Paliwal Exports vs ACIT

Adarsh Kumar Goel, J.—The assessee has preferred this appeal u/s 260A of the Income Tax Act, 1961 (in short "the Act") against the order dated 3.4.2007 passed by the Income Tax Appellate Tribunal, Delhi Bench, New Delhi (hereinafter referred to as "the Tribunal") in ITA No. 3478/Del/2005 for the assessment year 1999-2000, proposing to raise following substantial questions of law:

In the facts and circumstances of the case, the Reamed I.T.A.T. was justified in law to take into consideration only the interest paid by the appellant to the bank on the loan raised for financing the export business instead of net interest while computing the export project u/s 80HHC Act 1961?

The assessee is engaged in the business of export of handloom products While claiming deduction u/s 80HHC of the Act, the assessee included the benefit of netting of interest which was not allowed by the Assessing Officer. Though the CIT (A) upheld the plea of the assessee, the Tribunal following the judgment of this Court in Rani Paliwal Vs. Commissioner of Income Tax, held that the benefit of netting interest was not permissible as the said benefit was not related to export income.

We have heard Learned Counsel for the appellant.

The Tribunal held as under:

The assessee is an exporter claimed deduction u/s 80HHC in respect of business profit but has not deducted 90% of the interest receipt from the business profit as per Clause (baa) of Explanation to Section 80HHC. It was claimed by the assessee that there is no net debit balance in the interest receipt from the business profit as per Clause (baa) of Explanation to Section 80HHC. It was claimed by the assessee that there is no net debit balance in the interest account and such there is no income. The explanation of the assessee did not find favour in view of the Clause (a) of Section 80HHC. Accordingly, 90% of the interest income was deducted from the business profit for calculating the deduction u/s 80HHC. However, on appeal the issue was decided in favour of the assessee. The Hon''ble Jurisdictional High Court in the case of Rani Paliwal (supra) uphold the stand of the Tribunal by deciding that special deduction u/s 80HHC, 90% of the interest is deductible from the gross interest received by the assessee.

Learned Counsel for the appellant does not dispute that the matter is covered against the assessee by judgment of this Court in Rani Paliwal''s case (supra) which was also followed in Commissioner of Income Tax Vs. Liberty Footwear Company, .

In view of the above, question proposed cannot be held to be a substantial question of law.

The appeal is dismissed.