ITA No. 570/Ahd/2008 and C.O. No. 268/Ahd/2010, (Assessment Year: 2001-2002). Case: 1. ACIT, 2. GHCL Ltd. Vs 1. GHCL Ltd., 2. ACIT. ITAT (Income Tax Appellate Tribunal)

Order:

Shailendra Kumar Yadav, Member (J), (ITAT Ahmedabad 'A' Bench)

1. Both these appeal and Cross Objection are arising out from the order of CIT(A)-VIII, Ahmadabad, dated 15.11.2007 for A.Y. 2001-02. So they are being disposed of by common order for sake of convenience.

2. In ITA No. 570/Ahd/2008, Revenue has filed the appeal on the following grounds:

   1. The Ld. CIT (A) erred in law and on the facts of the case in directing the A.O. to reduce 90% of the interest after netting off interest expenses having nexus with interest income.

   2. The Ld. CIT (A) erred in law and on the facts of the case in directing the apart from expenses of Rs. 1,10,79,552/- already considered by the assessee for proportionate allocation, only auditor's expenses of Rs. 17,27,437/- need to be allocated proportionately and directing the A.O. to rework the indirect expenses for export of trading goods.

   3. On the facts and circumstances of the case, the Ld. CIT (A) ought to have upheld the order of the Assessing Officer.

3. Assessee is engaged in business of manufacturing of soda ash and edible salt. First issue is with regards to excluding 90% of gross interest of Rs. 503.02 lacs from profits of business under Explanation (baa) to Section 80HHC. The word is receipt and not income accordingly while computing deduction u/s. 80HHC 90% of gross receipt is to be reduced and not net of interest. In this regard, stand of assessee has been that interest was earned on over due collection of sales bills, margin money deposits with the Bank and turnover tax refund from State Government etc. and these have direct business connection and were necessitated by primary business needs and do not represent any investment of surplus funds. Thus, it was submitted before CIT(A) that interest income should be netted out with expenses and only interest income not having nexus with interest income should be disallowed. CIT(A) having considered the submission on behalf of assessee directed the Assessing Officer to reduce 90% of the interest by netting of interest expenses having nexus with interest income. Same has been opposed before us on behalf of Revenue, inter alia, submitted that CIT(A) erred in law and on facts in directing the Assessing Officer to reduce 90% of the interest after netting of interest expenses having nexus with interest.

   3.1 After going through the above submissions and material on record, we are not inclined to interfere with the finding of CIT(A) who has...