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TMI Blog2014 (4) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... own case for the previous year, it has been held that the context of Section 80HHC the interest income earned on fixed deposits having to be kept by the assessee for availing of credit facilities from bank, does not qualify as business income - The matter is remitted back to the AO for examination – Decided in favour of Revenue. Inclusion of interest income received from AEPC and banks – Held that:- As decided in assessee’s own case for the previous year, it has been held that, the expression "any profits and gains derived from any business of an industrial undertaking or an enterprise" appearing in sec. 80IA(1) has been referred to the business specified in sub section (4) of the said section. Sub section (4) does not include the business from earning of interest on FDRs - the interest income though may be in the nature of business income cannot be said to have been derived from the business of industrial undertaking within the meaning of sub section (4) of section 80IA - The decision in Pandian Chemicals Ltd. Versus Commissioner of Income-Tax [2003 (4) TMI 3 - SUPREME Court] followed – CIT(A) wrongly allowed the claim of the assessee treating the interest income as eligible bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act." Ground No.1 3. Apropos ground no.1, the ld. DR submitted that the assessee claimed deduction u/s 80HHC of the Income Tax Act, 1961 (for short the Act) and profits on sale of Duty Entitlement Passbook Scheme (DEPB) Licence is not included in section 28 of the Act. The DR also submitted that the benefits of the ratio of the judgment of Hon'ble Supreme Court in the case of Topman Export vs Commissioner of Income Tax (2012) 342 ITR 49 (SC) and judgment of Hon'ble Gujarat High Court in the case of Avani Exports Others vs Commissioner of Income Tax (2012) 348 ITR 391 (Guj) is not available to the assessee in the present case. The DR supported the order of the Assessing Officer and further pointed out that on page 10 of the assessment order, the Assessing Officer has categorically considered all the relevant provisions prior to disallowing claim of deduction of the assessee and the Commissioner of Income Tax(A) was not justified in allowing relief for the assessee in this regard. 4. Replying to the above, ld. counsel of the assessee submitted that in the case of Topman Export vs C.I.T. (supra) and Avani Export Others vs C.I.T. (supra), the Hon'ble Apex Court and Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used to offset customs duty payable in respect of further imports. Since at the time of initial import the custom duty paid was debited to P L account, therefore, when the corresponding credit was availed a matching amount was shown as revenue receipt in the P L account. Thus, the DEPB credit should be considered not as a sum covered by the provisions of sec. 28(iiia), (iiib) (iiic), but should be considered as a sum covered by the provisions of sec.28(iv). It was further submitted that the Supreme Court has ruled in the cases of CIT Vs Progold Manufacturing Co. Ltd (177 ITR 431) and Bajaj Tempo Vs CIT (196 ITR 188) that the law providing concession for tax purposes should be liberally construed and the initial exercise should be to find out as to whether the transaction is within the sweep of the statute. Once a conclusion is reached that the transaction is within the sweep of the statute, then the provisions should be applied reasonably and liberally keeping in view the purpose of the statute. In view of the judicial pronouncement and the facts of the case it was prayed that the DEPB credit may be included as part of the business profits for the purpose of computing deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid is the available to the importer. The Commissioner of Income Tax(A) also rightly held that the credit of DEPB can be used to offset custom duty payable in respect of further imports. As per accounting principle, at the time of initial import, custom duty paid was debited to P L account, therefore, when the corresponding credit was availed, a matching amount was shown as revenue receipt in the P L account. Thus, it was rightly held by the first appellate authority that the DEPB credit should be considered as a sum covered by the provisions of section 28(iv) of the Act. Accordingly, we also hold that the benefit of the ratio of the judgment of the decision of Hon'ble Apex Court in the case of Topman Export (supra) is also available for the assessee and ground no. 1 of the revenue, being devoid of merits is dismissed. Ground no.2 7. Apropos ground no.2, ld. DR submitted that ground no. 2 is covered in favour of the revenue and against the assessee by the decision of Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs Shri Ram Honda Power Corp. 289 ITR 475 (Del). It is also submitted by the DR that the interest earned on FDRs is outside the scope of the word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 243 ITR 92 (ii) Abad Enterprises v. CIT (2002) 253 ITR 319 (iii) CIT v. Jose Thomas (2002) 253 ITR 553 (iv) CIT v. Abad Fisheries (2002) 258 ITR 641 (v) Southern Cashew Exports v. DCIT (2003) 130 Taxman 203 (vi) ACIT v. South Indian Produce Co. (2003) 262 ITR 20 (vii) K. Ravindranathan Nair v. CIT (2003) 262 ITR 669 (viii) Urban Stanislaus Co. v. CIT (2003) 263 ITR 10 (ix) GTN Textiles v. DCIT (2005) 279 ITR 72. 30. In particular, reference may be made to the observations in Urban Stainless Co.