D.b. Income Tax Appeal v. The Ito, Ward

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR JUDGMENT (1) D.B. INCOME TAX APPEAL NO.13/ 2002M/ s RELIANCE TRADING CORPORATION Vs. THE ITO, WARD NO.2(3), JAIPUR & ANR. (2) D.B. INCOME TAX APPEAL NO.19/ 2008M/ s PAWAN ENTERPRISES Vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, JAIPUR(3) D.B. INCOME TAX APPEAL NO.20/ 2008SHRI VALLABH DAS KHANDELWAL Vs.THE ASSISTANT COMMISSIONER OF INCOME TAX, JAIPUR DATE:16.12.2015 HON'BLE MR.JUSTICE AJIT SINGH, ACTING CHIEF JUSTICEHON'BLE MR. JUSTICE ANUPINDER SINGH GREWAL Mr. T.C. Jain, Mr. Siddharth Ranka, for the appellants.Mr. Anuroop Singhi withMr. O.P. Pareek,Mr. Nikhil Simlote on behalf ofMr. R.B. Mathur, for the respondents. ***** All these appeals were admitted on the following questions of law:- “ (1) Whether the assessee is entitled for deductionunder section 80 HHC on interest income of Rs.1,76,930/ - asper law as existing at the relevant assessment year? (2) Whether the amendment in section 80 HHC, by wayof insertion of sub-section (4B) excluding interest income forthe purpose of deduction under section 80 HHC will affect thededuction of interest income under section 80 HHC for theperiod prior to amendment? (3) In case the assessee is not earning income inconvertible foreign exchange by way of an interest on themoney advanced, even then, whether the assessee is eligiblefor deduction under section 80 HHC of the Act?” And vide order dated 21.07.2003, the appeals were referred to a Larger Bench for decision of the questions of law. A Larger Bench after elaborate discussion, vide order dated 01.05.2015 has answered the questions of law as under:- “ The question No.1 is, thus, answered in favour of theRevenue, and against the assessee. So far as question No.2 is concerned, on the aforesaiddiscussion, we are also of the view that the amendment inSection 80HHC, by way of insertion of sub-section (4B),excluding interest income for the purposes of deductionunder Section 80HHC of the Act, will also affect thededuction of interest income under Section 80HHC of theAct, for the period prior to the amendment, inasmuch as theapplicability of the principle of direct and proximate nexusto the business income, will apply both, to the provisions ofthe Act prior to, and after the amendment, which came intoeffect by the Finance Act, 1992, with effect from01.04.1992. The question No.2, is thus decided in favour ofthe Revenue and against the assessee. On the question No.3, we hold that the earning of theincome convertible from foreign exchange by way ofinterest, is not necessary so long as the interest is derivedfrom business of export, and has direct and proximate nexus,with the income earned out of the profits retained for theexport business. The earning of the income convertible fromforeign exchange, is not a test for determining, as towhether deduction is allowable in respect of the incomederived from the profits retained for export business. Thequestion No.3, is also decided in favour of the Revenue andagainst the assessee.” The questions of law having been answered by a Larger Bench vide order dated 01.05.2015, the appeals stand finally disposed ofin terms of the order of Larger Bench. A copy of the judgment be placedin each of the connected file. (ANUPINDER SINGH GREWAL),J. (AJIT SINGH),ACTING C.J. / KKC/ Certificate: All corrections made in the judgment/ order have been incorporated in thejudgment/ order being emailed.KAMLESH KUMARP.A.