Itxa/124/2005 Of The Commissioner Of Income-Tax-Vii v. M/S Bhansali Engineering Polymes Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARYORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.124 OF 2005 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY INCOME TAX APPEAL NO.124 OF 2005 The Commissioner of Income Tax ..Appellant. V/s. M/s.Bhansali Engineering Polymars Ltd. ..Respondent. Mr.P.S.Sahadevan for appellant. Dr.K.Shivram for respondent. CORAM : DR. S.RADHAKRISHNAN AND J.P.DEVADHAR, JJ. DATED : 1ST APRIL, 2008. P.C. :- P.C. :- 1. Heard learned counsel for the appellant and learned counsel for the respondent. By this appeal, the appellant-revenue is seeking to raise the following substantial questions of law:- 1) Whether the I.T.A.T. was justified in setting aside the findings of the CIT (Appeals) in its order dated 13/11/2002 disallowing a deduction under section 80HH of Income Tax Act amounting to Rs.19,85,969/- out of total deduction amounting to Rs.26,23,020/- claimed by the assessee in the present facts and circumstances of the case in question ? 2) Whether the I.T.A.T. was justified in holding the interest income of Rs.95,97,864/- recovered from delayed payments from the Sundry Debtors to whom the industrial unit of the assessee had sold the goods could be Sundry Debtors to whom the industrial unit of the assessee had sold the goods could be treated as interest income derived from the industrial undertaking of the assessee in - = : 2 : = - light of the provisions of section 80HH of the Income Tax Act, 1962 and the findings of CIT (Appeals) in its order dated 13/11/2002, in this regard even though the assessee has realised income from other sources ? 2. The relevant assessment year is 1999-2000. 3. We have perused the order of the I.T.A.T. dated 12/7/2004 wherein in para 6 he has come to the conclusion as under:- " We have heard the rival submissions and considered the facts and materials on record including the decisions cited before us. As rightly contended by the learned counsel for the assessee the facts of the case laws relied upon in the assessment order are different from the facts of the case on hand. In the case of Pandyan Chemicals the Court was concerned with the interest received from the deposit of the Electricity Board which is also different from the facts of the case on hand. In the present case, the assessee has received interest for belated settlement of the bills by the debtors, which has direct nexus with the industrial undertaking and have direct nexus with the sales which in turn linked to industrial undertaking. The Hon’ble Madres High Court in the case of Madras Motors Ltd. had dealt with identical issue and held that if the purchasers did not make the payments and then agree to pay interest on the delayed payments, the said interest could directly be relatable to the business of the assessee and thus the interest would have to be included as the profits and gains derived from the business of the assessee and would be entitled to be covered by sec.80HH. Also the Third Member case reported in 87 ITD 264 Pune in the case of Kirloskar Electrodyne Ltd., it has been held that the interest received from customers for delayed payment was directly relatable to the business of the assessee and therefore the issue was to be decided in favour of the assessee. In our considered view in the above two decisions, the - = : 3 : = - facts are identical to that of the facts obtaining in the present case and the facts of the case relied upon by the revenue authorities are different from those prevailing in this case. Hence, we are to follow the decisions of Madras High Court reported 257 ITR 610 and the Third Member decision reported entitled to be covered by sec.80HH. Also the Third Member case reported in 87 ITD 264 Pune in the case of Kirloskar Electrodyne Ltd., it has been held that the interest received from customers for delayed payment was directly relatable to the business of the assessee and therefore the issue was to be decided in favour of the assessee. In our considered view in the above two decisions, the - = : 3 : = - facts are identical to that of the facts obtaining in the present case and the facts of the case relied upon by the revenue authorities are different from those prevailing in this case. Hence, we are to follow the decisions of Madras High Court reported 257 ITR 610 and the Third Member decision reported in 87 ITD 264 Pune and decide the issue in favour of the assessee. Hence, following the above decisions, we direct the Assessing Officer to consider the interest received for delayed payment of the dues by the debtors as income derived from industrial undertaking and to recompute the deduction under sec.80HH. Order accordingly. 4. It is clear that it is merely a finding of fact and no substantial question of law arises. The appeal, therefore, devoid of any merit is dismissed with no order costs. (DR.S.RADHAKRISHNAN, J.) (DR.S.RADHAKRISHNAN, J.) (J.P. DEVADHAR, J.) (J.P. DEVADHAR, J.)