IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 03/03/2006
Coram
The Hon'ble Mr.Justice P.D.DINAKARAN
and
The Hon'ble Mr.Justice P.P.S.JANARTHANA RAJA
Tax Case (Appeal) No.301 of 2006
Commissioner of Income-Tax,
Chennai. ... Appellant
-Vs-
M/s.Indo Matsushita Carbon Co Ltd.,
III Floor, 77 (Old No.35),
N.H.Road,
Nungambakkam,
Chennai-600 034 ... Respondent
The above T.C.(Appeal) is preferred under Section 260A of the
Income-Tax Act, 1961 against the order of the Income Tax Appellate Tribunal,
Madras A Bench, dated 10.8.2005 made in ITA Nos.698/Mds/2003 for the
assessment year 1993-94.
!For Appellant : Mr.J.Narayanaswamy
^For Respondent : ----
:J U D G M E N T
(Judgment of the Court was made by P.D.DINAKARAN, J.)
The above tax case appeal is directed against the order of the
Income-tax Appellate Tribunal ITA Nos.698/Mds/2003 dated 10.8.2005.
2.1. The Revenue is the appellant. The assessment year involved is
1993-94. The assessee is a company in which public are substantially
interested. The assessee filed its return of income for the assessment year
1993-94 claiming a relief on interest on over dues from trade debtors under
Section 80HH and 80I. The assessing officer disallowed the same on the ground
that the interest was not derived from industrial activity and therefore, the
assessee company is not eligible for deduction under Section 80HH and brought
the same to tax. Aggrieved by the said order, the assessee preferred an
appeal before the Appellate Commissioner of Income Tax, who, by an order dated
10.1.2003, confirmed the assessment order and held the issue in favour of the
Revenue. Hence, the assessee preferred further appeal before the Appellate
Tribunal, which, set aside the order of the Commissioner of Income Tax holding
that the trade debtors are derived only from the industrial undertaking and
hence they are to be considered for claiming the deduction under Section 80HH
and 80I.
2.2. Aggrieved by the order of the Appellate Tribunal, the Revenue
has filed the above appeal raising the following substantial question of law:
“Whether in the facts and circumstances of the case, the Tribunal was right in
holding that over dues from trade debtors is eligible for relief under Section
80HH and 80I?”
3. It is fairly conceded by the learned counsel appearing for the
Revenue that the issue raised in the above question of law is covered against
the Revenue by the decision of this Court in COMMISSIONER OF INCOME TAX VS.
MADRAS MOTORS LTD./M.M.FORGINGS LTD.(257 ITR 60).
4. It is settled law that there can be no doubt that the interest
earned on the belated payment would, however, be directly relatable to the
business of the assessee of forgings. If the purchasers of the forgings did
not make the payments for the forgings and then agree to pay the interest on
the delayed payments, the said interest would have direct nexus with the
business of forgings. The true test would be whether such interest would be
available to the assessee otherwise also. The answer to the question would be
certainly in the negative. The interest being directly relatable only to the
amounts receivable by the assessee during the course of its business on
account of the sale forgings, this interest would have to be included as the
profits and gains derived from the business of the assessee-videCOMMISSIONER
OF INCOME TAX VS. MADRAS MOTORS LTD./M.M.FORGINGS LTD(257 ITR 60).
5. In view of the above well settled proposition of law, we do not
find any error or infirmity in the order of the Appellate Tribunal, wherein
the ratio laid down in the decision referred to above has been rightly
followed and hence, the same is confirmed and the appeal is dismissed as no
substantial question of law arises for consideration of this Court. No costs.