Section 80IB deduction excludes interest income, while valid delegation can empower a tax officer to assess

Interest income earned on deposits was treated as not forming part of profits derived from the industrial undertaking for section 80IB purposes, while the revised computation excluding that component was accepted and the 100% deduction on eligible industrial profit was upheld. On jurisdiction, the statutory delegation framework under sections 2(7A), 120 and 124 was applied to treat the order authorising the Tax Recovery Officer to act as Assessing Officer as valid, and the assessment was held within jurisdiction. The assessee's challenge to jurisdiction therefore failed, and the substantive deduction claim remained sustained.

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Issues: (i) Whether interest income formed part of profits eligible for deduction under section 80IB of the Income-tax Act, 1961; (ii) Whether the assessment framed by the Tax Recovery Officer was without jurisdiction.

Issue (i): Whether interest income formed part of profits eligible for deduction under section 80IB of the Income-tax Act, 1961.

Analysis: The assessee had claimed deduction on the profits of a new industrial undertaking. The revised computation excluded interest earned on deposits and also gave effect to proportionate interest relatable to borrowed funds. On those facts, the remaining amount of profit was treated as income from the industrial undertaking, and the interest component was not accepted as a ground to reduce the eligible deduction further.

Conclusion: The deduction at 100% on the eligible industrial profit was upheld in favour of the assessee.

Issue (ii): Whether the assessment framed by the Tax Recovery Officer was without jurisdiction.

Analysis: The scheme of sections 2(7A), 120 and 124 of the Income-tax Act, 1961 was applied to hold that an income-tax authority may exercise powers assigned by a valid order of the competent authority. The order authorising the Tax Recovery Officer to act as Assessing Officer was treated as effective, and the officer was regarded as competent to frame the assessment under the statutory delegation framework.

Conclusion: The assessment was held to be within jurisdiction and the assessee's cross-objection failed.

Final Conclusion: The substantive deduction claimed by the assessee was sustained, while the challenge to the assessment jurisdiction was rejected, leaving both the Revenue's appeal and the assessee's cross-objection without relief.

Ratio Decidendi: Where the statute authorises delegation of assessment powers through a valid order under the jurisdiction provisions, an officer so empowered can act as Assessing Officer; and interest not derived from the industrial undertaking does not enlarge the eligible deduction under section 80IB.

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