Punjab Tractors Limited v. Commissioner Of Income Tax, Patiala

ITA No. 124 of 2003 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Punjab Tractors Limited Versus Commissioner of Income Tax, Patiala ITA No. 124 of 2003 Date of Decision: 10.9.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Pankaj Jain, Advocate for the appellant. Mr. Tajender K. Joshi, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 15.1.2003 passed by the Income Tax AppellateTribunal, Chandigarh Bench “A”, Chandigarh, in ITA No.194/CHANDI/99 for the assessment year 1995-96. This Court whileadmitting the appeal had framed the following substantial question oflaw:- “Whether under the facts and circumstances of thecase, the Tribunal was justified in holding thatinterest income received on bank deposits, incometax refund, loans to employees and on HDFC Bonds could not be treated as income derived from theIndustrial Undertaking for the purposes of Section80-I of the Income Tax Act, 1961? 2.Put shortly, the facts as narrated in the appeal are that theassessee is a Public Limited Company engaged in manufacture ofTractors, Forklifts, Harvester Combines and castings in its threemanufacturing divisions. The assessee filed its return on 29.11.1995declaring an income of Rs.29,68,55,610/- which was processed underSection 143(1)(a) of the Act. Thereafter, the assessee filed a revisedreturn of income on 25.5.1996 at an amount of Rs.29,71,75,910/-. Theassessee claimed deduction under Section 80-I of the Act on account ofinterest received from the bank deposits amounting to Rs.90,32,947/-,income tax refund of Rs.11,50,377/-, loans to employees ofRs.11,90,113/-, income from HDFC Bonds of Rs.1,56,000/-, recovery ofinsurance claims of Rs.3,02,000/- and the sale of fixed assets ofRs.7,21,000/- and credited a net amount of Rs.52,12,728/- as interest tothe profit and loss account being considered by the assessee asinterest derived from the profits and gains of business. The AssessingOfficer disallowed the claim of the assessee by treating the same asincome from other sources and also disallowed deduction claimedunder Section 80I of the Act on the above mentioned amounts. Feelingaggrieved, the assessee took the matter in appeal and theCommissioner of Income Tax (Appeals) [in short “the CIT (A)] upheldthe view of the Assessing Officer. On further appeal by the assessee,the Tribunal affirmed the orders passed by the Assessing Officer as wellas the CIT (A). Hence, the present appeal. 3.We have heard learned counsel for the parties. 4.The point in issue is regarding whether interest incomederived on bank deposits, income tax refund, loans to employees andon HDFC Bonds would be an income derived from the IndustrialUndertaking and would be eligible for deduction under Section 80-I ofthe Act. 5.The Tribunal while adjudicating the issue against theassessee following the judgment of the Hon'ble Supreme Court in CITv. Sterling Foods [1999] 237 ITR 579 (SC) had come to the conclusionthat the interest income derived on bank deposits, income tax refund,loans to employees and on HDFC Bonds could not be treated asincome derived from the Industrial Undertaking for the purposes ofSection 80-I of the Act. 6.Further, this Court in ITR No. 1 of 2010 (M/s Liberty Group Marketing Division v. Commissioner of Income Tax(Central), Ludhiana) decided on 18.8.2010 where the assessee whowas earning profit from business of trading activity or products of otherconcerns was held not to derive income from industrial undertaking.The reliance was placed on the judgment of the Hon'ble Supreme Courtin Sterling Foods' case (supra). 6.Further, this Court in ITR No. 1 of 2010 (M/s Liberty Group Marketing Division v. Commissioner of Income Tax(Central), Ludhiana) decided on 18.8.2010 where the assessee whowas earning profit from business of trading activity or products of otherconcerns was held not to derive income from industrial undertaking.The reliance was placed on the judgment of the Hon'ble Supreme Courtin Sterling Foods' case (supra). 7.In view of the above, it is held that the interest income onbank deposits, income tax refund, loans to employees, income fromHDFC Bonds, recovery of insurance claims and the sale of fixed assetscannot be termed to be an income derived from the industrialundertaking on which deduction under Section 80I could be allowed. 8.Accordingly, the substantial question of law is answered in ITA No. 124 of 2003favour of the revenue and against the assessee. 9.Consequently, the appeal is dismissed. -4- (AJAY KUMAR MITTAL) JUDGE September 10, 2010(ADARSH KUMAR GOEL)gbsJUDGE