Commissioner of Income Tax vs Nirma Ltd.

K.S. Jhaveri, J.—This appeal u/s. 260A of the Income Tax Act, 1961 is filed against the judgment and order dated 13.03.2003 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ''A'' in ITA No. 301/AHD/1996 whereby, the appeal filed by the Revenue was allowed in part for statistical purpose.

Briefly stated, the facts are that the assessee is a Company engaged in the business of manufacture of Detergent Powders, Detergent Cakes, Beauty Soaps, etc. in the brand name "Nirma". The assessee-Company pays Royalty for trade-mark "Nirma" to Nirma Chemical Works, a proprietary concern of S.K. Family Trust.

The assessee filed the return of income on 31.12.1992 declaring total income at Rs. 76,82,520/-. Assessment scrutiny was undertaken and the Assessing Officer passed the order of assessment u/s. 143(3) of the Act on 31.03.1995. Aggrieved by the order of the A.O., the assessee filed appeal before the CIT(A). The learned CIT(A) partly allowed the appeal filed by the assessee vide order dated 16.11.1995. Being aggrieved by the order of CIT(A), the Revenue filed appeal before the Tribunal. After hearing both the sides, the Tribunal partly allowed the appeal of the Revenue for statistical purpose, vide impugned judgment and order dated 13.03.2003. Hence, this appeal at the instance of the Revenue.

This appeal was admitted on 20.04.2006 in respect of the following questions of law;

"Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that netting of interest income should be allowed without considering the fact that interest income should be assessed as income from other sources while computing deduction under Section 80HH and 80I of of the Income Tax Act, 1961?"

We have heard learned counsel for both the sides. In Paras - 16 & 17 of the judgment, the Tribunal has observed as under;

"16. We have heard the ld. representative of the parties and perused the record. After considering the facts of the case we find that fixed deposit interest and cash assistance are covered against the assessee and sale of bardana is in favour of the assessee by various decision, as regards netting benefit of interest, the AO may examine it in accordance with para-4 of this order. As regards other items we find that the facts and figures are suggested to verification and to be examined in the light of the relevant decisions of ITAT Ahmedabad Bench and others as cited in the chart. The judgments of jurisdictional HC on the issue are to be followed. Under the circumstances, we send back item a, b, e & g to the file of AO with the direction to decide the same in accordance with the above discussion after providing reasonable opportunity of hearing to the assessee.

The fifth ground pertains to allowance of claim u/s. 80-I without reducing claim u/s. 80HH. The ld. AR pointed out that this controversy is covered in favour of the assessee by the various decisions as stated above in the chart. This controversy is also covered by the decision of ITAT in assessee''s own case in A.Y. 1991-92. We respectfully follow the above decision of ITAT and in view of that the AO is directed to allow the claim in accordance with the decision of ITAT."

The question of law raised in this appeal is already concluded by a decision of the Apex Court in the case of ACG Associated Capsules Pvt. Ltd. (Formerly Associated Capsules Pvt. Ltd.) Vs. The Commissioner of Income Tax, Central-IV, Mumbai, wherein, it has been held that ninety per cent of not the gross rent or gross interest but the net interest or net rent, which had been included in the profits of business of the assessee as computed under the head "Profits and gains of business or profession", was to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business.

There is no dispute amongst both the learned counsel that the aforesaid decision will apply in the facts of this case, as the facts are identical and therefore, we are not giving elaborate reasons.

Accordingly, the question whether the Tribunal is right in law in holding that netting of interest income should be allowed without considering the fact that interest income should be assessed as income from other sources while computing deduction under Section 80HH and 80I of of the Income Tax Act, 1961 is answered in the affirmative in favour of the assessee and against the Revenue. The appeal stands disposed of.