$ * IN HIGH COURT OF DELHI AT NEW DELHI Date of decision: 25th November, 2014 + ITA No. 54/2003 COMMISSIONER OF INCOME TAX IV ..... Appellant Through Mr. Kamal Sawhney, Sr. Standing Counsel with Mr. Sanjay Kumar, Jr. Standing Counsel. versus M/S INTERARCH BUILDING PRODUCT ..... Respondent Through Mr. M.P. Rastogi and Mr. K.N. Ahuja, Advocates. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE V. KAMESWAR RAO SANJIV KHANNA, J. (ORAL) This appeal by Revenue under Section 260A of Income Tax Act, 1961 (Act, for short) pertains to assessment year 1994-95 and was admitted for hearing by order dated 10th May, 2005, on following substantial question of law:- Whether Income Tax Appellate Tribunal was justified in law in holding that service charges of Rs.2,20,500/- to be recovered from M/s Interach are to be included in profits of industrial undertaking for computing deduction u/s 80-I of Act (wrongly mentioned by ITAT as u/s 80HHC)? 2. It is not disputed that respondent-assessee is entitled to claim deduction under Section 80-I of Act. respondent-assessee had ITA 54/2003 Page 1 of 3 shared common office with M/s. Interarch. Accordingly, they shared service charges in respect of common office. amount of Rs.2,20,500/- was received from M/s. Interarch and it is not case of Revenue that said amount was not part of service charge payable by M/s. Interarch for using common office. However, Assessing Officer while computing deduction under Section 80-I of Act excluded said amount on ground that it was not part of industrial activities and, therefore, should be excluded. aforesaid reasoning was affirmed in first appellate order passed by Commissioner of Income Tax (Appeals). However, in second appeal before Income Tax Appellate Tribunal, plea of assessee was accepted. 3. Tribunal has rightly and correctly recorded that Assessing Officer was bound to determine profits of industrial undertaking and while computing profit, receipts of industrial undertaking and expenditure incurred for carrying out business of industrial undertaking have to be taken into consideration. Thus, Rs.2,20,500/- would not form part of income earned i.e. income derived by industrial undertaking and equally Rs.2,20,500/-, which was service charge or expenditure incurred by M/s. Interarch, would not be treated as expenditure incurred by assessee. expenditure incurred by M/s. Interarch ITA 54/2003 Page 2 of 3 was relating to their business. Only expenditure relating to industrial undertaking would be deducted. expenditure incurred by assessee would not, therefore, include expenditure incurred for business of M/s. Interarch and was reimbursed to assessee. fact that expenditure related to and was payable by M/s. Interarch is not under challenge. It is not case of revenue that amount paid, exceeded or was more than expenditure actually incurred by M/s. Interarch and had effect of reducing expenditure incurred by respondent-assessee and thereby increased profits eligible for deduction under Section 80-I of Act. 4. In view of aforesaid position, we do not find any merit in present appeal and same is dismissed. substantial question of law is answered in favour of respondent-assessee and against appellant-Revenue. No costs. SANJIV KHANNA, J. V. KAMESWAR RAO, J. NOVEMBER 25, 2014 NA ITA 54/2003 Page 3 of 3 Commissioner of Income-tax IV v. M/s Interarch Building Product