2019 (3) TMI 363 - HC - Income Tax

Computation of deduction u/s 80HHC - whether the word Profit occurring in Section 80HHC means the net of the profit from the export of the self-manufactured goods and also the export of the traded goods? - HELD THAT - As assessee claimed that only net interest income could be included, namely, gross interest minus expenditure incurred on the borrowal of the amount for investment for earning that interest and such net interest alone could be considered for the purpose of Section 80HHC and, if that net figure is so taken, there is no question of disallowance to the extent of 90% of the negative figure of net interest we are of the opinion that this matter deserves to be sent back to the Tribunal for considering the aforesaid ground of the Assessee about the netting of the interest income, as the same apparently does not seem to have been considered by the Tribunal at all.

Summary

Issues:
1. Appeal against the order of the Income Tax Appellate Tribunal for Assessment Years 2000-2001 and 2001-2002.
2. Interpretation of the term 'Profit' in Section 80HHC of the Income Tax Act, 1961.
3. Whether only net interest income should be considered for the purpose of Section 80HHC.

Analysis:
The appellant filed appeals challenging the Income Tax Appellate Tribunal's order which dismissed the appeals of the Assessee for the Assessment Years 2000-2001 and 2001-2002. The Tribunal recorded the concession given by the Assessee's counsel regarding the interpretation of the term 'Profit' in Section 80HHC, citing the decision of the Supreme Court in the case of Ipca Laboratories v. Deputy Commissioner of Income Tax, 266 ITR 521. However, the Assessee claimed that only net interest income should be included for Section 80HHC, and the Tribunal failed to consider this aspect, despite it being raised as a specific ground in the appeal.

The High Court, after hearing both parties and examining the Tribunal's order, concluded that the matter should be remanded back to the Tribunal for reconsideration of the Assessee's claim regarding the netting of interest income. The Court found that this crucial aspect was not addressed by the Tribunal in its previous order. Therefore, the Tax Case Appeals of the Assessee were allowed, and the Tribunal was directed to reconsider the appeals afresh, specifically focusing on the issue of net interest income in accordance with the law. The parties were instructed to appear before the Tribunal on a specified date, with the Tribunal required to decide the issue within six months from that date.