DCIT, Circle-9(1), V. SPL Industries Ltd.,

ITA 4242/DEL/2005

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69633 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 01-10-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 03-11-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS RENUKA JAIN GU PTA
• Keywords: Business income
• Section: 80HHC; 115JB; 80IB; 56; 28; 15

Judgement Text

ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER I.T.A.NO.4242/DEL/2005 ASSESSMENT YEAR : 2002-03 DY.COMMISSIONER OF INCOME TAX, VS M/S SPL INDUSTRIES LTD., CIR. 9(1), R.NO.163, 5/66, K.C. HOUSE, C.R. BLDG., I.P. ESTATE, PADAM SINGH ROAD, NEW DELHI-110002 KAROL BAGH, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: MRS. RENUKA JAIN GUPTA SR.DR RESPONDENT BY : SHRI ASHW ANI TANEJA PER CHANDRAMOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX(A)-XII, NEW DELHI DATED 08.08.2005 FOR AY 2002-03. 2. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE DEDUCTION U/S 80HHC OF THE ACT BY INCLUDING A SUM OF RS.6,90,75,728/- REPRESENTING THE INCOME FROM SALE OF DEPB LICENSE I N THE PROFIT OF THE BUSINESS AS DEFINED IN SECTION 80 HHC OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE DEDUCTION U/S 80HHC OF THE ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 2 ACT BY NOT EXCLUDING THE AMOUNT OF INTEREST OF RS.87,89,652/- FROM THE PROFIT OF THE BUSINESS AS DEFINED IN SECTION 80HHC OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSIN G 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. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSIN G OFFICER TO RECOMPUTED THE INCOME U/S 115JB OF THE I T ACT AFTER REDUCING THE BOOK PROFITS BY THE AMOUNT O F DEDUCTION U/S 80HHC OF THE ACT. GROUND NO.1 3. APROPOS GROUND NO.1, THE LD. DR SUBMITTED THAT T HE ASSESSEE CLAIMED DEDUCTION U/S 80HHC OF THE INCOME TAX ACT, 1961 (FO R 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 SUB MITTED THAT THE BENEFITS OF THE RATIO OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORT VS COMMISSIONER OF INCOME TAX (2012) 342 ITR 49 (SC) AND JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS & OTHERS VS COMMISSIONER OF INCOME TAX (201 2) 348 ITR 391 (GUJ) IS NOT AVAILABLE TO THE ASSESSEE IN THE PRESENT CA SE. THE DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND FURTHER POIN TED OUT THAT ON PAGE 10 OF ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 3 THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS CAT EGORICALLY 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 ASSESS EE SUBMITTED THAT IN THE CASE OF TOPMAN EXPORT VS C.I.T. (SUPRA) AND AVANI E XPORT & OTHERS VS C.I.T. (SUPRA), THE HONBLE APEX COURT AND HONBLE GUJARAT HIGH COURT HAVE HELD THAT THE OBJECTIVE OF DUTY ENTITLEMENT PA SSBOOK SCHEME (DEPB) IS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY ON T HE IMPORT CONTENT OF THE EXPORT PRODUCTS. THEREFORE, IT HAS DIRECT NEXUS WI TH THE COST OF THE IMPORTS MADE BY AN EXPORTER FOR MANUFACTURING THE EXPORT PR ODUCTS. THE COUNSEL FURTHER CONTENDED THAT THE NEUTRALIZATION OF THE CO ST OF CUSTOMS DUTY UNDER THE DEPB CREDIT SCHEME, HOWEVER, IS BY GRANTING A D UTY CREDIT AGAINST THE EXPORT PRODUCT AND THIS CREDIT CAN BE UTILIZED FOR PAYING CUSTOMS DUTY ON ANY ITEM WHICH IS FREELY IMPORTABLE. THE DEPB CREDIT I S ISSUED AGAINST THE EXPORTS TO THE EXPORTER AND IS TRANSFERABLE BY THE EXPORTER. THE COUNSEL POINTED OUT THAT THE HONBLE APEX COURT IN TOPMAN E XPORT (SUPRA) HAS SETTLED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY HOL DING THAT THE SALE OF CREDIT IN DUTY ENTITLEMENT PASS BOOK, THE ENTIRE SALE PROCEED NOT BE TREATED AS PROFITS BUT ONLY DIFFERENCE BETWEEN SALE VALUE AND FACE VAL UE OF THE DEPB IS ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 4 CHARGEABLE AS INCOME U/S 28(IIIB) IN THE YEAR IN WH ICH APPLIED FOR AGAINST EXPORT AND PROFIT ON TRANSFER OF CREDIT CHARGEABLE U/S 28(IIID) IN THE YEAR IN WHICH DEPB IS TRANSFERRED. 