Punjab-Haryana High Court
Commissioner Of Income-Tax vs Liberty Footwear Company on 27 July, 2006
Equivalent citations: (2007)207CTR(P&H)185, [2006]287ITR339(P&H)
Author: Rajesh Bindal
Bench: Adarsh Kumar Goel, Rajesh Bindal
JUDGMENT Rajesh Bindal, J.
1. This is an appeal by the Revenue against the order dated April 23, 2004, passed by the Income-tax Appellate Tribunal, New Delhi (for short, "the Tribunal"), in M.A. No. 165/Del/2003 in I.T.A. No. 5317 (Del) of 1994, for the assessment year 1992-93 raising the following substantial question of law:
Whether, on the facts and the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in directing the Assessing Officer to allow netting in interest for computing deduction under Section 80HHC of the Income-tax Act?
2. Notice in this case was issued on July 18, 2005, and the service was effected for November 7, 2005. However, none has put in appearance on behalf of the respondent.
3. We have proceeded to decide the case on the merits for determination of the abovereferred substantial question of law because, in our opinion, the same does arise in the appeal and further that this Court had already opined on the issue in Rani Paliwal v. CIT against the assessee.
4. We have heard learned Counsel for the Revenue.
5. The short issue is as to whether in terms of Explanation (baa) to Sub-section (4C) of Section 80HHC of the Income-tax Act, 1961 (for short, "the Act"), 90 per cent, of the gross interest received is to be reduced out of the profit of business or the net interest.
6. The relevant Explanation is extracted below:
Explanation.For the purpose of this section,-
(baa) 'profits of the business' means the profits of the business as computed under the head 'Profits and gains of business or profession' as reduced by-
(1) ninety per cent, of any sum referred to in Clauses (iiia), (iiib) and (iiic) of Section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India;
7. The words used in Explanation (baa) to Sub-section (4C) of Section 80HHC of the Act are "receipts by way of interest". A plain reading thereof shows that it is the amount of interest which is shown by the assessee in receipt side. It does not in any way provide for netting of interest by reducing the interest paid by the assessee from the interest received by it for the purpose of calculation under the above provision.
8. Earlier also, this Court, while rejecting an appeal filed by the assessee, against the order of the Revenue in the case of Rani Paliwal [2004] 268 ITR 220, held that it is the gross interest which is to be taken into consideration for reduction of 90 per cent, thereof for arriving at the profit of the business, in terms of Explanation (baa) to Sub-section (4C) of Section 80HHC of the Act. Though in Rani Paliwal's case [2004] 268 ITR 220 (P & H), the Tribunal had decided the issue against the assessee, but still in the present case it was decided in favour of the assessee. Even an application filed by the Revenue for rectification was also rejected by the Tribunal vide order dated April 23, 2004, by referring to a Special Bench decision of the Tribunal even though the judgment of this Court in Rani Paliwal's case [2004] 268 ITR 220 (P & H) was already there on the issue. Reliance on an order passed by the Tribunal, where the issue is covered by a judgment of this Court, cannot be appreciated. The Tribunal in its order has not even referred to the judgment of this Court.
9. In view of our above discussions and the earlier view of this Court in Rani Paliwal's case [2004] 268 ITR 220, the present appeal is accepted and it is held that it is the gross interest received by the assessee, which is to be considered in terms of Explanation (baa) to Section 80HHC of the Act and not the net interest for the purpose of arriving at the profits of the business.
10. Accordingly, the appeal is allowed in the manner indicated above and the order of the Tribunal is set aside.