2003 (3) TMI 48 - HC - Income Tax

Has the Income-tax Appellate Tribunal erred in taking the view that the amount of Rs. 5,34,572 earned by way of interest by the assessee was income from other sources and thus could not be included under section 80HHC of the Income-tax Act, 1961? - Sub-section (4) of section 80HHC clearly postulates that deduction shall be admissible only when the assessee furnishes the particulars in the prescribed form along with the return of income and the report of the accountant. This was admittedly not done in the present case. - we find no infirmity in the view taken by the Tribunal. - we find no merit in this appeal

Summary

Issues:
1. Whether the interest earned by the assessee on fixed deposits can be considered as income from business or other sources for the purpose of section 80HHC of the Income-tax Act, 1961?

Analysis:
The primary issue in this case was whether the interest earned by the assessee on fixed deposits, amounting to Rs. 5,34,572, should be categorized as income from business or other sources under section 80HHC of the Income-tax Act, 1961. The assessee contended that the interest should be considered as income from business due to the association with a bank loan where 20% of the sale proceeds were deposited as security. However, the Assessing Officer rejected this claim, leading to an appeal where the order was reversed, but subsequently, the Tribunal upheld the Revenue's claim, resulting in the current appeal.

The Assessing Officer had initially disallowed the deduction under section 80HHC(1A) as the prescribed certificate was not furnished by the assessee. The appellate authority reversed this decision, stating that filing the certificates in Forms Nos. 10CCAC and 10CCAB was not mandatory. However, the Tribunal overturned this decision citing precedents and emphasized that the interest income from fixed deposits cannot be considered as income related to exports, which is the underlying purpose of section 80HHC. Furthermore, the Tribunal noted the absence of evidence regarding the loan amount taken by the assessee or the specific deposit details, leading to the conclusion that the interest income was rightly categorized as income from other sources.

Additionally, the Tribunal highlighted the requirement under sub-section (4) of section 80HHC, which mandates the furnishing of particulars in the prescribed form along with the return of income and the accountant's report for deduction eligibility. Since this condition was not met by the assessee, the Tribunal found no basis to allow the deduction under section 80HHC. The reference to Supreme Court judgments in similar cases emphasized the distinction between income earned from specific business activities, as in the case of a cooperative bank, and the interest income from fixed deposits, as in the present case, which does not qualify as business income.

In conclusion, the Tribunal's decision to categorize the interest income from fixed deposits as income from other sources rather than business income under section 80HHC was upheld by the High Court, considering the lack of evidence linking the interest to export-related activities and the failure to comply with the prescribed form requirements for deduction eligibility. The appeal was dismissed, affirming the Tribunal's view on the matter.