5. WE HAVE CAREFULLY CONSIDERED ABOVE SUBMISSIONS A ND PERUSED THE RECORD PLACED BEFORE US AND CITATIONS RELIED BY BOT H THE PARTIES. FROM THE IMPUGNED ORDER, WE OBSERVE THAT THE COMMISSIONER OF INCOME TAX(A) HAS DECIDED THE ISSUE WITH FOLLOWING OBSERVATIONS AND F INDINGS:- 4.1 IN APPEAL, THE LD. AR SUBMITTED THAT THIS IS SUE HAS BEEN AGITATED IN A NUMBER OF CASES BEFORE THE I TAT AND IT HAS BEEN HELD THAT 90% OF DEPB RECEIPTS ARE ASSESSABLE U/S 28(IV). SINCE THE TRIBUNAL HAS HELD THAT THESE RECEIPTS DO NOT FORM PART OF THE RECEIPTS MENTIONED IN SEC. 28(IIIA) (IIIB) OR (IIIC) THEREFO RE, SUCH RECEIPTS SHOULD NOT BE EXCLUDED FROM THE CALCULATIO N. IN THIS REGARD, RELIANCE WAS PLACED ON THE DECISION OF THE DELHI BENCH 'B' IN THE CASE OF P&G ENTERPRISES PVT. LTD. VS DCIT IN ITA NO. 3942/DEL/2004 IN RESPECT OF A. Y. 2001-02 AND THE DECISION OF THE AHMEDABAD BENCH OF IT AT IN THE CASE OF ACIT VS PRATIBHA SINTEX LTD. 6 3 TTJ 409. IT WAS SUBMITTED THAT DEPB IS NOT LIKE A LICENSE WHICH IS SALEABLE IN THE MARKET. THE DEPB ENTITLEMENT IS AVAILABLE TO THE IMPORTER ONLY AFTER MAKING THE INITIAL PAYMENT OF CUSTOM DUTY. A CREDIT OF AN AMOUNT EQUIVALENT TO THE DUTY PAID IS THEN AVAIL ABLE TO THE IMPORTER. THIS CREDIT CAN BE 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), (II IB) & (IIIC), BUT SHOULD BE CONSIDERED AS A SUM COVERED B Y THE ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 5 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 TH E 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 STATUT E. 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 PU RPOSE OF COMPUTING DEDUCTION U/S 80HHC. 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. AR, THE FACTS OF THE CASE AND THE JUDICIAL PRECEDEN TS RELIED UPON. THE CRUCIAL ASPECT OF THE MATTER IS WH ETHER THE IMPUGNED CREDIT UNDER DEPB SCHEME SHOULD BE CATEGORISED AS FALLING U/S 28(IV) OR WHETHER IT WOU LD FALL WITHIN THE SCOPE OF 'ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFITS' AS PROVIDED IN CLA USE (BAA)(1) OF EXPLANATION BELOW SEC.80HHC. IN CASE TH E CREDITS ARE CATEGORISED AS 'ANY OTHER RECEIPT OF SI MILAR NATURE', THEY WOULD BE EXCLUDED FROM THE COMPUTATIO N AS HAS BEEN DONE BY THE AO. IN CASE IT IS HELD THAT THE DEPB CREDITS OUGHT TO BE CATEGORISED AS FALLING U/S 28(IV), THEN THEY NEED NOT BE REDUCED FROM THE PROF ITS AND GAINS OF THE BUSINESS FOR THE PURPOSE OF COMPUT ING THE DEDUCTION. THIS ISSUE HAS BEEN CONSIDERED IN TH E P&G ENTERPRISES CASE (SUPRA), BY THE JURISDICTIONAL BENCH OF THE ITAT. THE HON'BLE ITAT, REFERRING TO T HE RULE OF EJUSDUM GENERIS, REFERRED TO THE PRINCIPLE ENUNCIATED BY JUSTICE G.P. SINGH IN 'THE PRINCIPLES OF STATUTORY INTERPRETATION' WHEREIN IT HAS BEEN DEFIN ED AS WHEN PARTICULAR WORDS PERTAINING TO A CLASS, CATEG ORY OR GENUS ARE FOLLOWED BY GENERAL WORDS, THE GENERAL WORDS ARE CONSTRUED AS LIMITED TO THINGS OF THE SAM E KIND AS THOSE SPECIFIED.' AFTER CONSIDERING ALL ASP ECTS OF ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 6 THE MATTER, IT WAS HELD THAT '90% OF DEPB RECEIPTS ASSESSABLE U/S 28(IV) CANNOT BE EXCLUDED FROM THE PROFITS OF BUSINESS AS COMPUTED UNDER THE HEAD 'PRO FITS AND GAINS OF BUSINESS OR PROFESSION' FOR THE PURPOS E OF COMPUTING PROFITS OF BUSINESS UNDER CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80HHC(4B). FOLLOWING THE ABOVE DECISION, I HOLD THAT THE ACTION OF THE AO IN DENYING THE BENEFIT OF DEPB CREDIT FOR THE PURPOSES OF COMPUTATION OF DEDUCTION U/S 80HHC WAS NOT JUSTIFIE D. ACCORDINGLY, THE AO IS DIRECTED TO RECOMPUTED THE DEDUCTION AFTER INCLUDING A SUM OF RS.6,90,75,728/- BEING THE AMOUNT OF DEPB CREDITS. 