Appellant's challenge on deduction denial under section 80HHC for interest income partly upheld by Tribunal

The Tribunal partly upheld the appellant's grievance challenging the disallowance of deduction under section 80HHC in respect of interest income for AY 1991-92. Relying on a High Court decision, the Tribunal directed the Assessing Officer to grant relief by excluding only the net amount of interest from corporate deposits. The Tribunal remitted the matter for necessary adjustments, resulting in the appeal being partly allowed in favor of the appellant. The decision was pronounced on 29th January 2016.

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Issues:
Challenge to correctness of order under section 143(3) read with section 254 for AY 1991-92 regarding disallowance of deduction under section 80HHC in respect of interest income.

Analysis:
The appellant challenged the correctness of the order dated 24th October, 2011, passed by the ld. CIT(A) under section 143(3) read with section 254 of the Income Tax Act, 1961, for the assessment year 1991-92. The specific grounds of appeal included the disallowance of deduction under section 80HHC in respect of interest income amounting to Rs. 2,94,39,911. The appellant contended that the deduction under section 80HHC for interest income should have been allowed as claimed. The Assessing Officer had required the assessee to show cause as to why the interest income should not be excluded for the purpose of determining the deduction under section 80HHC. The Assessing Officer concluded that the entire interest income should be treated as income chargeable under the head "income from other sources" and, therefore, ineligible for computing the deduction under section 80HHC. The CIT(A) upheld the Assessing Officer's decision, leading the appellant to appeal before the Tribunal.

In the appeal, the Tribunal considered the submissions of both parties, reviewed the material on record, and analyzed the legal position. Referring to a decision of the Hon'ble jurisdictional High Court in a similar case, the Tribunal noted that the issue was settled in favor of the assessee. The Tribunal upheld the grievance of the assessee based on the High Court's views and directed the Assessing Officer to grant the resultant relief. The Tribunal specifically addressed different components of interest income, such as interest on corporate deposits, interest for credit periods of less than 90 days, and finance charges for credit periods of 90 days or more. The Tribunal directed the Assessing Officer to exclude only the net amount of interest from corporate deposits and granted relief accordingly. The Tribunal also remitted the matter to the Assessing Officer for necessary netting of the amount in this regard.

Conclusively, the Tribunal partly upheld the appellant's grievance and directed the Assessing Officer to recompute the deduction under section 80HHC as per the directions provided. The appeal was partly allowed in favor of the appellant, and the decision was pronounced in the open court on 29th January 2016.

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