Case Law Details
RELEVANT PARAGRAPH
1. This appeal was admitted and heard on the following substantial question of law:-
“Whether the ITAT was correct in law in holding that the interest earned by the assessee on late payment received from the customers is eligible for deduction under section 80-IA of the Income-tax Act, 1961?”
11. The respondent assessee, which is an industrial undertaking, had supplied goods to its various customers which had been manufactured by it. Some of these customers did not make payment” in time. The dues which were payable by those buyers attracted interest on late payment charges. In this manner, ultimately, the payments which were received by the assessee against the supply, of goods also included interest on overdue payments.
12. Precisely, this very issue came up for consideration before the Gujarat High Court in the case of Nirma Industries Ltd. v. Deputy Commissioner of Income Tax, (2006) 2S3 ITR 402 (Guj). That was also a case where interest was received by the assesses from the debtors for late payment of the sale proceeds and the question was as to whether this interest can be treated as the income derived from the business for the purpose of Section 80-1 of the Act. Answering the question in favour of the assessee, the Gujarat High Court relied upon the judgement of the Apex Court in the case of Commissioner of Income Tax, Orissa Vs. Covinda Choudhury & Sons, Gosaninuagaon. Orissa % (1993) 203 ITR 881 in which case the Supreme Court had held that interest was of the same nature as other trading receipts in the following manner:-
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payment delay from debtors side, issued a debit note of interest on delay payment. what is the rate of GST on debit note of interest