2021 (1) TMI 295 - AT - Income Tax

Claim of deduction u/s 10A/10B - claim with respect to Misc. income and interest income - HELD THAT - The Tribunal in the case of assessee for assessment year 2008-09 found that the miscellaneous income was consisted of sale of the scrap and written off certain credit balances. In the year under consideration, there is no detail of source of miscellaneous income available on record except amount of income. In the instant assessment year, the amount of the scrap sales was separately identified and not included in miscellaneous income and so benefit of deduction on a scrap sales has already been allowed by the Learned CIT(A). In absence of detailed source of miscellaneous income, it cannot be decided conclusively, whether it forms part of profit of the undertaking or not. Similarly, in case of the interest income, the Tribunal in assessment year 2006-07 held that amount in question was not interest on loan, but it was investment made in purchase of shares of subsidiary company for the purpose of having control over it. In view of the above distinguishing facts, the ratio of the decision of the Tribunal (supra) cannot be applied in the instant case without verifying the facts. It is also not clear from the order of the Assessing Officer in the instant year, whether the FDR were made for the purpose of the business or for merely earning interest income. No such details have been provided before us also. Thus restore the issue in dispute to the file of the Assessing Officer for deciding in accordance with law

Issues Involved:
1. Validity of reduction in claim under section 10B of the Income-tax Act, 1961.
2. Eligibility of miscellaneous income and interest income for deduction under section 10B.
3. Procedural grounds related to the addition, alteration, amendment, or deletion of grounds at the time of hearing.

Detailed Analysis of the Judgment:

1. Validity of Reduction in Claim under Section 10B:
The assessee contested the reduction in the claim under section 10B, arguing that it had no nexus to the search and seizure operation. The Tribunal noted that the assessment under section 143(3) was pending and abated due to the search action under section 132. Therefore, the Assessing Officer (AO) was justified in considering disallowances other than those based on incriminating materials found during the search. Consequently, this ground of appeal was dismissed.

2. Eligibility of Miscellaneous Income and Interest Income for Deduction under Section 10B:
The assessee argued that both miscellaneous income and interest income should be considered part of the profits of the business of the undertaking and thus eligible for deduction under section 10B. The Tribunal referred to several case laws, including:
- PCIT Vs. Dishman Pharmaceutical and Chemicals Ltd.
- Riviera Home Furnishing Vs. Additional CIT
- CIT Vs. Hritik Exports Pvt. Ltd.

The Tribunal noted that the definition of "income from profits and gains" in sub-section 10B(4) includes any income forming part of the business of the undertaking. However, for the assessment year in question, the details of the miscellaneous income were not available, and the source of interest income was unclear. The Tribunal observed that in previous years, the miscellaneous income included sale of scrap and written-off credit balances, which were considered part of business income. However, in the current year, the scrap sales were separately identified and already allowed for deduction by the CIT(A).

Given the lack of detailed information about the sources of miscellaneous and interest income, the Tribunal restored the issue to the AO for a fresh decision in accordance with the law after verifying the sources. The Tribunal emphasized that the assessee should be provided with adequate opportunity of being heard.

3. Procedural Grounds Related to the Addition, Alteration, Amendment, or Deletion of Grounds:
The Tribunal did not specifically address procedural grounds related to the addition, alteration, amendment, or deletion of grounds at the time of hearing, as they were considered general in nature and dismissed as infructuous.

Separate Judgments for Assessment Years 2010-11 and 2011-12:
For the assessment year 2010-11, the Tribunal dismissed the first ground of appeal and restored the issue of miscellaneous and interest income to the AO for verification. For the assessment year 2011-12, the Tribunal followed the same approach, dismissing the first ground and restoring the issue of interest income to the AO for a fresh decision.

Conclusion:
The appeals were partly allowed for statistical purposes, with the Tribunal directing the AO to verify the sources of miscellaneous and interest income and decide the eligibility for deduction under section 10B accordingly. The procedural grounds were dismissed as general and infructuous.

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