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The Tax PublishersT.C.A. Nos. 1212 & 1213 of 2009
2019 TaxPub(DT) 7642 (Mad-HC) : (2020) 422 ITR 0390INCOME TAX ACT, 1961
Section 263 Section 80HHC
On the date when assessment Order was finalised decision of Jurisdictional High Court in case of V. Chinnapandi was clearly available wherein it was held that 90 % of interest income had to be excluded from business income in view of clause (baa) of Explanation to section 80HHC for the purpose of deduction under section 80HHC. Later on High Court held in case of Dollar Apparels that 100% of interest income had to be reduced for the purpose of deduction under section 80HHC. However, this judgment was rendered on 21-2-2007 whereas Assessment Order was passed on 28-3-2006 AO had diligently followed decision of Jurisdictional High Court in case of V. Chinnapandi and reduced 90% of interest income from business profits for the purpose of deduction under section 80HHC. At best, AO had followed one of courses legally available and no fault could be found with his order. Therefore, invocation of jurisdiction under section 263 was not justified.
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Deduction under section 80HHC - Computation - AO relying on decision of jurisdictional High Court excluded 90% of interest income from business income in view of clause (baa) of Explanation to section 80HHC - CIT directed AO to tax entire interest income as income from other sources
CIT in exercise of powers under section 263 directed AO to re-compute deduction under section 80HHC by treating interest income of assessee as income from other sources in accordance with 1st proviso to sub-section (3) of section 80-HHC and sub-clause (baa) under Explanation below section 80HHC. Aggrieved by the orders of CIT, assessee preferred appeal before ITAT and same stood allowed by the Tribunal. Revenue approached High Court.Held : Section 263 is not intended to be invoked for every type of mistake or error committed by AO as ever loss of revenue as a consequence of order of AO cannot be treated as prejudicial to the interest of revenue. Decisions are available on both sides to the effect that interest income should be assessed as income from other sources or business income. Depending upon these decisions, again there are lot of decisions available on both sides where deduction under section 80HHC should be available in respect of interest income or not. However, on the date when assessment Order was finalised decision of Jurisdictional High Court in case of V. Chinnapandi was clearly available wherein it was held that 90 % of interest income had to be excluded from business income in view of clause (baa) of Explanation to section 80HHC for the purpose of deduction under section 80HHC. Later on High Court held in case of Dollar Apparels that 100% of interest income had to be reduced for the purpose of deduction under section 80HHC. However, this judgment was rendered on 21-2-2007 whereas Assessment Order was passed on 28-3-2006 AO had diligently followed decision of Jurisdictional High Court in case of V. Chinnapandi and reduced 90% of interest income from business profits for the purpose of deduction under section 80HHC. At best, AO had followed one of courses legally available and no fault could be found with his order. Therefore, impugned orders of Tribunal setting aside order of CIT required no interference.
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