Appeal Dismissed: Section 80 HHC Deduction Denied. Direct Nexus Rule Upheld. No Costs.

Tilak Exports and Imports Pvt. Ltd. Versus Assistant Commissioner of income Tax

Tilak Exports and Imports Pvt. Ltd. Versus Assistant Commissioner of income Tax - TMI Issues involved:
1. Deduction under Section 80 HHC of Income Tax Act 1961 disallowed by the Assessing Officer.
2. Dispute regarding the nature of receipt of interest income.
3. Interpretation of Section 80HH of the Income-tax Act, 1961 in relation to interest derived by the industrial undertaking.
4. Applicability of Section 80 HHC in cases where interest income is assessed under the head 'income from profit and gains of the business.'

Analysis:
1. The appellant filed its original return of income tax claiming deduction under Section 80 HHC for the financial year 1996-97. The Assessing Officer disallowed the claim of excess deduction with reference to the interest income. The appellate authority initially allowed the appeal, but the Tribunal remanded the matter back to the assessing officer to consider the nature of the interest income.
2. The assessing officer disallowed the claim after treating the interest income as income from other sources. The appellate authority partly allowed the appeal, leading to both assessee and revenue filing a second appeal before ITAT. The ITAT dismissed the appeal by the assessee and allowed the appeal by the revenue, holding that the profits of the business for deduction under Section 80HHC would automatically reduce by the amount of interest if assessed under other sources.
3. The Tribunal's decision was based on the judgment of the Hon'ble Supreme Court in Pandian Chemicals Vs. CIT, where it was held that interest derived by an industrial undertaking on deposits made with the Electricity Board could not be considered profits or gains derived by the undertaking for the purpose of special deduction under Section 80HH. The Court emphasized the direct or immediate nexus requirement for income to be considered derived from the industrial undertaking.
4. The Court further cited precedents like CIT vs. Raja Bahadur Kamakhya Narayan Sing and Mrs. Bacha F. Guzdar vs. CIT to support the interpretation of the law. It was emphasized that rules of interpretation would apply only in case of doubt, and unequivocal language leaves no room for liberal interpretation. The Court dismissed the appeal, stating that no substantial question of law arises due to the clear application of the Supreme Court's judgment.

Conclusion:
The High Court dismissed the appeal based on the clear interpretation of the law and the direct nexus requirement for income to be considered derived from the industrial undertaking for the purpose of special deductions under the Income Tax Act. The decision was in line with the Supreme Court's judgment and established legal principles, leading to the rejection of the appeal without any costs awarded.