J. Creations Vs ACIT (Madras High Court)
The Madras High Court heard an appeal arising from Assessment Year 2004-05 concerning the computation of deductions under Sections 80-IB and 80-HHC of the Income Tax Act, 1961. The assessee had filed its return declaring total income of Rs. 59,96,390. During scrutiny assessment, the Assessing Officer treated interest of Rs. 1,23,569 earned on bank deposits as “Income from other sources” and denied deduction under Section 80-HHC on such income.
The assessee succeeded before the Commissioner of Income Tax (Appeals), who held that the interest income from fixed deposits was assessable under the head “Business” and not “Other sources”. The appellate authority also held that Section 80-IB(9) merely regulates deductions under Chapter VI-A and does not restrict other deductions, directing that deduction under Section 80-HHC be allowed on the eligible profits without reducing the deduction granted under Section 80-IB.
The Revenue challenged the appellate order before the Income Tax Appellate Tribunal. The Tribunal partly allowed the Revenue’s appeal. It held that assessing the interest income as business income while excluding 90% of such income from business profits for the purpose of computing deduction under Section 80-HHC was in accordance with the directions of the High Court. On the issue of simultaneous deductions under Sections 80-IB and 80-HHC, the Tribunal decided in favour of the Revenue by following the Special Bench decision in Asstt. CIT, Circle-I, Tirupur v. Rogini Garments [2007] 108 ITD 49/111 TTJ 274 (Chennai).
