ORDER
Keshaw Prasad, A.M.
1. All the three appeals have been directed by the assesses. The appeal for asst. yrs. 1991-92, arises out of the CIT(A)’s order dt. 11th Jan., 1995, for asst. yr. 1992-93, arise out of the order of the CIT(A), dt. 28th April, 1994, and the appeal for asst. yr. 1994-95, arises out of the order of the CIT(A), dt. 6th July, 1996. As the issues are common in all the appeals, these are being disposed of by a consolidated order.
2. First issue which is common to all the three years relates to the taxation of interest on short-term deposit as income from other sources rather than business income and thereby denying deduction under Section 80-I of the Act on such income.
3. The assessee is a company engaged in the business of publishing of books and journals of Indian Customs and Central Excise Law and other related matters. It has earned certain income by way of interest. Claiming such income as business income, the assessee claimed deduction under Section 80-I of the Act on such income. However, the AO assessed the interest income under the head ‘income from other sources’ and thereby denied deduction under Section 80-I of the Act by observing that such interest income was not derived from the industrial undertaking.
4. On appeal, the CIT(A) upheld the findings of the AO against which the appeal is before us.
5. It is argued by the learned counsel that admittedly in asst. yr. 1990-91, this issue was considered by the Tribunal who held it against the assessee. But subsequent to this decision, the issue came up for further consideration before Delhi Bench of the Tribunal in the case of Gullium Equipments (P) Ltd. When there was a difference of opinion between both the Members, the issue was referred to the Third Member for his opinion. Considering the views of the Third Member, the Tribunal vide its order reported in Asstt. CIT v. Gallium Equipment (P) Ltd. (2001) 73 TTJ (Del)(TM) 130 : (2002) 254 ITR 1 (AT) (Del), has held that where there was live link and connection between earning of income and the business carried on by the assessee, the income will partake the character of business income and such income will be deemed to have been derived from industrial undertaking. He, therefore, pleaded that in view of the Third Member decision in the case of GuUium Equipments (P) Ltd. (supra), the earlier decision of the Tribunal in assessee’s case has no force and the same has to be ignored. For this purpose, the learned counsel relied on the decision of Hon’ble Supreme Court in the case Pradip Chandra Parija and Ors. v. Pramod Chandra Patnaik and Ors. (2002) 254 ITR 99 (SC). Learned counsel further stated that the ratio laid down by the Hon’ble Supreme Court in the case of CIT v. Sterling Foods (1999) 237 ITR 579 (SC) was also not applicable because in that case, no live link between
carrying on the business by the assessee and the income earned by the assessee existed. In order to prove that there was a live link between the income earned by the assessee and the business carried on by it, the learned counsel stated that the journal published by the assessee-company is available on annual subscription basis and the period of subscription is one year from January to December. The persons subscribing the journal are required to pay the entire annual subscription is advance and thereafter the parts of the journal are published on periodic intervals and despatched to the subscribers at fortnightly intervals from January to December. While fixing the annual subscription for the journal, the yield which can accrue to the assessee by investing the advance money received, which is spent over a span of 12 months, is also taken into account and comparatively low subscription rates are fixed. The advance money received is invested in short-term deposits to make the funds readily available for further expenditure from time to time.
6. Similarly, some of the books published by the assessee carries “Free Updating Services”, therefore, while fixing the price of such books, the likely expenditure on such updating services to be rendered in future and the yield that can accrue on investing of such amount till it is utilised, is also take into account.
7. Thus, interest accrued on the short-term deposits of such advance amount is a business income and eligible to the benefit of Section 80-I of the IT Act.
8. The reliance was further placed on the decisions Rollatainers Ltd. v. Dy. CIT (2000) 69 TTJ (Del) 8, Honda Siel Power Products Ltd. v. Dy. CIT (2000) 69 TTJ (Del) 97 and S. Damanjit Singh v. Asstt. CIT (2002) 121 Taxman 303 (Del)(Mag).
