Commissioner Of Income-Tax, Chennai - Ix v. M/S.abdul Rahman Industries, Chennai-600 003

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE P.D.DINAKARAN THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.39 of 2004 Commissioner of Income-tax,Chennai - IX Vs ..Appellant M/s.Abdul Rahman Industries,Chennai-600 003. ..Respondent Appeal under Section 260A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Chennai, 'C' Bench dated16.07.2003 in I.T.A. No.803/Mds/98 for the assessment year 1993-94(ITA NO. 202/96-97 DATED 15.5.1997 on the file of the Commissioner ofIncome-Tax (Appeals) II, Chennai against G.I.No. 1310-A, dated29.3.1996 on the file of the Assistant Commissioner of Income-Tax,City Circle VII, (1), Chennai). JUDGMENT This appeal is filed by the Revenue under Section 260A of theIncome Tax Act, 1961 in I.T.A. No.803/Mds/98 passed by the Income TaxAppellate Tribunal, Chennai, 'C' Bench. On 03.02.2004, this Courtadmitted this appeal and formulated the following substantial questionof law: "Whether on the facts and in the circumstances ofthe case the Income Tax Appellate Tribunal wasright in holding that the assessee was entitled todeduction under Section 80 HHC in respect ofRs.9,59,197/- being unclaimed balances writtenback in the profit and loss account relating tothe assessment year 1993-1994?" https://hcservices.ecourts.gov.in/hcservices/ 2.The brief facts leading to the above questions of law are asunder: The assessee is a firm engaged in the business of manufacture ofshoes and tannery and also export sales of shoe uppers. The relevantassessment year is 1993-94 and the corresponding accounting year endedon 31.03.1993. The assessee filed Return of income on 15.12.1994admitting the total income as nil. The Return was processed underSection 143(1)(a) of the Income-tax Act ("Act" in short). Theassessee did not furnish Form 10CCAC along with the Return of incomeand hence the claim of the assessee firm for deduction under Section80HHC of the Act, was rejected. Later the total income as perassessment under Section 143(1)(a) of the Act was determined atRs.10,89,460/-. Subsequently, the matter was taken up for scrutinywith the prior approval of the Deputy Commissioner. Notice underSection 143(2) of the Act was issued to the assessee and theassessment was completed under Section 143(3) of the Act, after makingcertain additions. While completing the assessment, the AssessingOfficer treated the sum of Rs.9,59,197/- as income under the head"other sources" and also computed the income as under: Aggrieved by the order, the assessee filed an appeal to theCommissioner of Income-tax (Appeals). The C.I.T.(A) dismissed theappeal and confirmed the order of the Assessing Officer. Aggrieved bythe order, the assessee filed an appeal to the Income-tax AppellateTribunal ("Tribunal" in short). The Tribunal allowed the appeal andheld that the income should be treated under the head "business" andon this basis, the assessee is entitled to the benefit under Section80HHC of the act. 3.Learned Standing Counsel appearing for the Revenue submittedthat, since the assessee did not produce any details regarding thenature of "Sundry Credit Balances Written Back", the Assessing Officeris right in treating the said amount as income under the head "OtherSources" and consequently, the assessee is also not entitled to reliefunder Section 80HHC of the Act. 4.Learned counsel appearing for the assessee submitted thatthe authorities below failed to understand the fact that the SundryCredit Balances were only out of the business income and expenditureand hence the same should be assessed only under the head "business". 3.Learned Standing Counsel appearing for the Revenue submittedthat, since the assessee did not produce any details regarding thenature of "Sundry Credit Balances Written Back", the Assessing Officeris right in treating the said amount as income under the head "OtherSources" and consequently, the assessee is also not entitled to reliefunder Section 80HHC of the Act. 4.Learned counsel appearing for the assessee submitted thatthe authorities below failed to understand the fact that the SundryCredit Balances were only out of the business income and expenditureand hence the same should be assessed only under the head "business". 5.Heard the counsel. In the present case, the assesseerightly offered the sum of Rs.9,59,197/- as income for assessmentwhich is not in dispute. In the case of Commissioner of Income-taxVs. T.V.Sundaram Iyengar and Sons Ltd. reported in 222 ITR 344, theSupreme Court considered the similar issue and taken a view that, whenthe assessee himself transferred the amount from the credit balancesstanding in favour of the customers of the company to the profit andloss account of the company, the same is taxable as income of theassessee. There is no dispute regarding the taxability of the receiptThe only dispute is, how the said amount should be assessed - whetherthe said amount should be assessed under the head "Income frombusiness" or under the head "Income from other sources". There werecredits appearing in the books on the basis of purchase of items fromvarious suppliers and these suppliers were not paid. These unclaimedcredit balances were brought to the Profit and Loss Account and thesame had emanated from trading transaction only. There is a findinggiven by the Tribunal that the said transaction is very much connectedor closely linked with the assessee's business activities. Thereceipt had arisen only out of ordinary trading transaction and henceit was rightly assessed under the head "business". Therefore, we areof the view that the reasons given by the Tribunal are based on validmaterials and evidence and hence we do not find any error or legalinfirmity in the order of the Tribunal so as to warrant interference. 6.Under the circumstances, we are of the view that theTribunal is right in holding that the income should be assessed underthe head "business" and also on this basis, the assessee is entitledto the benefit under Section 80HHC of the Act. Hence, we answer thequestion of law in favour of the assessee and against the Revenue andaccordingly, the tax case is dismissed. No costs. km Sd/Asst.Registrar /true copy/ Sub Asst.Registrar TO 1. THE ASSISTANT REGISTRARINCOME-TAX APPELLATE TRIBUNALRAJAJI BHAVAN, III FLOORBESANT NAGAR, CHENNAI-90INCOME-TAX APPELLATE TRIBUNALRAJAJI BHAVAN, III FLOORBESANT NAGAR, CHENNAI-90 2. THE COMMISSIONER OF INCOME-TAX(CHENNAI)-IX, CHENNAI(CHENNAI)-IX, CHENNAI 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, CHENNAI4. THE ASSISTANT COMMISSIONER OFINCOME TAX, CITY CIRCLE VII(1),CHENNAI1 CC TO MR.J. BALACHANDER, ADVOCATE SR NO 61714(APPEALS)-II, CHENNAI4. THE ASSISTANT COMMISSIONER OFINCOME TAX, CITY CIRCLE VII(1),CHENNAI1 CC TO MR.J. BALACHANDER, ADVOCATE SR NO 61714 Tax Case (Appeal) No. 39 of 2004 JRG(CO) BP/27.12