2004 (9) TMI 565 - AT - Income Tax

Tribunal Upholds Reduction of Rebate under Section 80HHC, Clarifies Interest Deduction Rules

The Tribunal upheld the reduction of rebate claimed under section 80HHC, following the Special Bench's decision in Lalsons Enterprises case. It clarified ... Deductions, Interest chargeable Issues:- Challenge to reduction of rebate claimed under section 80HHC- Consideration of Special Bench decisions in the appeal- Legitimacy of reopening assessment and disturbing claimed rebate- Confirmation of interest charges under sections 234B and 234CAnalysis:1. Reduction of rebate claimed under section 80HHC:The appellant challenged the reduction of rebate claimed under section 80HHC by the CIT(A). The dispute centered around whether to deduct 90% of gross interest received or 90% of net interest while computing business profits under Explanation (baa) to section 80HHC. The Tribunal analyzed the legislative intent behind the provision and referred to Circular No. 621 to interpret the meaning of 'profits of the business.' The Tribunal held that only 90% of net interest remaining after allowing a set-off of interest paid, which has a nexus with the interest received, should be reduced, as per the decision of the Special Bench in Lalsons Enterprises v. Dy. CIT.2. Consideration of Special Bench decisions:The Tribunal considered the decisions of the Special Bench of the Delhi Tribunal in Lalsons Enterprises case, which clarified the treatment of interest income for the purpose of reducing it from business profits under section 80HHC. The Tribunal relied on the Special Bench's interpretation that only 90% of net interest, not gross interest, should be deducted, based on the nexus with the interest received. This decision guided the Tribunal's ruling in the present case, emphasizing the importance of judicial interpretation and adherence to precedents.3. Legitimacy of reopening assessment and disturbing claimed rebate:The appellant contended that the Assessing Officer had no valid ground to reopen the assessment and disturb the claimed rebate, arguing that mere change of opinion is not sufficient for reassessment. However, the Tribunal did not delve into this issue as it was not pressed by the appellant's counsel. The Tribunal's focus remained on the substantive tax issues related to the reduction of rebate under section 80HHC and the application of relevant legal principles.4. Confirmation of interest charges under sections 234B and 234C:Regarding the levy of interest under sections 234B and 234C, the Tribunal upheld the charges, citing the decision of the Hon'ble Apex Court in CIT v. Anjum M.H. Ghaswala. The Tribunal emphasized the mandatory nature of these interest charges and concluded that they were applicable in the present case. Consequently, both appeals of the assessee were disposed of accordingly, with the Tribunal's decision primarily focusing on the interpretation of tax provisions and adherence to judicial precedents in resolving the tax disputes raised by the appellant.