6. IN VIEW OF ABOVE, WE HOLD THAT THE COMMISSIONER OF INCOME TAX(A) HAS RELIED ON THE JUDGMENT OF ITAT DELHI B BENCH IN THE CASE OF PG ENTERPRISES LTD. VS DCIT IN ITA NO.3942/D/2004 FOR AY 2001-02. ACCORDINGLY, WE HOLD THAT THE COMMISSIONER OF INCOM E TAX(A) RIGHTLY HELD THAT DEBP ENTITLEMENT IS AVAILABLE TO THE IMPORTER ONLY AFTER MAKING THE INITIAL PAYMENT OF CUSTOM DUTY AND THE CREDIT OF AN AMOUNT EQUIVALENT TO THE DUTY PAID IS THE AVAILABLE TO THE IMPORTER. THE CO MMISSIONER OF INCOME TAX(A) ALSO RIGHTLY HELD THAT THE CREDIT OF DEPB CA N BE USED TO OFFSET CUSTOM DUTY PAYABLE IN RESPECT OF FURTHER IMPORTS. AS PER ACCOUNTING PRINCIPLE, AT THE TIME OF INITIAL IMPORT, CUSTOM DU TY PAID WAS DEBITED TO P&L ACCOUNT, THEREFORE, WHEN THE CORRESPONDING CREDIT W AS AVAILED, A MATCHING AMOUNT WAS SHOWN AS REVENUE RECEIPT IN THE P&L ACCO UNT. THUS, IT WAS RIGHTLY HELD BY THE FIRST APPELLATE AUTHORITY THAT THE DEPB CREDIT SHOULD BE ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 7 CONSIDERED AS A SUM COVERED BY THE PROVISIONS OF SE CTION 28(IV) OF THE ACT. ACCORDINGLY, WE ALSO HOLD THAT THE BENEFIT OF THE R ATIO OF THE JUDGMENT OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF TOPMA N 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 GROUN D NO. 2 IS COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE B Y THE DECISION OF HOBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INC OME 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 DERIVED IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS 262 ITR 278, C.I.T. VS STERLING F OODS 237 ITR 579 . 8. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE S UBMITTED THAT THE INTEREST EARNED ON FDR IS IN THE NATURE OF BUSINESS . THE COUNSEL ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS NOT ALLOWE D NETTING OF INTEREST OF INCOME AGAINST INTEREST PAID AND IF NETTING WERE AL LOWED, THE EXPENDITURE INCURRED ON EARNING THE INCOME SHOULD HAVE BEEN CON SIDERED AND ALLOWED TO THE ASSESSEE. DURING THE ARGUMENTS, THE COUNSEL OF THE ASESSEE SUBMITTED A COPY OF THE JUDGMENT OF ITAT DELHI F BENCH IN ASS ESSEES OWN CASE IN ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 8 ITA NO.1224/D/2004 FOR AY 2001-02 DATED 28.9.2007 W HEREIN IT HAS BEEN HELD AS UNDER:- 7. AS REGARDS THE CONTENTION OF LD. DR THAT THE W ORDS DERIVED FROM APPEARING IN SECTION 80HHC(1) IS TO BE INTERPRETED IN VIEW OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS (SUPRA) AND THE DE CISION IN THE CASE OF STERLING FOODS (SUPRA). FOR THE PUR POSE OF SECTION 80HHC THE INCOME DERIVED FROM EXPORT IS TO BE COMPUTED AS PER THE MACHINERY PROVISIONS OF SECTION 80HHC(3) READ WITH CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC. FOR THE PURPOSE OF DEDUCTION U/S 80 HHC THE DECISION RELIED UPON BY LD. DR IN THE CASE OF P ANDIAN CHEMICALS LTD. AND STERLING FOODS LTD. WOULD NOT BE APPLICABLE. HOWEVER, THE REVENUES CASE IS COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V. SHRIRAM HONDA POWER EQUIPMENT CORPORATION LTD. (SUPRA). THE RELEVANT P ART OF THE DECISION IS REPRODUCED AS UNDER:- 28. IN THE CONTEXT OF SECTION 80HHC ITSELF, THE MA DRAS HIGH COURT IN K.S.SUBBIAH PILLAI V. CIT (2003) 260 ITR 3 04 HAS HELD THAT IF AN ASSESSEE WHICH IS ENGAGED IN THE BUSINES S OF EXPORTS, INVESTS SURPLUS FUNDS IN FIXED DEPOSITS AND EARNS I NTEREST THEREON, SUCH INCOME CANNOT BE TREATED AS BUSINESS INCOME SINCE IT DOES NOT BEAR ANY DIRECT NEXUS WITH THE EX PORT BUSINESS OF THE ASSESSEE. 