest income was earned on the fixed deposits which was required to be maintained as per the statutory requirements of the respective state. Since the interest income was inextricably linked to the main business activity of the assessee, it should be considered to be treated as eligible for claiming deduction.
The coram consisting of Kuldip Singh and Anil Chaturvedi held that the Revenue was not justified in denying the claim of deduction on income, which is inextricably linked to the main business activity.
Therefore, the ITAT held that AO was not justified in denying the claim of deduction under section 80IC of the Act and thus directed the AO to grant deduction on the interest income earned by the assessee.
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