2016 (3) TMI 732 - HC - Income Tax

allowability of 80 HHC in respect of the interest income - Held that - The issue is no more res-integra as the Larger Bench of this Court in the case of Reliance Trading Corporation Vs. ITO (2015 (5) TMI 689 - RAJASTHAN HIGH COURT ) has answered the questions in favour of the Revenue. Consequent thereto this Court in the case of CIT & ors. Vs. Vimal Chand Surana and ors. (2016 (3) TMI 681 - RAJASTHAN HIGH COURT), had also gone into the issue at length and after considering the arguments raised by the counsel for the parties held that the deduction u/Sec. 80-HHC is not admissible on the interest earned by such exporters. - Decided against the assessee

Summary

Issues:
Income Tax Appeal under Sec. 260A against ITAT order for AY 1992-93 - Restoration of AO order on interest income and its taxability under 'Income from other sources'.

Analysis:
1. The appeal challenged the ITAT's decision to restore the AO's order regarding the allowability of 80 HHC on interest income and the taxability of interest earned from idle funds under 'Income from other sources' for the AY 1992-93.

2. The case involved the appellant claiming business income from manufacturing and trading stones, including exports, and income from property and other sources. The AO considered the interest received on advances to debtors as income from other sources, not directly related to the export business, disallowing Sec. 80-HHC deduction.

3. The CIT(A) allowed the claim as business income due to regular transactions, but the Tribunal reversed this decision citing precedents and held the interest as income from other sources. The appellant argued for Sec. 80-HHC deduction based on business income character, while the respondent cited court judgments against such deductions.

4. The High Court referred to the Larger Bench judgment in Reliance Trading Corporation case, which disallowed Sec. 80-HHC on interest earned by exporters. The Court upheld this decision in the present case, relying on various legal precedents and concluded that the interest income did not qualify for Sec. 80-HHC deduction.

5. The Court dismissed the appeal as devoid of merit, aligning with the Larger Bench and Division Bench judgments, affirming that interest income from idle funds did not entitle the appellant to Sec. 80-HHC deduction. The judgment favored the Revenue, emphasizing the non-admissibility of the deduction on such interest income.