2008 (11) TMI 326 - HC - Income Tax

Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in allowing the appeal of the assessee holding that the interest income earned by the assessee on fixed deposits with the bank and other interest income are eligible for deduction under section 80-IA of the Income-tax Act, 1961 ? Held, yes - we are not inclined to entertain the above appeals, as there is no substantial question of law involved in both the appeals

Summary

Issues:
1. Interpretation of section 80-IA of the Income-tax Act, 1961 regarding eligibility of interest income for deduction.
2. Application of precedents from Supreme Court and High Courts in similar cases.

Analysis:
1. The primary issue in this case was whether the interest income earned by the assessee on fixed deposits with the bank and other sources is eligible for deduction under section 80-IA of the Income-tax Act, 1961. The Income-tax Appellate Tribunal, considering the facts and the decision in Pandian Chemicals Ltd. v. CIT, held that the interest income should be considered as part of business profit for the purpose of granting deduction under section 80-IA. The Tribunal directed the assessing authority to include the interest income as part of the assessee's business income for granting relief under section 80-IA.

2. The appellant relied on the judgment of the Supreme Court in Pandian Chemicals Ltd. v. CIT and the Madras High Court's decision in CIT v. Pandian Chemicals Ltd. to support their case. On the other hand, the respondent cited the judgment of the Delhi High Court in CIT v. Eltek SGS P. Ltd. The Delhi High Court distinguished the language used in sections 80-IB and 80HH of the Income-tax Act, emphasizing that section 80-IB requires profits and gains derived from any business of the industrial undertaking, not necessarily directly linked to the industrial activity. The court also noted that the judgment in Pandian Chemicals Ltd. v. CIT dealt with section 80HH and did not provide a principle difference from previous decisions.

3. Considering the arguments and precedents presented, the High Court dismissed both appeals, stating that there was no substantial question of law involved. The court's decision was based on the interpretation of the relevant sections of the Income-tax Act and the application of precedents from the Supreme Court and various High Courts, ultimately leading to the rejection of the appellant's claim for deduction under section 80-IA for the interest income earned.