2004 (3) TMI 347 - AT - Income Tax

Summary

Issues Involved:
1. Deduction under Section 80HHD of the Income Tax Act.
2. Levy of interest under Section 234B of the Income Tax Act.
3. Write back of unclaimed credit balances for the assessment year 1993-94.

Detailed Analysis:

1. Deduction under Section 80HHD of the Income Tax Act:

The first issue pertains to the deduction under Section 80HHD of the Income Tax Act for both assessment years 1989-90 and 1993-94. The assessee, engaged in the business of travel agents and tour operators, claimed this deduction based on the report of a chartered accountant. The Assessing Officer (AO) excluded incomes from dividends, capital gains, and interest from banks and others, arguing these were not derived from services provided to foreign tourists. This exclusion was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], following similar decisions in previous years.

The assessee argued that the Tribunal had previously adjudicated this issue in their favor, particularly for assessment years 1990-91 and 1992-93, where it was held that interest from banks was inextricably linked to the business activities and thus eligible for deduction under Section 80HHD. The Departmental Representative, however, relied on the Supreme Court decision in Pandian Chemicals Ltd. vs. CIT, which dealt with Section 80HH, not Section 80HHD.

The Tribunal noted that Section 80HHD is different from Section 80HH, as it provides a specific formula for computing profits derived from services to foreign tourists. The Tribunal also referenced various High Court decisions and previous Tribunal rulings supporting the assessee's claim that interest income should be considered business income eligible for deduction under Section 80HHD. Consequently, the Tribunal directed the AO to allow the deduction on interest income but upheld the CIT(A)'s rejection of the claim on other incomes due to lack of arguments.

2. Levy of interest under Section 234B of the Income Tax Act:

The second issue concerns the levy of interest under Section 234B, which is consequential in nature. The Tribunal directed the AO to recalculate the interest based on the income determined as per their order.

3. Write back of unclaimed credit balances for the assessment year 1993-94:

For the assessment year 1993-94, the issue of writing back unclaimed credit balances was raised. The assessee's counsel conceded that this issue had been decided against them in earlier years by the Tribunal. Since no new facts were presented, the Tribunal concurred with the previous decisions and upheld the CIT(A)'s rejection of the claim.

Conclusion:

Both appeals by the assessee were partly allowed. The Tribunal directed the AO to allow the deduction under Section 80HHD on interest income from banks while rejecting the claim on other incomes. The recalculation of interest under Section 234B was directed, and the write-back of unclaimed credit balances for the assessment year 1993-94 was denied.