Balaji Jewellers & Exporters V. Assistant Commissioner of Income Tax Circle 9(1)

ITTA/276/2013

AI Insights

The case involves M/s. Balaji Jewellers & Exporters, the appellant, who appealed against the decision of the Income Tax Appellate Tribunal. The core issue was whether the interest income accrued from Fixed Deposits, which were initially funded by export profits, could be treated as 'income from business' eligible for deductions under Section 80HHC of the Income Tax Act. The Tribunal and the High Court found that the interest income, although sourced from export profits, did not qualify as profit from export activities directly and thus was not eligible for the benefits under Section 80HHC.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 796393 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 16-07-2013
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Shah Originals
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Export Profits; Income from Business; Interest on Fixed Deposits; Section 80HHC
• Section: 80HHC

Judgement Text

"IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI INCOME TAX APPELLATE TRIBUNAL APPEAL NO.276 OF 2013 DATED:16.7.2013 Between: M/s. Balaji Jewellers & Exporters 22-6-1069,Kali Kaman Road Gulzar House Hyderabad … Appellant And Assistant Commissioner of Income Tax Circle 9(1), 1st Floor, “B” Block I.T. Towers, A.C. Guards Hyderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A. NO.276 OF 2013 JUDGMENT: (per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is preferred and sought to be admitted on the following suggested question of law. “Whether, on the facts and circumstances of the case, the Tribunal is right in sustaining the order of the Assessing Officer, who disallowed the claim of the assessee u/s 80 HHC of the Income Tax Act, to the extent of interest received on the Fixed Deposits? We have heard the learned counsel for the appellant and gone through the impugned judgment and order of the learned Tribunal. The short fact, which is relevant for consideration in this appeal, is that the assessee is an exporter of Jewellery and while doing its business, it has earned income and this has been converted into foreign exchange. On receipt of the proceeds, the same was kept in fixed deposits. The interest accrued on the fixed deposits was sought to be treated as ‘income from business’. The learned Tribunal on fact held that as there is no direct export activity on the interest received on fixed deposits, it cannot be treated as income from business. Hence, the benefit under Section 80HHC of the Income Tax Act, (for short, ‘the Act’) is not available. It appears, the learned Tribunal has relied on a decision of Bombay High Court in Commissioner of Income Tax v. Shah Originals[1]. The question is whether on the aforesaid facts, Section 80HHC of the Act is applicable or not. We set out Section 80HHC(1) of the Act, hereunder: “80 HHC(1). Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India or any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction to the extent of profits, referred to in sub-section (1B), derived by the assessee from the export of such goods or merchandise.” It is clear from the aforesaid Section that deduction will be allowed in respect of the profit derived by the assessee from export of goods or merchandise. Here, the receipt of profits from exports was invested in fixed deposits and the interest accrued therefrom was sought to be treated as export profits. We are unable to accept this contention of the assessee that the interest income earned from fixed deposits can be said to be profit from export business. After profit is earned, the same was converted into other corpus. Section 80HHC(1) of the Act provides that on the profit derived from the corpus of export only, deduction can be allowed. Here the interest income derived is from different corpus and this income cannot be said to be profit from the exports, though source of investment is export profits. Nonetheless, accrual of the income is quite different from that of business. Therefore, the learned Tribunal has followed correct proposition of law. Learned counsel for the appellant - assessee contends that on identical facts in assessee’s own case, earlier the Tribunal held in favour of the assessee and the said decision was applied by the Commissioner of Income Tax (Appeals) and hence the judgment of the Commissioner of Income Tax, should not be interfered with. We are unable to accept the contention of the learned counsel for two reasons. In case of income tax assessments there cannot be any question of res judicata. Moreover, the earlier decision of the Tribunal on identical facts does not appear to be correct one. The learned Tribunal has power to ignore its earlier decision in preference to a High Court’s decision. This is exactly done in this case. Therefore, we do not find any reason to interfere with the judgment and order of the learned Tribunal, and no question of law is involved in this matter. Hence, the appeal is dismissed. No order as to costs. ________________________ K.J. SENGUPTA, CJ ______________________ G. ROHINI, J 16.7.2013 bnr [1] 327 ITR 19 "