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After the Apex Court rulings in Sterling foods, Tuticorn and Bokara Steel the Benches of the Tribunal are taking a narrow view on the admissibility of deductions under sections 80I/IA/IB and U/s10A/10B on the amount of interest income earned by an undertaking. In Assistant Commissioner of Income-tax vs. Gallium Equipment (P.) Ltd (79ITD41) the Delhi Bench of the ITAT in a majority decision noticed that the assessee was under a business compulsion to invest into FDRs hence allowed a deduction u/s 80I on interest income.

The Bench nonetheless further made a pointer that the case would have been certainly different if assessee was having surplus funds and purchasing FDRs and earning interest then certainly that would have been outside the purview of industrial undertaking as industrial undertaking of the assessee was to manufacture and sale of tube mill plant equipments.

It may therefore be advisable for the assessees to review past claims for immediate corrective actions to prevent heavy interest liability. Perhaps the penalties may not sustain but interest is unavoidable.

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