1999 (10) TMI 743 - AT - Income Tax

Tribunal denies deduction for interest and commission income under section 80-I for Assessment years 1990-91 to 1993-94.

Lupin Agrochemical (I) Ltd. Versus Deputy Commissioner of Income-tax

Lupin Agrochemical (I) Ltd. Versus Deputy Commissioner of Income-tax - TMI Issues:Computation of deduction under section 80-I for Assessment years 1990-91 to 1993-94.Analysis:The primary issue in this case revolves around the computation of deduction under section 80-I for the appellant, a company engaged in manufacturing agro-chemical formulations used as pesticides. The Assessing Officer excluded interest income from the eligible profits for deduction under section 80-I, stating it falls under 'income from other sources' and is not related to profits from the industrial undertaking. Additionally, commission income for Assessment year 1993-94 was also excluded. The appellant contended that interest income was part of business income, citing relevant tribunal and Supreme Court decisions. They argued that even if interest income is from other sources, only the net income should be excluded for deduction calculation. Furthermore, they proposed that any interest income exceeding interest paid on borrowed funds should be excluded. The appellant also highlighted discrepancies in treatment of interest income for different assessment years.The Departmental Representative argued that since the Assessing Officer categorized the interest income as 'income from other sources,' the appellant cannot dispute this assessment. They emphasized that the appellant did not challenge this categorization earlier. The Departmental Representative also pointed out that the appellant did not contest the interest details before the Commissioner (Appeals), questioning the timing of raising this issue.Upon careful consideration, the Tribunal found that the interest income exclusion was justified based on the Supreme Court's decision in the case of Sterling Foods. The Court ruled that income must have a direct nexus with the industrial undertaking to qualify for deduction under section 80-I. The Tribunal also referenced the Tuticorin Alkali Chemicals case, emphasizing that interest income, regardless of its utilization, is taxable as revenue. The Court reiterated that interest earned by investing borrowed capital is an independent income source, not derived from the industrial undertaking. Similarly, commission income was deemed an independent income source, not qualifying for deduction under section 80-I. Consequently, the Tribunal upheld the disallowance of interest income and commission income for the relevant assessment years.This detailed analysis showcases the Tribunal's thorough examination of the issues surrounding the computation of deduction under section 80-I, providing a comprehensive understanding of the legal principles and precedents applied in reaching the decision.