29. IN THE FOLLOWING DECISIONS, THE KERALA HIGH COU RT HAS CONSISTENTLY HELD THAT IN THE CONTEXT OF SECTION 80 HHC THE INTEREST INCOME EARNED ON FIXED DEPOSITS HAVING TO BE KEPT B Y THE ASSESSEE FOR AVAILING OF CREDIT FACILITIES FROM BAN K, DOES NOT QUALIFY AS BUSINESS INCOME AND THEREFORE, WILL GO TO REDUCE THE DEDUCTIBLE AMOUNT FOR THE PURPOSES OF THAT SECTION: (I) NANJI TOPANBHAI V. ACIT (2000) 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 ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 9 (V) SOUTHERN CASHEW EXPORTS V. DCIT (2003) 130 TAXM AN 203 (VI) ACIT V. SOUTH INDIAN PRODUCE CO. (2003) 262 IT R 20 (VII) K. RAVINDRANATHAN NAIR V. CIT (2003) 262 ITR 669 (VIII) URBAN STANISLAUS CO. V. CIT (2003) 263 ITR 1 0 (IX) GTN TEXTILES V. DCIT (2005) 279 ITR 72. 30. IN PARTICULAR, REFERENCE MAY BE MADE TO THE OBS ERVATIONS IN URBAN STAINLESS CO.(2003) 263 ITR 10 (KER.) WHERE T HE ASSESSEE HAD CONTENDED THAT AS A CONDITION FOR OBTAINING A L OAN FROM THE BANK, 20% OF THE SALE RECEIPTS HAD TO BE DEPOSITED BY WAY OF SECURITY. IT WAS CLAIMED THAT THE INTEREST EARNED O N SUCH DEPOSIT WAS BUSINESS INCOME FOR THE PURPOSE OF SECTION 80HH C. THIS WAS NEGATIVED BY THE KERALA HIGH COURT BY OBSERVING THA T (PAGE 12) THAT THE ASSESSEE CAN CLAIM DEDUCTION IN RESPECT O F THE PROFITS DERIVED FROM THE EXPORT OF GOODS ONLY WHEN IT IS ES TABLISHED THAT THE INCOME IS SOLELY RELATED TO THE EXPORT. THE OBV IOUS INTENTION BEHIND THE PROVISION IN SECTION 80HHC IS TO PROMOTE EXPORTS. HOWEVER, THE INCOME EARNED BY WAY OF INTEREST FROM FIXED DEPOSIT IS NOT AN INCOME FROM EXPORTS. THUS, IT WAS RIGHTLY TAKEN INTO ACCOUNT AS INCOME FROM OTHER SOURCES. THIS DECISIO N HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT BY THE DISMIS SAL OF THE SPECIAL LEAVE PETITION [ORDER REPORTED IN 265 ITR ( STATUTES) 38]. IN K. RAVINDRANATHAN NAIR, IN DEALING WITH A SIMIL AR ISSUE, THE KERALA HIGH COURT HELD (ITR PAGE 673): THE INTEREST FROM SHORT TERM DEPOSITS RECEIVED BY THE APPELLANT IS NOT THE DIRECT RESULT OF ANY EXPORT OF ANY GOODS OR MERCHANDISE. THE FIXED DEPOSIT WAS MADE ONLY FOR TH E PURPOSE OF OPENING LETTERS OF CREDIT AND FOR GETTING OTHER BEN EFITS WHICH ARE NECESSARY REQUIREMENTS TO ENABLE THE APPELLANT TO M AKE THE EXPORT. FROM THE ABOVE IT IS CLEAR THAT THE INTERES T INCOME RECEIVED ON THE SHORT-TERM DEPOSITS THOUGH IT CAN B E ATTRIBUTED TO THE EXPORT BUSINESS CANNOT BE TREATED AS INCOME WHI CH IS DERIVED FROM THE EXPORT BUSINESS. IN THE ABOVE CIRCUMSTANCE S, EVEN ASSUMING THAT THE BANK HAD INSISTED FOR MAKING SHOR T-TERM DEPOSITS FOR OPENING LETTERS OF CREDIT AND FOR OTHE R FACILITIES, IT CANNOT BE SAID THAT THE INCOME IS DERIVED FROM THE EXPORT BUSINESS. ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 10 THE ABOVE DECISION IN RAVINDRANATHAN NAIR HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT BY THE DISMISSAL OF THE S PECIAL LEAVE PETITION [ORDER REPORTED IN 263 ITR (STATUTES) 3]. TO THE SAME EFFECT IS THE JUDGMENT OF THE SAME HIGH COURT IN SOUTHERN CASHEW EXPORTS V. DCIT WHICH HAS BEEN AFFIRMED BY THE HON BLE SUPREME COURT ON ACCOUNT OF THE DISMISSAL OF THE SPECIAL LE AVE PETITION [ORDER REPORTED IN 264 ITR (STATUTES) 142]. THE RESULTANT POSITION IS THAT ON THREE OCCASIONS THE HONBLE SUPREME COURT HAS AFFIRMED JUDGMENTS OF THE KERALA HIGH COURT THAT HAS CONSISTENTLY HELD THAT INTEREST EARN ED ON FIXED DEPOSITS FOR THE PURPOSES OF AVAILING CREDIT FACILI TIES FROM THE BANK, DOES NOT HAVE AN IMMEDIATE NEXUS WITH THE EXPORT BU SINESS AND THEREFORE HAS TO NECESSARILY BE TREATED AS INCOME F ROM OTHER SOURCES AND NOT AS BUSINESS INCOME. IN EACH OF THES E DECISIONS, THE KERALA HIGH COURT HAS CONSISTENTLY FOLLOWED THE EARLIER JUDGMENTS LISTED AT (I) TO (IV) OF PARA 14 ABOVE. THE DECISION OF THE BOMBAY HIGH COURT IN CIT V. PU