2012 (5) TMI 487 - HC - Income Tax

Deduction u/s 80HHC - denial of benefit of netting of interest - Held that - Apex court held in case of ACG Associated Capsules Private Limited v. Commissioner of Income Tax, Central-IV, Mumbai 2012 (2) TMI 101 (SC) that 90% of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads PGBP is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Matter remanded back to A.O. to work out the deductions Decided in favor of assessee.

Summary

Issues:
1. Disallowance of deduction under section 80HHC of the Income Tax Act and levy of interest under Section 234B.
2. Interpretation of Section 234B regarding the levy of interest.
3. Claim of expenditure for earning interest under Section 57(iii) and its allowance under 'Income From Other Sources.'
4. Denial of benefit for 'netting of' interest while computing deduction under Section 80HHC of the Act.

Analysis:
1. The appellant filed its return declaring income, and the assessment concluded with a net taxable income. The Assessing Officer disallowed the deduction under section 80HHC and levied interest under Section 234B. The appeal before CIT(A) was partly allowed, and further appeal before the Tribunal was dismissed, leading to the present appeal.

2. The appellant raised substantial questions of law related to the interpretation of Section 234B, claiming the mandatory levy of interest in case of conflict of decision and payment of admitted liability. The Civil Miscellaneous Application was allowed, addressing the questions raised by the appellant.

3. The appellant's counsel conceded that certain questions were concluded against the appellant based on a previous judgment. The arguments focused on whether netting of interest for computing deduction under Section 80HHC was required. Citing judgments of the Apex Court and Delhi High Court, the appellant sought a remand to the Assessing Officer for recomputation.

4. The revenue did not dispute the appellant's submission regarding the netting of interest for deduction under Section 80HHC. The court, in line with the Apex Court's judgment, remanded the matter to the Assessing Officer for a fresh order concerning the appellant's claim under Section 80HHC.

In conclusion, the court disposed of both appeals, with Question No.(iv) being answered in favor of the appellant, and the matter being remanded for reevaluation in accordance with the relevant judgments.