Punjab Tractors Limited V. Commissioner of Income Tax, Patiala

ITA/124/2003

AI Insights

Punjab Tractors Limited appealed against the decision of the Income Tax Appellate Tribunal, which had disallowed deductions under Section 80-I of the Income Tax Act for certain types of interest income. The company argued that income from bank deposits, tax refunds, employee loans, and HDFC Bonds should qualify as income derived from industrial undertakings. However, both the Tribunal and the lower courts found that such income does not qualify under Section 80-I, referencing the Supreme Court's decision in CIT v. Sterling Foods. The High Court of Punjab and Haryana upheld this view, leading to the dismissal of the appeal.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 796710 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 10-09-2010
• Assessment Year: misc
• Other Referred Cases: CIT v. Sterling Foods [1999] 237 ITR 579 (SC), ITR No. 1 of 2010 (M/s Liberty Group Marketing Division v. Commissioner of Income Tax (Central), Ludhiana)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: TAJENDER JOSHI
• Assessee Lawyers: PANKAJ JAIN
• Keywords: Bank deposits; Deduction under Section 80-I; Income Tax Refund; Industrial Undertaking; Interest income; Loans to employees; HDFC Bonds
• Section: 260A; 143(1)(a); 80-I

Judgement Text

"ITA No. 124 of 2003 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 124 of 2003 Date of Decision: 10.9.2010 Punjab Tractors Limited ....Appellant. Versus Commissioner of Income Tax, Patiala ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Pankaj Jain, Advocate for the appellant. Mr. Tajender K. Joshi, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 15.1.2003 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh, in ITA No. 194/CHANDI/99 for the assessment year 1995-96. This Court while admitting the appeal had framed the following substantial question of law:- “Whether under the facts and circumstances of the case, the Tribunal was justified in holding that interest income received on bank deposits, income tax refund, loans to employees and on HDFC Bonds ITA No. 124 of 2003 -2- could not be treated as income derived from the Industrial Undertaking for the purposes of Section 80-I of the Income Tax Act, 1961? 2. Put shortly, the facts as narrated in the appeal are that the assessee is a Public Limited Company engaged in manufacture of Tractors, Forklifts, Harvester Combines and castings in its three manufacturing divisions. The assessee filed its return on 29.11.1995 declaring an income of Rs.29,68,55,610/- which was processed under Section 143(1)(a) of the Act. Thereafter, the assessee filed a revised return of income on 25.5.1996 at an amount of Rs.29,71,75,910/-. The assessee claimed deduction under Section 80-I of the Act on account of interest received from the bank deposits amounting to Rs.90,32,947/-, income tax refund of Rs.11,50,377/-, loans to employees of Rs.11,90,113/-, income from HDFC Bonds of Rs.1,56,000/-, recovery of insurance claims of Rs.3,02,000/- and the sale of fixed assets of Rs.7,21,000/- and credited a net amount of Rs.52,12,728/- as interest to the profit and loss account being considered by the assessee as interest derived from the profits and gains of business. The Assessing Officer disallowed the claim of the assessee by treating the same as income from other sources and also disallowed deduction claimed under Section 80I of the Act on the above mentioned amounts. Feeling aggrieved, the assessee took the matter in appeal and the Commissioner of Income Tax (Appeals) [in short “the CIT (A)] upheld the view of the Assessing Officer. On further appeal by the assessee, the Tribunal affirmed the orders passed by the Assessing Officer as well as the CIT (A). Hence, the present appeal. ITA No. 124 of 2003 -3- 3. We have heard learned counsel for the parties. 4. The point in issue is regarding whether interest income derived on bank deposits, income tax refund, loans to employees and on HDFC Bonds would be an income derived from the Industrial Undertaking and would be eligible for deduction under Section 80-I of the Act. 5. The Tribunal while adjudicating the issue against the assessee following the judgment of the Hon'ble Supreme Court in CIT v. Sterling Foods [1999] 237 ITR 579 (SC) had come to the conclusion that the interest income derived on bank deposits, income tax refund, loans to employees and on HDFC Bonds could not be treated as income derived from the Industrial Undertaking for the purposes of Section 80-I of the Act. 6. Further, this Court in ITR No. 1 of 2010 (M/s Liberty Group Marketing Division v. Commissioner of Income Tax (Central), Ludhiana) decided on 18.8.2010 where the assessee who was earning profit from business of trading activity or products of other concerns was held not to derive income from industrial undertaking. The reliance was placed on the judgment of the Hon'ble Supreme Court in Sterling Foods' case (supra). 7. In view of the above, it is held that the interest income on bank deposits, income tax refund, loans to employees, income from HDFC Bonds, recovery of insurance claims and the sale of fixed assets cannot be termed to be an income derived from the industrial undertaking on which deduction under Section 80I could be allowed. 8. Accordingly, the substantial question of law is answered in ITA No. 124 of 2003 -4- favour of the revenue and against the assessee. 9. Consequently, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE September 10, 2010 (ADARSH KUMAR GOEL) gbs JUDGE "