(2003) 263 ITR 10 (Ker.) where the assessee had contended that as a condition for obtaining a loan from the bank, 20% of the sale receipts had to be deposited by way of security. It was claimed that the interest earned on such deposit was business income for the purpose of Section 80HHC. This was negatived by the Kerala High Court by observing that (Page 12) that "the assessee can claim deduction in respect of the profits derived from the export of goods only when it is established that the income is solely related to the export. The obvious intention behind the provision in Section 80HHC is to promote exports. However, the income earned by way o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est income was business income, but that it was not income from exports. In those circumstances, the High Court held that since the entire business activity of the assessee is only of exports, "the entire business income is deemed to be profit derived from export of goods." It is not clear from the narration of the facts in Punit commercial whether the interest earned was as a result of parking surplus funds in deposits. If it was so earned then it is difficult, in view of the decisions of the Kerala High Court that have been affirmed by the Hon'ble Supreme Court, to categorise such income as business income. 35. Turning to the submissions in the present cases, as regards the first of the categories, viz., the parking of surplus funds, there should be no difficulty at all. In view of the large number of the decisions of the Hon'ble Supreme Court in the context of Section 56 and Section 57 and those of the Kerala High Court in the context of Section 80HHC itself, we are unable to accept the contention of the assessees based on Snam Progretti that interest earned on parked surplus funds should qualify as business income. Clearly, Snam Progretti was not rendered in the context of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the above judgment of ITAT in assessee's own case/appeal pertaining to AY 2001-02. Respectfully following the precedent, we set aside the issue to the file of Assessing Officer with the direction that the nature of interest received should be examined in the light of decision of Hon'ble Jurisdictional High Court of Delhi in the case of Commissioner of Income Tax vs Shriram Honda Power Equipment Corporation (supra) and above decision of ITAT in asessee's own case (supra) for AY 2001-02, deduction u/s 80HHC should be computed on merits accordingly. In the result, ground no.2 of the revenue is decided in the manner as indicated above and deemed to be treated as allowed for statistical purposes. Ground no.3 10. Ld. DR pointed out para from 5 to 6.1 of the impugned order of the Commissioner of Income Tax(A) and submitted that the Commissioner of Income Tax(A) granted relief in an erroneous manner by directing the Assessing Officer to recompute the deduction u/s 80IB of the Act by including the interest income of Rs.87,89,652 received from AEPC and banks to the profits derived from eligible business. 11. Replying to the above, the counsel of the assessee submitted copies of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- "11. The expression "any profits and gains derived from any business of an industrial undertaking or an enterprise" appearing in sec. 80IA(1) has been referred to the business specified in sub section (4) of the said section. Sub section (4) does not include the business from earning of interest on FDRs. Therefore, the interest income though may be in the nature of business income cannot be said to have been derived from the business of industrial undertaking within the meaning of sub section (4) of section 80IA. As regards the contention of assessment that for assessment year 2000-01 ITAT F' Bench has allowed the relief to the assessee in respect of interest on FDRs, we find that ITAT for AY 2000-01 has decided the matter in favour of assessee relying on the decision of ITAT in the case of ACIT v. Maxcare Laboratories Ltd. 273 ITR (AT) 1. The decision of ITAT Cutack Bench relates to AY 1995-96 to AY 1998-99. Section 80IA was substituted by the Finance Act, 1999 w.e.f. 1st April, 2000. Prior to substitution the provisions of section 80IA(1) applicable upto AY 1999-2000 did not include the expression "from any business referred to in sub section (4) (such business b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs Maxcare Laboratories Ltd. 273 ITR (AT) 1 for AY 1995-96 to AY 1998-99. It was also held that the decision of ITAT Cuttack Bench is not applicable for AY 2000-01 onwards. The Tribunal categorically made it clear that section 80IA of the Act was substituted by Finance Act, 1999 w.e.f. 1.4.2000 and prior to this substitution, the provisions of Section 80IA(1) applicable upto AY 1999-2000 did not include the expression "From any business referred to in sub section (4)" and thus, upto 1999-2000 the legislature did not specify the eligible business of the assessee. Subsequently, as per amendment w.e.f. 1.4.2000 in section 80IA of the Act, the eligible business has been specified in sub-section (4) of section 80IA of the Act and therefore earlier decision of ITAT "F" Bench in ITA No. 2692/D/03 (supra) has been held to be per incurium as having been rendered without considering the subsequent amendment made by Finance Act, 1999 w.e.f 1.4.2000. 13. The DR submitted that the decision in asessee's own case for AY 2001-02 in ITA NO. 1224/D/2004 (supra) holds the field in favour of the Revenue. The counsel for the assessee submitted that where two views are possible, the view in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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