Urban Stanislaus Co. vs Commissioner of Income Tax

Jawahar Lal Gupta, C.J.—Has the Tribunal erred in taking the view that the amount of Rs. 5,34,572 earned by way of interest by the assessee was income from other sources and thus could not be included u/s 80HHC of the IT Act, 1961? This is the short question that arises for consideration in this appeal u/s 260A of the Act. A few facts may be noticed.

The assessee is engaged in the business of exporting cashewnuts. During the asst. yr. 1993-94, the assessee had earned an interest of Rs. 5,34,572 on the fixed deposits. The assessee claimed that the amount of interest was to be considered as income from business and not under other sources. The assessing authority rejected it. On appeal, the order of the assessing authority was reversed. However, the Revenue''s claim was accepted by the Tribunal. Hence, this appeal.

Mr. Kochunni Nair contends that the appellant had taken loan from the bank. 20 per cent of the sale proceeds had to be deposited by way of security for the loans. Thus, the interest earned on the fixed deposits was income from business and not from the other sources.

A perusal of the order of assessment passed by the AO shows that the assessee had claimed a carry forward of business losses amounting to Rs. 91,13,180. Still further, the assessee had claimed "a sum of Rs. 20,350 towards deduction u/s 80HHC(1A)...............". After consideration of the matter, the AO had found that deduction u/s 80HHC(1A) can be claimed only in respect of the amount for which the prescribed certificate as contemplated under Clause (4) had been furnished. Still further, the assessee''s claim that the amount of interest viz., Rs. 5,34,572 represented the income from business was not sustained.

This order was, however, reversed by the appellate authority. It was held that the appellant was not bound to file the certificates in Forms 10CCAC and 10CCAB. Thus, the appeal was allowed. The Tribunal has, however, reversed the decision in view of the two judgments of this Court in Abad Enterprises Vs. Commissioner of Income Tax, and Commissioner of Income Tax Vs. Jose Thomas, . The income has been assessed under ''other sources''.

Nothing has been placed on record to show as to howmuch loan had been taken by the assessee during the asst. yr. 1993-94. Still further, there is no indication with regard to the amount of deposit which had been made by way of 20 per cent of the sale proceeds during the relevant period. There is nothing on record which may even remotely indicate that an amount of Rs. 5,34,572 would have accrued as interest on the deposit during the relevant period. In this situation, we find no infirmity in the view taken by the Tribunal. It deserves mention that the assessee can claim deduction in respect of the profits derived from the export of goods only when it is established that the income is solely related to the export. The obvious intention behind the provision in Section 80HHC is to promote exports. However, the income earned by way of interest from fixed deposits is not an income from exports. Thus, it was rightly taken into account as income from other sources.

There is another aspect of the matter. Clause (4) of s, 80HHC clearly postulates that deduction shall be admissible only when the assessee furnishes the particulars in the prescribed form along with the return of income and the report of the accountant. This was admittedly not done in the present case.

In view of the above, we find no infirmity in the view taken by the Tribunal.

Mr. Nair has referred to the decision of their Lordships of the Supreme Court in Commissioner of Income Tax Vs. KARNATAKA STATE CO-OPERATIVE APEX BANK, . In this case, their Lordships were dealing with the provision contained in Section 80P. The issue was whether "the Tribunal was right in law in holding that the interest income arising from the investment made out of the reserve fund is exempt u/s 80P(2)(a)(i) of the IT Act ?". In this case, the assessee was a co-operative bank. It was found that the bank was statutorily required to place a part of its funds with the State Bank or the Reserve Bank of India. Thus, interest earned by the bank was income from business. However, such is not the position in the present case.

Mr. Nair has also referred to the decision of their Lordships of the Supreme Court in Commissioner of Income Tax Vs. GUJARAT MINERAL DEVELOPMENT CORPORATION, . The issue in this case related to the deduction on account of the deposit made with the Government for laying of electric cables. The full facts of the case have not been placed before us. Their Lordships had decided the appeal in view of an earlier decision. We find no similarity between the issues arising in the two cases.

No other point has been raised.

In view of the above, we find no merit in this appeal. It is consequently dismissed.