HIGH COURT OF BOMBAY
Tanna Exports Ltd.
Versus
Commissioner of Income tax
IT Reference NO. 63 OF 1996
SEPTEMBER 18, 2012
JUDGMENT
S.J. Vazifdar, J.– This is a Reference under section 256(1) of the Income Tax Act, 1961 arising out of the order of the Income Tax Appellate Tribunal (Tribunal) dated 23rd November, 1994 in ITA No.763/Bom/1992 pertaining to the assessment year 1989-1990. The Tribunal on the assessee’s application drew up the statement of claim and framed the following question for the opinion of this Court :-
“Whether on facts and in the circumstances of the case, the Tribunal was justified in law in holding that while computing the profits for the purpose of deduction u/s. 80HHC, interest income of Rs.40,20,418/- was required to be excluded ?”
2. The applicant-assessee is engaged in the business of export, inter-alia, of rice, green peas and hardware. The assessee filed its return of income of Rs.8,44,690/- on 31st October, 1989 and a revised return on 7th March, 1990, declaring an income of Rs.4,46,920/-. The Assessing Officer, by an order dated 21st January, 1991, assessed the total income at Rs.48,05,374/-. The difference arises on account of the determination of the deduction under section 80HHC.
3. Along with his return, the assessee filed a certificate, calculating the deduction under section 80HHC at Rs.3,08,19,854/-. The assessee received Rs. 40,20,418/- towards interest in the circumstances we will refer to later and a sum of Rs. 4,64,700/- by way of liquidated damages. This Reference is concerned only with the amount received towards interest. The question is whether the amount received towards interest ought to be added to the total turn-over or not. For the purpose of the deduction under section 80HHC, the assessee took the profit from the business at Rs. 3,12,17,908/-, which included the interest received. The AO sought the details of the interest. The information revealed that almost the entire interest was received from their sister-concerns. A paltry amount of Rs.1,849/- was received on account of the deposit for a car. The AO treated the interest as “income from other sources” and computed the deduction under section 80HHC at Rs.2,68,60,683/-. The AO calculated the profit derived from export for determining the benefit under section 80HHC, applying the prescribed formula :-