9. On the other hand, learned Departmental Representative stated that there was no live link between earning the interest income on business carried on by the assessee. It was pleaded that the issue was covered against the assessee by the decision of Hon’ble Supreme Court in the case of Sterling Food (supra), as well as the order of the Tribunal in assessee’s own case in the asst. yr. 1990-91. He, therefore, supported the order of the CIT(A).
10. We have considered the rival submissions. Admittedly, in the asst. yrs. 1990-91, the Tribunal has taken the view against the assessee but subsequently Delhi Bench of the Tribunal by its Third Member decision in the case of Gullium Equipments (P) Ltd. (supra) on the difference of opinion, held that if there was live link between the interest income earned by the assessee and the business carried on by the assessee then such income will have to be treated as business income derived from the industrial undertaking. Hon’ble Supreme Court in the case Piadip Chandra Parija and Ors. v. Piamod Chandra Patnaik and Ors. (supra) has held that the two member Bench was bound by the decision of Three Member Bench. The findings of the Third Member on a difference of opinion was, therefore, a finding by 2:1. Thus, in view of the findings of the Hon’ble apex Court, we have no option but to ignore the Tribunal’s decision in the assessee’s case taken prior to the decision in the case of Gullium Equipments (P) Ltd. and follow the ratio laid own by the Third Member in the case of Gullium Equipment (P) Ltd. (supra). We have, therefore, verified the activities of the assessee vis-a-vis the income earned by the assessee which has been detailed earlier, Perusal of the specific activities carried on by the
assesses, it was clear that the interest income earned by the assessee was business income and derived from the industrial undertaking. We, therefore, hold that the assessee is eligible to deduction under Section 80-I on such interest income. The disallowance sustained by the CIT(A) is therefore, deleted.
11. The assessee has also raised an additional ground of appeal relating to the levy of interest such Section 234B of the Act pertaining to asst. yrs, 1992-93 and 1994-95. While relying on the decision of Hon’ble Supreme Court in the case of CIT and Ors. v. Ranchi Club Ltd. (2001) 247 ITR 209 (SC), the learned counsel stated that the levy of interest under Section 234B of the Act was illegal as there is no direction to charge interest under any of the sections.
12. After hearing the rival submissions, we hold that as the additional ground raised by the assessee involves interpretation of the provisions of law, we admit the same.
13. Hon’ble Supreme Court in the case of Ranchi Club (supra) has approved the decision of Hon’ble Patna High Court in the case of Udai Misthan Bhandar & Complex and Ors. v. CIT and Ors. wherein it was held that if no specific section was mentioned in the assessment order for levy of interest, such levy will be illegal. We have perused the assessment record and find that the AO has not directed to levy the interest at all, what to say of any particular section. In view of the decision of the Hon’ble apex Court in the case of Ranchi Club (supra), we hold the levy of interest under Section 234B in both the years was illegal and the same is deleted.
14. In the asst. yr. 1994-95, the issue of deduction under Section 80Q of the Act was also raised. This issue has been challenged on the computation of deduction under Section 80Q. While the AO has calculated the deduction in one way, the assessee’s claim of deduction was based on the calculation on some other method. However, during the course of hearing, it was agreed that the deduction under Section 80Q may be calculated on the basis of Board’s Circular No. 621, dt. 19th Dec., 1991 [(1992) 195 ITR (St) 184] and Board Circular No. 706, dt. 26th June, 1995 & [(1995) 214 ITR (St) 2], In view of the rival submissions, we set aside this issue and restore back to the file of the AO with the direction that the deduction under Section 80Q of the Act may be calculated on the basis of Board’s circular mentioned above. This ground of appeal is allowed with the above directions.
15. In the result, the appeal for asst. yrs. 1991-92 and 1992-93 are allowed whereas the appeal for asst. yr. 1994-95 is partly allowed.