2002 (8) TMI 95 - HC - Income Tax

Reassessment, Export, Special Deduction - notice under section 148 - (1) Whether, on the facts and in the circumstances of the case, was the Tribunal right in holding that the reopening of the assessment is valid, in a case where the assessment has been reopened under section 147 since the time to issue a notice under section 143(2) was over? - (2) Was the appellant entitled to benefit of section 80HHC(2)(a) of the Act as regards extension of time limit for bringing into India, the foreign exchange earned by the appellant? - both the income-tax appeals are dismissed.

Summary

Issues:
1. Validity of assessment procedure under section 143(1)(a) and section 148 of the Income-tax Act.
2. Treatment of interest income of Rs. 15,23,037 as business income under section 80HHC.
3. Deduction eligibility of export sale proceeds of Rs. 11,10,377 under section 80HHC.
4. Exclusion of Rs. 11,10,377 from the total turnover for deduction calculation.

Validity of Assessment Procedure:
The High Court considered the validity of the assessment procedure under sections 143(1)(a) and 148 of the Income-tax Act. The assessee argued that since no order was passed under section 143(3) before issuing the notice under section 148, the procedure was invalid. However, the court disagreed with this contention, citing the Mahanagar Telephone Nigam Ltd. case. The court held that the assessment was valid even without a specific order under section 143(3) before issuing the notice under section 148.

Treatment of Interest Income:
Regarding the treatment of interest income of Rs. 15,23,037, the court ruled that it cannot be considered as business income or profit under section 80HHC of the Act. The deduction under this section is only applicable to profits derived from the export of specified goods. The court referred to a previous decision to support this ruling, stating that interest on bank deposits does not constitute business income for the purpose of section 80HHC. Consequently, the court held that the interest income is not deductible as business income.

Deduction Eligibility of Export Sale Proceeds:
The court addressed the issue of the eligibility of deduction for export sale proceeds of Rs. 11,10,377 under section 80HHC. The Tribunal found that since the amount was not brought into India within six months, it could not be considered for deduction. The court agreed with this finding, stating that the amount not being brought into India within the specified time rendered it ineligible for deduction under section 80HHC.

Exclusion from Total Turnover Calculation:
Regarding the exclusion of Rs. 11,10,377 from the total turnover for deduction calculation, the court upheld the Tribunal's decision. The amount, which was not included in the profits due to failure to bring it into India within the stipulated time, was also deemed ineligible to be included in the total turnover. The court concurred with the Tribunal's reasoning that since the amount could not be part of the profits, it should not be included in the total turnover for calculation purposes.

In conclusion, the High Court dismissed both income-tax appeals, affirming the decisions made by the Tribunal on the issues related to the validity of assessment procedures, treatment of interest income, deduction eligibility of export sale proceeds, and exclusion from the total turnover calculation.