NIT COMMERCIAL LTD. 245 ITR 550 (BOM) CONCERNED A CASE WHERE THE ASSESSEE WAS A 100 PER CENT EXPORTER. THE HIGH COUR T NOTICED THAT ACCORDING TO THE TRIBUNAL, THE AO HAD PROCEEDED ON THE FOOTING THAT THE INTEREST INCOME WAS BUSINESS INCOME, BUT T HAT IT WAS NOT INCOME FROM EXPORTS. IN THOSE CIRCUMSTANCES, THE HI GH COURT HELD THAT SINCE THE ENTIRE BUSINESS ACTIVITY OF THE ASSE SSEE IS ONLY OF EXPORTS, THE ENTIRE BUSINESS INCOME IS DEEMED TO B E PROFIT DERIVED FROM EXPORT OF GOODS. IT IS NOT CLEAR FROM THE NAR RATION OF THE FACTS IN PUNIT COMMERCIAL WHETHER THE INTEREST EARNED WAS AS A RESULT OF PARKING SURPLUS FUNDS IN DEPOSITS. IF IT WAS SO EAR NED THEN IT IS DIFFICULT, IN VIEW OF THE DECISIONS OF THE KERALA H IGH COURT THAT HAVE BEEN AFFIRMED BY THE HONBLE SUPREME COURT, TO CATE GORISE 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 S URPLUS FUNDS, THERE SHOULD BE NO DIFFICULTY AT ALL. IN VIEW OF THE LARG E NUMBER OF THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CONTE XT OF SECTION 56 AND SECTION 57 AND THOSE OF THE KERALA HIGH COUR T IN THE CONTEXT OF SECTION 80HHC ITSELF, WE ARE UNABLE TO A CCEPT THE ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 11 CONTENTION OF THE ASSESSEES BASED ON SNAM PROGRETTI THAT INTEREST EARNED ON PARKED SURPLUS FUNDS SHOULD QUALIFY AS BU SINESS INCOME. CLEARLY, SNAM PROGRETTI WAS NOT RENDERED IN THE CONTEXT OF SECTION 80HHC AND CANNOT BUT BE CONFINED TO THE FAC TS OF THAT CASE. CIRCULAR NO.564 DATED 5.7.1990 CAN ALSO NOT H ELP IN INTERPRETING SECTION 80HHC WHICH IS A STAND ALONE PROVISION. WE ARE THEREFORE OF THE VIEW THAT WHERE SURPLUS FUNDS ARE PARKED WITH THE BANK AND INTEREST IS EARNED THEREON IT CAN ONLY BE CATEGORISED AS INCOME FROM OTHER SOURCES. THIS RECEIPT MERITS S EPARATE TREATMENT UNDER SECTION 56 OF THE ACT WHICH IS OUTS IDE THE RING OF PROFIT AND GAINS FROM BUSINESS AND PROFESSION. IT G OES ENTIRELY OUT OF THE RECKONING FOR THE PURPOSES OF SECTION 80HHC. TO GIVE EFFECT TO THIS POSITION, THE AO WHILE COMPUTING PROFITS OF THE EXPORT BUSINESS WILL HAVE TO REMOVE FROM THE DEBIT SIDE OF THE PROFIT AND LOSS ACCOUNT THE CORRESPONDING INTEREST EXPENDITURE THAT HAS BEEN LAID OUT TO EARN SUCH INCOME FROM OTHER SOURCES. OTHERWISE THIS WILL DEPRESS THE PROFITS BY AN AMOUNT WHICH IS OUT OF THE RECKONING OF SECTION 80HHC, A CONSEQUENCE NOT INTENDED TO BE BROUGHT ABOUT. THE OTHER CATEGORY IS WHERE THE EXPORTER IS REQUIR ED TO MANDATORILY KEEP MONIES IN FIXED DEPOSIT IN ORDER T O AVAIL OF CREDIT FACILITY FOR THE EXPORT BUSINESS. THE ARGUMENT ON B EHALF OF THE ASSESSEE IS THAT BUT FOR SUCH A STIPULATION BY THE BANK THERE WAS NO NEED FOR THE EXPORTER TO KEEP THE MONEY IN FIXED DE POSIT AND THEREFORE THE INCOME EARNED FROM SUCH FIXED DEPOSIT S BEARS A DIRECT NEXUS TO THE BUSINESS ACTIVITY ITSELF. GIVEN THE REPEATED AFFIRMATION BY THE HONBLE SUPREME COURT OF THREE J UDGMENTS OF THE KERALA HIGH COURT ON THE SAME ISSUE, WE ARE INCLINE D TO FOLLOW THE VIEW EXPRESSED BY THE KERALA HIGH COURT ON EACH OF THESE OCCASIONS. WE ACCORDINGLY HOLD THAT INTEREST EARNED ON FIXED DEPOSITS FOR THE PURPOSES OF AVAILING CREDIT FACILI TIES FROM THE BANK, DOES NOT HAVE AN IMMEDIATE NEXUS WITH THE EXPORT BU SINESS AND THEREFORE HAS TO NECESSARILY BE TREATED AS INCOME F ROM OTHER SOURCES AND NOT BUSINESS INCOME. QUESTION (A) AND I SSUE (I) ARE ANSWERED ACCORDINGLY. RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE NATURE OF INTEREST RECEIVED SHOULD BE EXAM INED IN ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 12 THE LIGHT OF DECISION OF HONBLE JURISDICTIONAL HIG H COURT AND DEDUCTION U/S 80HHC SHOULD BE COMPUTED ON MERIT S ACCORDINGLY. 