2008 (3) TMI 216 - HC - Income Tax

Deduction u/s 80HH and 80I on gross total income - Tribunal is right in law in holding that the assessee is entitled to relief u/s. 80-I of the rate of 20% of the profit without allowing deduction u/s. 80HH

Summary

Issues:
1. Interpretation of Section 80-I and 80HH of the Income-tax Act, 1961.
2. Treatment of interest income from bank and insurance company for deduction under Section 80HH.

Analysis:

Issue 1: Interpretation of Section 80-I and 80HH
The case involved two questions referred by the Income-tax Appellate Tribunal regarding the Assessment Year 1989-90. The first question was whether the assessee is entitled to relief under Section 80-I without allowing deduction under Section 80HH. The Tribunal, in a common order dated 23.08.1996, allowed the appeal of the assessee on this count. The Court referred to previous judgments and confirmed the Tribunal's decision in favor of the assessee based on the interpretation of Section 80-I.

Issue 2: Treatment of interest income for deduction under Section 80HH
Regarding the second question, the issue was the treatment of interest income received from a bank and an insurance company for computing the deduction under Section 80HH. The Assessing Officer disallowed the interest income from the bank for the deduction under Section 80HH, stating that it did not qualify as profits derived from an Industrial Undertaking. However, the Commissioner (Appeals) and the Tribunal held that the interest income should be included in the net profits for the purpose of deduction under Section 80HH. The Court noted the different character of the interest income and left the decision open for the Tribunal to adjust based on the law enunciated by the Apex Court, specifically citing the case of Pandian Chemicals Ltd. v. Commissioner of Income-tax.

In conclusion, the Court disposed of the reference, affirming the decision in favor of the assessee under Section 80-I and leaving the treatment of interest income from the bank and insurance company open for further consideration by the Tribunal in accordance with relevant legal principles.