High Court upholds decision on interest deduction under sec. 80IB of Income Tax Act

The High Court dismissed the appeal, upholding the decision on the deduction of interest on late payment received from debtors under sec. 80IB of the Income Tax Act. The Court ruled against the Revenue on this issue, citing a previous judgment and principles established therein. Additionally, the Court refrained from deciding on the deduction of income from the sale of wastage/scrap due to the tax-effect falling below the specified threshold as per instructions issued by the Central Board of Direct Taxes.

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Issues:
1. Deduction of interest on late payment received from debtors under sec. 80IB of the Income Tax Act.
2. Deduction of income from sale of wastage/scrap.

Analysis:
1. The first issue in this appeal pertains to whether the Tribunal erred in allowing the deduction of Rs.20,09,915/- under sec. 80IB of the Income Tax Act for interest on late payment received from debtors. The Court referred to a previous judgment in the case of NIRMA INDUSTRIES LTD vs. DY. C.I.T, where it was held that interest paid by debtors for late payment of sale proceeds should be considered as eligible income for computing relief under section 80-I of the Act. The Court noted that the Tribunal correctly followed the principles established in the Division Bench judgment and ruled against the Revenue on this issue.

2. The second issue involves the deduction of Rs. 4,64,139/- as income from the sale of wastage/scrap. However, due to the tax-effect being less than Rs.2 lakh, the Court cited instructions No. 5 of 2008 issued by the Central Board of Direct Taxes, which states that appeals with tax-effect below the threshold are not maintainable. Consequently, the Court dismissed the present appeal, affirming the decision against the Revenue on the first issue and refraining from deciding the second issue on its merits in line with the aforementioned instructions.

In conclusion, the High Court dismissed the appeal, upholding the decision on the first issue regarding the deduction of interest on late payment received from debtors under sec. 80IB of the Income Tax Act, while refraining from deciding on the second issue due to the tax-effect falling below the specified threshold as per the instructions issued by the Central Board of Direct Taxes.

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