9. ON CAREFUL PERUSAL OF ABOVE JUDGMENT IN ASSESSEE S OWN CASE, WE HOLD THAT GROUND NO. 2 OF THE PRESENT APPEAL IS SQUARELY COVERED BY THE ABOVE JUDGMENT OF ITAT IN ASSESSEES OWN CASE/APPEAL PERT AINING TO AY 2001-02. RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT THE NATUR E 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 INCOM E TAX VS SHRIRAM HONDA POWER EQUIPMENT CORPORATION (SUPRA) AND ABOVE DECISION OF ITAT IN ASESSEES OWN CASE (SUPRA) FOR AY 2001-02, DEDUCTIO N U/S 80HHC SHOULD BE COMPUTED ON MERITS ACCORDINGLY. IN THE RESULT, GRO UND 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 IM PUGNED ORDER OF THE COMMISSIONER OF INCOME TAX(A) AND SUBMITTED THAT TH E COMMISSIONER OF INCOME TAX(A) GRANTED RELIEF IN AN ERRONEOUS MANNER BY DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE DEDUCTION U/S 80 IB OF THE ACT BY ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 13 INCLUDING THE INTEREST INCOME OF RS.87,89,652 RECEI VED FROM AEPC AND BANKS TO THE PROFITS DERIVED FROM ELIGIBLE BUSINESS . 11. REPLYING TO THE ABOVE, THE COUNSEL OF THE ASSES SEE SUBMITTED COPIES OF THE JUDGMENT OF ITAT F BENCH IN ASSESSEES OWN CA SE IN ITA NO.2692/D/2003 FOR THE AY 2000-01 DATED 28.12.2005 AND IN ASSESSEES OWN CASE IN ITA NO.1224/D/2004 FOR AY 2001-02 DATED 28.09.2007. THE JUDGMENT OF TRIBUNAL FOR THE AY 2000-01 (SUPRA) IS RELEVANT TO THE ISSUE INVOLVED IN GROUND NO. 3 OF THE REVENUE. THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT PARA NO. 5 & 6 READ AS UNDER:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HAVE ALSO PERUSED THE CASE LAWS. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF GARMENTS. THE ASSESSEE EARNED INTEREST O N DEPOSITS MADE WITH APPARELS EXPORT PROMOTION COUNCI L FOR ALLOWING EXPORT OF GARMENT AND ON DEPOSITS WITH THE BANK FOR OPENING LETTER OF CREDITS. 6. WE FIND THAT THE ISSUE BEFORE, US IS COVETED BY THE ORDER OF CUTTAK BENCH OF ITAT IN THE CASE OF ACIT V S MAXCARE LABORATORIES LTD. (SUPRA). THE WORD USED IN SECTION 80IA ARE PROFITS AND GAINS FROM THE BUSINE SS OF AN INDUSTRIAL UNDERTAKING' AS AGAINST THE WORDS USE D IN SECTION 80 HH AND 80I 'PROFITS AND GAINS DERIVED FR OM AN INDUSTRIAL UNDERTAKING'. THIS SHOWS THE INTENTIO N OF THE LEGISLATURE WHILE INSERTING THE ADDITIONAL WORD S IN SECTION 8OIA ANY BUSINESS OF WAS TO GIVE THE BENE FIT OF DEDUCTION NOT ONLY TO THE PROFITS AND GAINS DERI VED FROM THE INDUSTRIAL UNDERTAKING BUT ALSO TO GIVE TH E BENEFIT OF DEDUCTION IN RESPECT OF INCOME HAVING A CLOSE AND DIRECT NEXUS WITH THE PROFITS AND GAINS OF THE INDUSTRIAL UNDERTAKING. THEREFORE, AFTER HAVING RE GARD ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 14 TO THE FACTS OF THE CASE BEFORE US AND THE LEGAL PO SITION AS DISCUSSED IN THE ORDER, WE ARE OF THE OPINION TH AT THE LEARNED COMMISSIONER OF INCOME TAX(A) WAS RIGHT IN HOLDING THAT INTEREST EARNED ON DEPOSITS WITH AEPC AND WITH THE BANK HAD DIRECT AND PROXIMATE CONNECTION W ITH THE BUSINESS OF INDUSTRIAL UNDERTAKING OF THE ASSES SEE. THEREFORE, THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA ON THE INTEREST ON THE DEPOSITS. THUS, WE FIND NO INFIRMITY IN THE ORDER OF COMMISSI ONER OF INCOME TAX(A) AND THE SAME IS SUSTAINED FOR THE REASONS GIVEN THEREIN. FURTHER, IN ASSESSEES OWN APPEAL IN ITA NO.1224/DE L/2004 FOR AY 2001-02 (SUPRA), REVERSING ITS OWN DECISION FOR AY 2000-01, THE SAME ISSUE HAS BEEN DECIDED IN FAVOUR OF THE REVENUE BY RESTORING THE A SSESSMENT ORDER. THE RELEVANT OBSERVATIONS AND FINDINGS OF THE TRIBUNAL IN PARA 11 READS AS UNDER:- 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 REFE RRED TO THE BUSINESS SPECIFIED IN SUB SECTION (4) OF THE SAID SECTION. SUB SECTION (4) DOES NOT INCLUDE THE BUSI NESS FROM EARNING OF INTEREST ON FDRS. THEREFORE, THE I NTEREST INCOME THOUGH MAY BE IN THE NATURE OF BUSINESS INCO ME CANNOT BE SAID TO HAVE BEEN DERIVED FROM THE BUSINE SS OF INDUSTRIAL UNDERTAKING WITHIN THE MEANING OF SUB SE CTION (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 RES PECT 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. ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 15 SECTION 80IA WAS SUBSTITUTED BY THE FINANCE ACT, 19 99 W.E.F. 1 ST 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 BEING HEREINAFTER RE FERRED TO AS THE ELIGIBLE BUSINESS. THEREFORE, UPTO AY 1 999- 2000 THE LEGISLATURE DID NOT SPECIFY THE ELIGIBLE B USINESS OF AN UNDERTAKING. BUT FROM AY 2000-01, THE ELIGIB LE BUSINESS HAS BEEN SPECIFIED IN SUB SECTION (4) OF S ECTION 80IA. HENCE THE DECISION OF HONBLE CUTTACK BENCH WILL NOT BE APPLICABLE FOR AY 2000-01 ONWARDS. CONSEQUENTLY, THE DECISION OF ITAT F BENCH IN ASSESSEES OWN CASE IS PER INCURIUM AS HAVING BEEN RENDERED WITHOUT CONSIDERING THE AMENDMENT BROUGHT INTO THE STATUTE W.E.F. 1.4.2000. THE LD. AR OF TH E ASSESSEE SOUGHT TO DISTINGUISH THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICAL LTD. BUT WE DO NOT FIND ANY DISCUSSION ON THIS ISSUE BY THE BENCH DISTINGUISHING THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF PANDIAN CHEMICALS LTD. THEREFORE, IT I S INCORRECT ON THE PART OF THE ASSESSEE TO ARGUE THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICAL LTD. HAS BEEN DISTINGUISHED. THUS , THE LEGAL POSITION AFTER AMENDMENT BY THE FINANCE ACT, 1999 W.E.F. 1.4.2000 IS THAT INCOME SHOULD BE DERIVED FR OM ELIGIBLE BUSINESS AS SPECIFIED U/S 80IA(A) OF THE A CT. THUS, THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICAL LTD. WILL BE APPLICABLE FOR RE LEVANT ASSESSMENT YEAR. HENCE, THE ALLWOABILITY OF DEDUCT ION U/S 80IA IS TO BE CONSIDERED IN RESPECT OF INCOME D ERIVED FROM ELIGIBLE BUSINESS OF AN INDUSTRIAL UNDERTAKING . INTEREST INCOME EARNED ON FDRS, THUS, CANNOT BE TRE ATED INCOME DERIVED FROM ELIGIBLE BUSINESS AS SPECIFIED U/S 80IA OF THE ACT. THE ISSUE IS THEREFORE SQUARELY C OVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF PANDIAN CHEMICAL LTD. 262 ITR 278. SINCE LD. COMMISSIONER OF INCOME TAX(A) HAS WRONGLY ALLOWED T HE CLAIM OF ASSESSEE TREATING THE INTEREST INCOME AS E LIGIBLE BUSINESS INCOME, WE SET ASIDE THE ORDER OF LD. ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 16 COMMISSIONER OF INCOME TAX(A) AND RESTORE THE ORDER OF ASSESSING OFFICER. 12. FROM BARE READING OF ABOVE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE FOR AY 2001-02, WE CLEARLY OBSERVE THAT THE EA RLIER DECISION FOR AY 2000-01 HAS BEEN REVERSED IN FAVOUR OF THE REVENUE AND ORDER OF RELIEF ALLOWED FOR THE ASSESSEE IN AY 2000-01 HAS BEEN SET ASIDE BY RESTORING THE ORDER OF THE ASSESSING OFFICER. THE TRIBUNAL HELD THAT EARLIER DECISION OF ITAT F BENCH FOR AY 2000-01 WAS BASED ON THE DECI SION OF ITAT CUTTACK BENCH IN THE CASE OF ACIT VS MAXCARE LABORATORIES LTD. 273 ITR (AT)1 FOR AY 1995-96 TO AY 1998-99. IT WAS ALSO HELD THA T THE DECISION OF ITAT CUTTACK BENCH IS NOT APPLICABLE FOR AY 2000-01 ONWA RDS. THE TRIBUNAL CATEGORICALLY MADE IT CLEAR THAT SECTION 80IA OF TH E 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 19 99-2000 DID NOT INCLUDE THE EXPRESSION FROM ANY BUSINESS REFERRED TO IN SUB SECTION (4) AND THUS, UPTO 1999-2000 THE LEGISLATURE DID NOT SP ECIFY 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 SPE CIFIED IN SUB-SECTION (4) OF SECTION 80IA OF THE ACT AND THEREFORE EARLIER DECIS ION OF ITAT F BENCH IN ITA NO. 2692/D/03 (SUPRA) HAS BEEN HELD TO BE PER I NCURIUM AS HAVING BEEN ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 17 RENDERED WITHOUT CONSIDERING THE SUBSEQUENT AMENDME NT MADE BY FINANCE ACT, 1999 W.E.F 1.4.2000. 