Should interest received by an FD be netted off with interest paid if a company is eligible for deduction u/s 80IC?

[Before Shri P. M. Jagtap, Vice President (KZ) & Shri A. T. Varkey, Judicial Member]
I.T.A. No. 1883/Kol/2019
Assessment Year: 2013-14

M/s. PDP Steels Ltd.
(PAN: AABCP6726C)

vs

Income-tax Officer, Ward-3(3),
Kolkata

Date of Hearing (Virtual) 31.08.2021
Date of Pronouncement 03.09.2021
For the Appellant Shri S. Jhajharia, FCA
For the Respondent Shri Supriyo Pal, Addl. CIT

ORDER

At the outset, the Ld. AR of the assessee Shri S. Jhajharia drew our attention to the fact that the assessee had preferred additional ground of appeal wherein the assessee has raised without prejudice to the grounds of appeal preferred before this Tribunal that
since the assessee company is eligible for deduction u/s 80IC of the of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), the interest received by the assessee from the FD should have been netted off with interest paid since it is inextricably linked
with the business of the eligible unit and as such only the net interest ought to have been considered for the purpose of deduction u/s. 80IC of the Act and relied up on the decision of this Tribunal in assessee’s own case for AY 2014-15 in ITA No. 2155/Kol/2018 order dated 20.03.2021. Thereafter, the Ld. AR pointed out that the Ld. CIT(A) has erred in the impugned order by observing erroneously the interest amount at Rs.2,80,01,668/- instead of correct amount of Rs.28,07,860/- and therefore, he prayed
that this typographical error committed in the impugned order should be corrected. We find that this submission of the Ld. AR is correct.

2. Brief facts of the case as taken note by the AO is that assessee had set up industrial unit at Bonda Industrial Park, Assam and claimed 100% deduction of its unit u/s. 80IC of the Act on the gross total income. The AO from perusal of Note No. 18 of
the Balance Sheet found that the assessee had other income of Rs.28,07,860/-. On being confronted, the assessee submitted that this other income is the interest from fixed deposit with the bank. According to the assessee, the fixed deposit are kept with the
bank for margin money and it is an integral part of the business requirement and hence, eligible for deduction u/s. 80IC of the Act. However, the AO did not accept the submission of the assessee and had disallowed Rs.28,07,860/- and added the same as
income of the assessee. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who has confirmed the same.

3. Respectfully following the Tribunal’s order cited supra, we restore this issue raised in the additional ground of appeal of the assessee to the file of Ld. CIT(A) to pass appropriate order in terms of the Tribunal’s order in assessee’s own case supra for AY
2014-15. Therefore, this appeal of assessee is allowed for statistical purposes.

4. In the result, the appeal of assessee is allowed for statistical purposes.
Order is pronounced in the open court on 3rd September, 2021.

Please find attached the enclosed file for the full judgement