In T.c.(A) Sr v. The Joint Commissioner Of Income-Tax,Special Range-Vi, Chennai-600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 19.11.2018 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MR.JUSTICE N.SATHISH KUMAR Tax Case (Appeal) No.197 of 2009 M/s.Clariant Chemicals (India) Ltd.,Karumuttu Centre, III Floor,498, Anna Salai, Chennai-600 035. (Cause titled accepted, vide Court order dated 03.03.2009 in M.P.No.1 of 2009 in T.C.(A) SR No.74205 of 2006) ... Appellant -vs- The Joint Commissioner of Income-tax,Special Range-VI, Chennai-600 034.... Respondent Tax Case (Appeal) filed under Section 260-A of the IncomeTax Act, 1961 against the order of the Income-tax AppellateTribunal'B'Bench,Chennaidated17.03.2006inI.T.A.No.29/Mds/2000 for the assessment year 1996-97, againstthe order dated 15/10/99 made in 9T/WT/9T Appeal NO.187/98-99 onthe file of the Commissioner of Income Tax(Appeals)V, chennai-34and against the order dated 18/09/98 and made in PAN/GIR.NO.47-055-CZ-2607-2-V on the file of the Deputy Commissioner of IncomeTax, Special Range VI, Chennai-34. For Appellant:Mr.R.Venkata Narayanan,For M/s.Subbaraya Aiyar,Padmanabhan, Ramamani For Respondent :Mrs.R.Hemalatha, Senior Standing Counsel******JUDGMENT (Delivered by T.S.Sivagnanam, J.) This appeal, filed by the appellant/assessee under Section260A of the Income-tax Act, 1961, is directed against the orderof the Income-tax Appellate Tribunal 'B' Bench, Chennai, (for https://hcservices.ecourts.gov.in/hcservices/ brevity “the Tribunal”) dated 17.03.2006, passed inI.T.A.No.29/Mds/2000 for the assessment year 1996-97. 2. The appeal was admitted, on 30.03.2009, on the followingsubstantial questions of law:-“(i) Whether, on the facts and in thecircumstances of the case, the Tribunal wasjustified in not holding that the interest receivedon belated payment of sale price from customers donot form part of the 'business profit'? (ii) Whether, on the facts and in thecircumstances of the case, the Tribunal was right inlaw in holding that interest on belated payments isin the nature of miscellaneous income as per cl.(baa) to Explanation to section 80HHC of the IncomeTax Act and hence 90% of the same has to be excludedfrom the profits of the business for the purpose ofcomputation of deduction under section 80HHC? (iii) Whether on the facts and in thecircumstances of the case, the Tribunal was right inlaw in holding that only the gross interest receiptsshould be reduced from the profits of the businessas per cl.(baa) to Explanation to Section 80HHC?” 3. Heard Mr.R.Venkata Narayanan, learned counsel for theappellant and Mrs.R.Hemalatha, learned Senior Standing Counselfor the respondent. 4. The issue to be decided is whether the Tribunal was rightin reversing the decision of the Commissioner of Income-tax(Appeals)-V (for brevity “the CIT(A)) dated 15.10.1999 by which,the CIT(A) directed the Assessing Officer to take note of thefollowing decisions:- (i) CIT vs. South India Shipping Coprn. Ltd., [1995] 216 ITR651; (ii) CIT vs. Visakhapatnam Port Trust, 1983 144 ITR 146 AP;(iii) MAC Industries Ltd. vs. ACIT (I.T.A.No.1595/Mds/1996); (iv) Deputy Commissioner of Income Tax vs. Vindhya TelelinksLtd., (1997) 58 TTJ Jab 450; and (v) Kentilal Chotulal vs. D.C. 63 ITJ 527 (Mum)and deal with the subject, reducing relatable interestpayment from interest receipts, after verifying the evidences asmay be put forth by the assessee. The Tribunal reversed thesaid finding by placing reliance on the decision of this Courtin K.S.Subbiah Pillai & Company vs. CIT, (2003) 260 ITR 304. 5. The Revenue cannot dispute the legal position that thedecision in K.S.Subbiah Pillai & Company (supra) is no longer https://hcservices.ecourts.gov.in/hcservices/ (i) CIT vs. South India Shipping Coprn. Ltd., [1995] 216 ITR651; (ii) CIT vs. Visakhapatnam Port Trust, 1983 144 ITR 146 AP;(iii) MAC Industries Ltd. vs. ACIT (I.T.A.No.1595/Mds/1996); (iv) Deputy Commissioner of Income Tax vs. Vindhya TelelinksLtd., (1997) 58 TTJ Jab 450; and (v) Kentilal Chotulal vs. D.C. 63 ITJ 527 (Mum)and deal with the subject, reducing relatable interestpayment from interest receipts, after verifying the evidences asmay be put forth by the assessee. The Tribunal reversed thesaid finding by placing reliance on the decision of this Courtin K.S.Subbiah Pillai & Company vs. CIT, (2003) 260 ITR 304. 5. The Revenue cannot dispute the legal position that thedecision in K.S.Subbiah Pillai & Company (supra) is no longer https://hcservices.ecourts.gov.in/hcservices/ good law, in the light of the decision of the Hon'ble SupremeCourt in ACG Associated Capsules (P) Ltd. vs. Commissioner ofIncome Tax, (2012) 247 CTR 0372 wherein the Hon'ble SupremeCourt held that ninety per cent of the net interest or net rent,which has been included in the profits of the assessee ascomputed under the head “Profits and gains of business orprofession” and not the gross interest or gross rent, is to bededucted under Clause (1) of Explanation (baa) to Section 80HHCfor determining the profits of the business. 6. In the light of the above decision, the substantialquestions of law are answered in favour of the assessee and theappeal is accordingly allowed. The direction issued by theCommissioner of Income-tax (Appeals)-V is restored and to becomplied with by the Assessing Officer at the earliest. Nocosts. Sd/- Assistant Registrar(CO) //True Copy// Sub Assistant RegistrarabrTo1.The Income-tax Appellate Tribunal Bench 'B' Chennai. 2.The Joint Commissoner of Income Tax,Special Range-VI,Chennai-600 034. 3.The Commissioner of Income Tax,(Appeals)V, Chennai-34. 4.The Depurty Commissioner of Income Tax, Special Range-VI,Chennai-34. +1cc to Mr.T.Ravi Kumar, Advocate sr.no.78835+1cc to M/s.Subbaraya Aiyar, Advocate sr.no.78979 vd(co)nr 10/01/2019 https://hcservices.ecourts.gov.in/hcservices/