Commissioner Of Income-Tax, Chennai v. M/S.polaris Software Lab Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 06.11.2006 CORAM THE HON'BLE MR.JUSTICE P.D.DINAKARANANDTHE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.2505 of 2006 Commissioner of Income-tax,Chennai. ..Appellant Vs. M/s.Polaris Software Lab Ltd.,No.244, Carex Centre,Mount Road, Chennai-6. ..Respondent Appeal under Section 260A of the Income Tax Act, 1961 against thorder of the Income Tax Appellate Tribunal, Madras, 'B' Bench date28.04.2006 in I.T.A. No.1417/Mds/2002 for the assessment year 1998-9against the order of the Commissioner of Income Tax (Appeals) iI.T.A.No. 518/M.2001-2002 against the order of the Deputy Commissioneof Income Tax, Company Circle-IV(5), Chennai-6. For Appellant : Mr.T.Ravi KumarJUDGMENT (Judgment of the court was delivered byP.P.S.Janarthana Raja, J.) This appeal is filed under Section 260A of the Income Tax Act1961 by the Revenue against the order of the Income Tax AppellatTribunal, Madras, 'B' Bench dated 28.04.2006 passed in in I.T.ANo.1417/Mds/2002, raising the following substantial questions of law:-1. Whether in the facts and circumstances of thecase, the Tribunal was right in remitting back thematter to the lower authority to find out thenature of income when there is a clear cut findingabout the same by the lower authority after adetailed scrutiny?2. Whether in the facts and circumstances of thecase, the Tribunal was right in directing thelower authority to decide the issue in accordance https://hcservices.ecourts.gov.in/hcservices/ with the ratio of the decisions which wererendered in the context of sec80HHC, when theassessee in question is not at all claimingbenefit of that section?" 2. The facts leading to the above questions of law are as under:The assessee is a Private Limited Company and is engaged in thbusiness of software technology. The relevant assessment year i1998-99 and the corresponding accounting year ended on 31.03.1998The assessee filed Return of income on 27.11.1998 admitting income oRs.5,51,780/-. The said Return was processed under Section 143(1) othe Income-tax Act (hereinafter referred to as the "Act"). Laternotice under Section 143(2) of the Act was issued by the AssessinOfficer. Subsequently, assessment was completed on a total income oRs.30,47,010/-. While computing the assessment, the Assessing Officetreated the interest receipts as "income from other sources" and noas "business income", as claimed by the assessee. Aggrieved by thorder, the assessee filed an appeal to the Commissioner of Income-ta(Appeals). The C.I.T.(A) dismissed the appeal and upheld the order othe Assessing Officer. Aggrieved, the assessee filed an appeal to thIncome-tax Appellate Tribunal (hereinafter referred to as th"Tribunal"). The Tribunal allowed the appeal for statistical purposby remanding the matter back to the Assessing Officer to find out thtrue nature of the income and assess the same accordingly. 3.Learned Standing Counsel appearing for the Revenue submittethat the Tribunal has erred in remitting back the matter to thAssessing Officer to find out the nature of the income, when thAssessing Officer had already scrutinised the same in detail, ancontended that it should be assessed only under "income from othesources". 3.Learned Standing Counsel appearing for the Revenue submittethat the Tribunal has erred in remitting back the matter to thAssessing Officer to find out the nature of the income, when thAssessing Officer had already scrutinised the same in detail, ancontended that it should be assessed only under "income from othesources". 4.Heard the counsel. The Tribunal had remanded the matter anheld as follows:"3. After going through the records, it is observedthat the answer to this question would depend onthe nature of income, whether such income is incomefrom business or income from other sources. It isnot clear from the records whether the interestincome is from business income or income from othersources. Accordingly, the issue is set aside tothe file of the Assessing Officer to decide theissue afresh after giving reasonable opportunity ofbeing heard to the Assessee. The Assessing Officeris directed to find out the nature of the income,whether it is income from other sources or incomefrom business. If it is income from other sources,then netting is not allowed in view of the decisionof the Hon'ble Jurisdictional High Court in the case of K.S.Subbiah Pillai & Co. (India) Pvt. Ltd.v. CIT (260 ITR 304). If it is business incomethen the Assessing Officer will find out the nexusbetween the interest earned and the interest paidand decide the issue in accordance with the ratioof the decision of the Special Bench of thisTribunal in the case of Lalsons Enterprises v. DCIT(89 ITD 25) or CIT v. S.S.C. Shoes (275 ITR 46).Accordingly, the appeal of the Assessee is allowedfor statistical purposes." The direction in the remand order is to find out the nature of thincome and depending upon the nature of the income, the AssessinOfficer should consider the contentions of the assessee in accordancwith the judgment, cited supra, in the remand order. The said remanorder, in no way, affects the interest of the Revenue and the Revenualso is not in a position to produce any material or evidence to shothat the interest of the Revenue is affected, by this remand order. 5.In view of the foregoing reasons, we find no error or legainfirmity in the order of the Tribunal and the same does not requirinterference. Hence, we find no merit in this appeal and accordinglyno substantial questions of law arise for consideration of this Courand the tax case is dismissed. No costs. kmSd/Asst.Registrar/true copy/Sub Asst.RegistrarTO 1. THE ASSISTANT REGISTRARINCOME TAX APPELLATE TRIBUNALRAJAJI BHAVAN, BESANT NAGAR,CHENNAI-90 2. THE INCOME TAX APPELLATETRIBUNAL,MADRAS 'B' BENCH, MADRAS. 3. THE COMMISSIONER OFINCOME TAX (APPEALS)MADRAS.4. THE ASST. COMMISSIONER OFINCOME TAX, CIRCLE-IV (5)CHENNAI-6 1 CC TO MR. PUSHYA SITARAMAN, S.S.C, FOR IT DEPT, SR 52885 T.C. (A) No.2505 of 2006 HPR(CO)BP/29