2008 (4) TMI 236 - HC - Income Tax

Tribunal was justified in holding that the interest income of Rs.95,97,864/-recovered from delayed payments from the Sundry Debtors to whom the industrial unit of the assessee had sold the goods could be treated as interest income derived from the industrial undertaking of the assessee in light of the provisions of section 80HH - even though the assessee has realised income from other sources, Assessing Officer is directed to recompute the deduction under sec.80HH.

Summary

Issues:
1. Interpretation of section 80HH of the Income Tax Act for deduction claims.
2. Treatment of interest income from delayed payments in relation to industrial undertaking.

Analysis:
1. The appellant-revenue challenged the Income-tax Appellate Tribunal's decision regarding the disallowance of a deduction under section 80HH of the Income Tax Act. The Tribunal, in its order, emphasized that the interest income received from delayed payments by the debtors had a direct nexus with the industrial undertaking of the assessee. Citing precedents like CIT v. Madras Motors Ltd., the Tribunal concluded that such interest income should be considered as profits derived from the business and, therefore, eligible for deduction under sec.80HH. The Tribunal highlighted the relevance of specific case laws and found the facts of the present case aligned with those decisions, leading to a judgment in favor of the assessee.

2. The second issue revolved around the treatment of interest income of Rs.95,97,864/- recovered from delayed payments from Sundry Debtors in light of section 80HH of the Income Tax Act. The Tribunal, after considering the arguments and case laws presented, directed the Assessing Officer to include the interest received for delayed payment of dues by debtors as income derived from the industrial undertaking. By following the decisions of Madras High Court and the Third Member case, the Tribunal concluded that the interest income in question was directly relatable to the business of the assessee, thus entitling it to be covered by sec.80HH. The Tribunal's decision was based on the specific facts of the case and the application of relevant legal precedents.

In conclusion, the High Court upheld the Tribunal's decision, stating that it was a finding of fact, and no substantial question of law arose. The appeal by the appellant-revenue was deemed devoid of merit and dismissed accordingly, with no order as to costs.