2016 (1) TMI 1240 - AT - Income Tax

Deduction under section 80HHC computation - Held that - As decided in CIT vs Nirma Limited 2014 (10) TMI 388 - GUJARAT HIGH COURT following the decision in M/s ACG Associated Capsules Pvt. Ltd. 2012 (2) TMI 101 - SUPREME COURT OF INDIA - for the purpose section 80HHC of the Act, it is not the entire amount received by the assessee on sale of DEPB credit, but the sale value of less the face value of the DEPB that will represent profit on transfer of DEPB credit by the assessee relying upon Topman Exports v. CIT 2012 (2) TMI 100 - SUPREME COURT OF INDIA - even other amounts, such as, interest or rent when are to be excluded for the purpose of explanation (baa) to section 80HHC of the Act - Ninety per cent of not the gross rent or gross interest, but the net thereof shall have be excluded - the amounts are to be excluded for the purpose of deduction u/s 80HHC of the Act - when the profit is being excluded from the claim of deduction, not the gross profit but the net thereof, that is the gross profit minus the expenditure incurred for earning such profit should be excluded the benefit of deduction u/s 80I of the Act on various incomes, such as, job work receipt, sale of empty soda ash bardan, sale of empty barrels and plastic waste is to be granted.

Summary

Issues:
Challenge to correctness of order under section 143(3) read with section 254 for AY 1991-92 regarding disallowance of deduction under section 80HHC in respect of interest income.

Analysis:
The appellant challenged the correctness of the order dated 24th October, 2011, passed by the ld. CIT(A) under section 143(3) read with section 254 of the Income Tax Act, 1961, for the assessment year 1991-92. The specific grounds of appeal included the disallowance of deduction under section 80HHC in respect of interest income amounting to Rs. 2,94,39,911. The appellant contended that the deduction under section 80HHC for interest income should have been allowed as claimed. The Assessing Officer had required the assessee to show cause as to why the interest income should not be excluded for the purpose of determining the deduction under section 80HHC. The Assessing Officer concluded that the entire interest income should be treated as income chargeable under the head "income from other sources" and, therefore, ineligible for computing the deduction under section 80HHC. The CIT(A) upheld the Assessing Officer's decision, leading the appellant to appeal before the Tribunal.

In the appeal, the Tribunal considered the submissions of both parties, reviewed the material on record, and analyzed the legal position. Referring to a decision of the Hon'ble jurisdictional High Court in a similar case, the Tribunal noted that the issue was settled in favor of the assessee. The Tribunal upheld the grievance of the assessee based on the High Court's views and directed the Assessing Officer to grant the resultant relief. The Tribunal specifically addressed different components of interest income, such as interest on corporate deposits, interest for credit periods of less than 90 days, and finance charges for credit periods of 90 days or more. The Tribunal directed the Assessing Officer to exclude only the net amount of interest from corporate deposits and granted relief accordingly. The Tribunal also remitted the matter to the Assessing Officer for necessary netting of the amount in this regard.

Conclusively, the Tribunal partly upheld the appellant's grievance and directed the Assessing Officer to recompute the deduction under section 80HHC as per the directions provided. The appeal was partly allowed in favor of the appellant, and the decision was pronounced in the open court on 29th January 2016.