2016 (3) TMI 374 - SC - Income Tax

Netting in interest for computing deduction under Section 80HHC - whether ITAT was correct in law in directing the Assessing Officer to allow netting in interest for computing deduction under Section 80HHC - Held that - As in the present appeal by the Assessee we are only concerned with the correctness of the opinion of the High Court on the question framed by it, we answer the same in favour of the Assessee following the decision of this Court in ACG Associated Capsules (P) Ltd. (2012 (2) TMI 101 - SUPREME COURT OF INDIA ) wherein held Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads PGBP is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business.

Summary

Issues:
Interpretation of Section 80HHC of the Income Tax Act for computing deduction - Correctness of High Court's opinion on the question framed in the appeal under Section 260A of the Income Tax Act.

Analysis:
The Supreme Court addressed the question framed by the High Court in an appeal under Section 260A of the Income Tax Act, 1961. The question pertained to whether the Income-Tax Appellate Tribunal was correct in law in directing the Assessing Officer to allow netting in interest for computing deduction under Section 80HHC of the Income-Tax Act. The Court referred to its previous decision in ACG Associated Capsules (P) Ltd. Vs. Commissioner of Income Tax and noted that the Revenue contended that the question as framed did not actually arise and that the High Court erred in framing and answering it. The Revenue's counsel referred to the order of the Income Tax Appellate Tribunal and the decision in Pandian Chemicals Ltd. Vs. Commissioner of Income Tax, Madurai. However, the Court clarified that in the present appeal, the focus was solely on the correctness of the High Court's opinion on the question framed. The Court ruled in favor of the Assessee, aligning with its decision in ACG Associated Capsules (P) Ltd. It further stated that if the Revenue had any grievances regarding the question framed and its relevance to the case, they could pursue available remedies, including moving the High Court for a review. Consequently, the appeal was disposed of accordingly.