Circular barring appeals below Rs.1,00,000 is internal guidance and not binding on appeals; lease receipts held rental income, s.80HHC denied

HC held that the CBDT circular directing income-tax authorities not to file appeals where tax effect is below Rs.1,00,000 is merely internal instruction and does not bind the Tribunal, which must decide filed appeals on merits. On facts, lease receipts from property let to a related concern constituted rental income, not business income, since leasing was not the assessee's business; accordingly deductions under s.80HHC were disallowed. The Tribunal's rejection of 80HHC relief for interest on FDRs was affirmed.

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Issues:
1. Appeal against Tribunal's order under Income-tax Act, 1961.
2. Classification of income from leasing of asset.
3. Claim for deduction under section 80HHC of the Act.

Analysis:

Issue 1:
The appeal was filed against the Income-tax Appellate Tribunal's order, where the Revenue's appeals against the Commissioner of Income-tax (Appeals) were allowed, and the assessee's claim was rejected. The appellant raised three substantial questions of law. However, the High Court found that none of the questions raised was a question of law, let alone a substantial one. The Court dismissed the appeal, stating that the questions did not merit admission.

Issue 2:
Regarding the classification of income from the temporary leasing of an asset, the assessee argued that the income should be considered as 'Business income' rather than 'Property income.' The property in question was leased out to a sister concern, and the income was treated as rental income by the assessing authority. The High Court upheld the decisions of the assessing authority and the Tribunal, stating that since the property was leased out and the assessee was receiving rent, the income could not be classified as 'Business income,' especially when leasing out properties was not the assessee's primary business activity.

Issue 3:
The issue revolved around the deduction claimed under section 80HHC of the Act concerning interest as part of the assessee's business income. The Assessing Officer and the Tribunal differed in their treatment of the interest received and paid by the assessee for the purpose of deduction. The Commissioner of Income-tax (Appeals) allowed a deduction based on a different interpretation. The High Court agreed with the Tribunal's view that 90% of the interest deductible for the claim under section 80HHC should be from the gross interest received by the assessee, without deducting the interest paid by the assessee. The Court found that the Tribunal's decision was in line with the clear language of the relevant provision, and thus, upheld the disallowance of the assessee's claim in this regard.

In conclusion, as there were no substantial questions of law involved in the case, the High Court dismissed the appeal.

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