13. THE DR SUBMITTED THAT THE DECISION IN ASESSEES OWN CASE FOR AY 2001-02 IN ITA NO. 1224/D/2004 (SUPRA) HOLDS THE FI ELD IN FAVOUR OF THE REVENUE. THE COUNSEL FOR THE ASSESSEE SUBMITTED TH AT WHERE TWO VIEWS ARE POSSIBLE, THE VIEW IN FAVOUR OF THE ASSESSEE SHOULD BE ADOPTED WHILE DEALING WITH THE ISSUE. ON THESE CONTENTIONS, WE ARE OF TH E CONSIDERED OPINION THAT THE TRIBUNAL IN ITS EARLIER ORDER FOR AY 2000-2001 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WITHOUT CONSIDERING THE AMEN DMENT IN SECTION 80IA OF THE ACT W.E.F. 1.4.2006. HENCE, IN ITS SUBSEQUENT DECISION FOR AY 2001-02, THE TRIBUNAL ADOPTED A PROPER AND JUSTIFIED VIEW BY DECIDING ISSUE IN FAVOUR OF THE REVENUE AFTER TAKING CARE OF SUBSEQUENT AMEN DMENT IN THE RELEVANT PROVISIONS WHICH WERE EFFECTIVE FROM 1.4.2000 I.E. AY 2000-01. 14. ON SPECIFIC QUERY FROM THE BENCH, THE COUNSEL O F THE ASSESSEE AND THE DR ACCEPTED THAT ORDER IN ITA NO. 1224/D/2004 DATED 28.9.2007 HAS NOT BEEN SET ASIDE OR MODIFIED BY ANY HIGHER FORUM OR A UTHORITY TILL DATE. IN VIEW OF ABOVE JUDGMENT OF TRIBUNAL IN ASSESSEES OW N CASE FOR AY 2001-02, WE HOLD THAT THE ISSUE IS SQUARELY COVERED IN FAVOU R OF THE REVENUE BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CO MMISSIONER OF INCOME TAX VS PANDIAN CHEMICALS LTD. (SUPRA) AND WE HOLD T HAT THE COMMISSIONER ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 18 OF INCOME TAX(A) WRONGLY ALLOWED THE CLAIM OF THE A SSESSEE TREATING THE INTEREST INCOME AS ELIGIBLE BUSINESS INCOME AND WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX(A) AND RESTORE THAT OF T HE ASSESSING OFFICER IN THIS REGARD. 15. GROUND NO. 3 OF THE REVENUE IS ALLOWED. GROUND NO.4 16. APROPOS GROUND NO. 4, THE LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX(A) ERRED IN DIRECTING THE ASSESSING O FFICER TO RECOMPUTE THE INCOME OF THE ASSESSEE U/S 115JB OF THE ACT REDUCIN G PROFITS BY THE AMOUNT OF DEDUCTION U/S 80HHC OF THE ACT. 17. REPLYING TO THE ABOVE, THE COUNSEL OF THE ASSES SEE PLACED RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT OF INDIA IN T HE CASE OF AJANTA PHARMA LTD. V COMMISSIONER OF INCOME TAX (2010) 327 ITR 305(SC) WHEREIN REVERSING THE DECISION OF HONBLE BOMBAY HI GH COURT, THEIR LORDSHIPS HELD THAT SECTION 115J OF THE ACT WAS A S ELF-CONTAINED CODE AND APPLIED NOTWITHSTANDING ANY PROVISIONS IN THE ACT, IN THIS CASE, IT WAS FURTHER HELD THAT SECTION 115JB OF THE ACT IS THE SUCCESSOR SECTION TO SECTION 115JA AND SECTION 115JB OF THE ACT CONTINUES TO REMAIN A SELF-CONTAINED CODE. IN THIS CASE, HONBLE SUPREME COURT HELD THAT 100% EXP ORT PROFITS EARNED BY THE ASSESSEE AS COMPUTED U/S 80HHC(3) OF THE ACT WA S ELIGIBLE FOR ITA NO.4242/DEL/2005 ASSTT. YEAR: 2002-03 19 DEDUCTION UNDER CLAUSE (IV) OF THE EXPLANATION TO S ECTION 115JB OF THE ACT. ACCORDINGLY, GROUND NO. 4 OF THE REVENUE IS DEVOID OF MERITS AND THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. THEREFO RE, WE HOLD THAT THE COMMISSIONER OF INCOME TAX(A) RIGHTLY FOLLOWED ITS OWN DECISION IN THE ASSESSEES CASE FOR AY 2001-02 AND RIGHTLY DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE INCOME TAXABLE U/S 115JB OF THE ACT A FTER ALLOWING DEDUCTION U/S 80HHC OF THE ACT AS PER EARLIER DECISION OF THE TRIBUNAL. WE ARE UNABLE TO SEE ANY PERVERSITY OR INFIRMITY IN THE IMPUGNED ORDER IN THIS REGARD AND GROUND NO. 4 OF THE REVENUE IS DISMISSED. 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 22.11.2013. SD/- SD/- (SHAMIM YAHYA) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 22 ND NOVEMBER 2013 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. 4.CIT 5. DR BY ORD ER ASSTT. 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