2020 (2) TMI 164 - HC - Income Tax

Computation of deduction u/s.80HHC - Whether Tribunal correctly held that 90% of gain on derivative products and gain on interest rate swap on derivative instruments should be excluded from the profits of the business for the purpose of computation of deduction - as submitted that the Assessee did not earn any income on the gain on derivative products and gain on interest swap on derivative instruments, as discussed by the learned Tribunal - HELD THAT - Contention sought to be raised by the Assessee before this Court now does not appear to have been raised before the learned Tribunal in the manner it has been raised before this Court and the facts and details of the reduction of interest liability on account of change of contract with the lending financial institutions from Foreign currency Fixed Interest Loan to Foreign currency Floating Interest rate has not been discussed by the learned Tribunal in the impugned order. Tribunal, being the final fact finding body, has to be recorded its independent findings facts and then only apply the law applicable to such facts. We do not find any such discussion on this aspect of the matter by the learned Tribunal. We are inclined to remand the matter back to the learned Tribunal without answering the aforesaid question of law, as quoted above.

Summary

Issues:
- Interpretation of exclusion of gain on derivative products and interest rate swap for deduction u/s.80HHC of the Income Tax Act, 1961.

Analysis:
1. The Tax Case Appeal was filed against the Tribunal's order for the Assessment year 2004-05, focusing on the exclusion of 90% of gain on derivative products and interest rate swap for the purpose of deduction u/s.80HHC of the Act. The Tribunal upheld the exclusion based on a Supreme Court decision and remitted the issue of DEPB income for further consideration.

2. The Appellant argued that the gain on derivative products and interest rate swap were not earned income but resulted from a change in loan type, reducing interest liability significantly. Referring to a Supreme Court judgment, the Appellant contended that the Tribunal misapplied the law and failed to consider the specific circumstances leading to the reduced interest liability.

3. The Respondent supported the Tribunal's decision, leading to the High Court's analysis. The Court noted that the Appellant's argument was not presented in the same manner before the Tribunal, and crucial details regarding the interest liability reduction were not discussed in the Tribunal's order. The Court emphasized the Tribunal's role as a fact-finding body and the necessity of detailed findings before applying relevant laws.

4. Consequently, the High Court decided to remand the matter back to the Tribunal for a fresh consideration. The Court highlighted the need for the Tribunal to independently assess the facts, consider the specific details of the interest liability reduction, and apply the law accordingly. The Court disposed of the Appeal and instructed the Tribunal to reevaluate the matter after hearing both parties' contentions.