Ita/432/2009 Of The Commissioner Of Income Tax v. M/S Crane Software International Ltd

1. IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 9 DAY OF JUNE, 20195 PRESKBNT THR HON BLE MR. JUSTICEK MOHAN M SHANTANAGOU DA ANT) THR HON’BLE MR. JUSTICK ARAVIND KUMAR ITA NO.432 /200 BETWEEN: Ll.THRE COMMISSINER OF INCOME-TAX C.R.BUILDING, QUEENS ROAD, BENGALURU. iaTHR DBPUTY COMMISSIONBR OF INCOME-TAX, CENTRAL CIRCLE-I(1), C.R.BUILDING, QUEENS ROAD,BENGALURU. |BENGALURU. | _ APPELLANTS (BY SRI.K.V.ARAVIND, STANDING COUNSEL) AND: M/S.CRANE SOFTWARE INTERNAITONAL LTD.SHANKARANARAYANA BUILDINGS,BLOCK-I, 4 FLOOR, 20, M.F.ROAD, BENGALURU-560 OO] _ RESPONDENT (BY SRILA.SHANKAR & M.LAVA, ADVOCATES) THIS APPEAL IS FILED UNDER SECTION QJoOA OF THEINCOME TAX ACT, 1961 PRAYING TO FORMULATE THESUBSTANTIAL QUESTIONS OF LAW AND ALLOW THE APPEALAND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX|APPELLATETRIBUNAL|BANGALOREIN-ITA| 2 NO.1406/BANG/2008 DATED 25.03.2009 CONFIRMING THE)ORDER PASSKD BY THR DBPUTY COMMISSIONBR OF|INCOME TAX, CENTRAL CIRCLE — 1, BANGALORE. — THIS APPEAL COMING ON FOR HEARING, THIS DAY,MOHAN|IVSHANTANAGOU DARJ,DELIVEREDTHERKFOLLOWING: JUDGMENT The second Substantial question of law raised in this.appeal is covered against the revenue by the Apex Court inthe Case oftACG ASSOCIATED CAPSULES (P) LTD. vs.|COMMISSIONER OF INCOME TAX.reported in043 ITR 89Hence, the second substantial question of law is answeredaccordingly against the revenue. © 2 |The first substantial question of law reads thus: 1.|Whether the Appellate Authorities|were correct in holding that interest incomeearned from fixed deposits which was to fallwithin the head ‘Income from Business’ orIncomefromOther.Sources’andconsequently the same would alfect thecomputation of deduction u/s 8OHHE ofthe Act, was held to be a debatable issue,which cannot be rectified u/s 154 of theAct? 3.|This appeal is filed by the revenue and thematter is for the Assessment Year 2003-04. The assessee. O| filed return of income on 28.11.2003 declaring the incomeof Rs.6,74,93,080/- for the Assessment Year 2003-04 andsame was processed under Section 143(1) of the IncomeTax Act, 1961 on 30.08.2005. Notice was issued under|section 143(2) and same was replied. Subsequently,assessment order came to be passed under Section 143(3)of the Income Tax Act, 1961 on 16.12.2005. 4According to the revenue, on verification ofrecords, it was found that the assessee - company was inreceipt of interest on Fixed Deposits at Rs.2,28,80,959/-and TDS was also deducted. Hence, the revenue was of theimpression that this being the income from other sources,needs to be reduced from the profit of business to arrive atthe deduction under Section 8OHHE. Thus, revenue hasconcluded that same has resulted in excess allowance ofSOHHE. Accordingly, proceedings under Section 1594 ofIncome Tax Act, 1961 were initiated and assessee wascalled upon to furnish its objection. | 4 5On re-appreciating the matter, order came to bepassed under Section 194 of the Income Tax Act, 1961 asper Annexure-C dated 27.03.2007, whereunder it came tobe held that assessee is not entitled to deductions under.section SOHHE of the Act. Appellate Commissioner setaside the order in Appeal No.ITA.No.17/7/DCIT.CentraCircle.1(1)/BLR/CIT(A)-V1I/2007-08videorderdated19.08.2008 by concluding that, from the records it is foundthat the Fixed Deposits from which the interest had beenearned, has been given as security tor Term Loans andOverdraits in appellant’s business and payment of intereston such Overdraits and Term Loans far exceeds the receiptof interest received on Fixed Deposits. Appellate|Commissioner having concluded that the issue involved inthe case was contentious one, annulled the order passedby the Assessing Authority under Section 194 of theIncomeTax|Act, 1961.|SaidorderoT AppellateCommissioner is confirmed by the Tribunal. 6. We do not find any ground to interfere in theimpugned order, inasmuch as, the question as to whetherthe interest received on Fixed Deposits Kept apart forbusiness purposes falls within the business income orincome from other sources is debatable point. Suchdebatable point is beyond the scope of Section 1594 of theIncome Tax Act, 1961. At an earlier point of time, theAssessing Officer had taken one particular view, since twoviews were possible. Hence, this is not the case wherein theAuthority would have exercised power under Section 194 ofthe Income Tax Act, 1961. Hence, appeal standsdismissed. Accordingly, substantial question of law isanswered against the revenue. Sd/- JUDGE Sd/- JUDGE DR