2008 (1) TMI 439 - AT - Income Tax

Summary

Issues:
Rectification of mistake apparent on record in the order passed by the Tribunal under section 254(2) of the IT Act, 1961 regarding the deduction allowable under section 80HHC based on the interpretation of case laws and jurisdictional High Court decisions.

Detailed Analysis:

1. The applicant assessee filed a miscellaneous application under section 254(2) of the IT Act, 1961, pointing out a mistake apparent on record in the Tribunal's order dated 21st July, 2006. The issue revolved around the interpretation of Expln. (baa) below section 80HHC(4B) concerning the deduction of interest from business profits. The assessee referred to various case laws and argued for the rectification of the order based on the nexus between interest paid and interest received.

2. The learned counsel for the assessee highlighted the reliance on case laws such as Lalsons Enterprises, Liberty Footwear Co., and Paliwal Exports to support the argument for netting off interest after considering the nexus between interest paid and received. The Departmental Representative, on the other hand, defended the Tribunal's order based on the decision of the jurisdictional High Court in the case of Rani Paliwal.

3. The Tribunal analyzed the arguments presented by both parties and referred to previous decisions where similar issues were addressed. The Tribunal rejected the Department's miscellaneous application, emphasizing the importance of considering the nexus between interest paid and received for the purpose of deduction under section 80HHC.

4. The Tribunal further discussed the relevance of the decision in the case of Paliwal Exports and the observations made by the High Court of Delhi in the case of CIT v. Shri Ram Honda Power Equipment. The Tribunal acknowledged the different interpretations of the law but ultimately upheld the necessity of considering the nexus between interest paid and received.

5. Citing the decision of the Hon'ble Supreme Court in the case of Honda Siel Power Products Ltd. v. CIT, the Tribunal recognized the importance of rectifying mistakes that could cause prejudice to either party. The Tribunal admitted the oversight in not considering certain decisions while passing the order and rectified the same to ensure consistency and fairness in the application of the law.

6. In conclusion, the Tribunal allowed the miscellaneous application filed by the assessee, rectified the order passed on 21st July, 2006, and directed the Assessing Officer to recompute the allowable deduction under section 80HHC in accordance with the principles discussed regarding the netting off of interest received from business profits.