2017 (9) TMI 1759 - HC - Income Tax

Interest receipt not constitute business income for the purpose of computation of deduction u/s 80IB of the Act - Whether the corresponding interest expenditure incurred wholly and exclusively for generating such interest income should have been allowed u/s 57(iii) - interest income is not being considered as income from business and rather income from other sources - Held that - Issues covered by the decision of this Court in MOHAN FASHIONS VERSUS ACIT 2017 (5) TMI 1640 - RAJASTHAN HIGH COURT M/S DHADDHA EXPORTS VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-I JAIPUR 2017 (7) TMI 1249 - RAJASTHAN HIGH COURT and M/S. CHORDIA TRADING CORPORATION CHORDIA BHAWAN VERSUS THE INCOME TAX OFFICER WARD-1 (2) JAIPUR 2016 (12) TMI 358 - RAJASTHAN HIGH COURT Whether section 80HHC and 80IB are independent of each other and therefore deductions under both the sections on the gross total income is to be computed independently and not on the reduced balance after taking into account the other deduction.? - Held that - Issue covered by the decision of Supreme Court in case of Joint Commissioner of Income Tax vs. Mandideep Eng. & PKG. IND. (P) Ltd. 2006 (4) TMI 75 - SUPREME COURT which is referred to larger Bench of this Court in Tax Appeal 437/2011 (Hi Choice Exports P. Ltd. vs. Income Tax Officer Ward 2) decided 2017 (5) TMI 1641 - RAJASTHAN HIGH COURT

Summary

Issues:
1. Whether interest receipt of ?1,57,331 constitutes "business income" for the purpose of deduction u/s 80IB of the Act?
2. Should the interest expenditure incurred for generating such interest income be allowed u/s 57(iii) of the Act if the interest income is not considered as "income from business"?
3. Are sections 80HHC and 80IB of the IT Act independent of each other for computing deductions on the gross total income independently?

Analysis:

Issue 1:
The appellant challenged the Tribunal's decision allowing the department's appeal. The Court framed the question of law regarding the interest receipt and its classification as "business income" for deduction under section 80IB of the Act. The appellant relied on previous decisions to support their contention.

Issue 2:
The Court allowed an additional question based on the Supreme Court's decision in a specific case. It pertained to whether interest expenditure, incurred for generating interest income classified as "income from other sources," should be allowed under section 57(iii) of the Act. The appellant cited relevant precedents to strengthen their argument.

Issue 3:
Regarding the independence of sections 80HHC and 80IB for computing deductions on the gross total income, the Court referred to a Supreme Court decision. The Court noted that the issue was answered in favor of the assessee based on the Supreme Court's decision, which upheld the decision of the Court itself. The Court ruled in favor of the assessee, subject to a larger bench reference.

In conclusion, the Court answered the first two issues in favor of the assessee based on previous decisions and addressed the third issue favorably, considering the Supreme Court's ruling. The appeal was allowed in favor of the assessee, subject to further proceedings related to the third issue.