2019 (4) TMI 292 - HC - Income Tax

Court upholds reassessment, remits deduction issue for reconsideration.

The High Court dismissed the Assessee's appeals challenging the validity of reassessment proceedings under Section 147 of the Income Tax Act. However, the ... Reassessment u/s 147 - No challenge of reassessment in first round - deduction u/s 80 HHC on the interest earned on the bank deposits - HELD THAT:- Assessee having not raised the said question in clear terms before the authorities below cannot be permitted to raise the said question now as an after-thought. The said contention of the Assessee is liable to be rejected and the same is accordingly rejected. Thus, the question framed for consideration on 27.10.2009 is answered as against the Assessee and in favour of the Revenue. Merits of claim u/s. 80HHC since interest on Bank Deposits earned in the ordinary course of business, is taxable as Business income and is excluded from Section 56 of the Act, in 'Income from Other Sources' we are of the opinion that the Tribunal should consider the issue again in view of the later decisions of this Court viz., M/s.Ashok Leyland Ltd Vs. The Deputy Commissioner of Income Tax [2018 (4) TMI 715 - MADRAS HIGH COURT]. Therefore, we remit the matter back to the learned Tribunal to decide the said issue afresh on merits in view of the latest decisions of this Court . Issues:1. Validity of reassessment proceedings under Section 147 of the Income Tax Act.2. Availability of deduction under Section 80 HHC on interest earned by the Assessee on bank deposits.Validity of Reassessment Proceedings under Section 147:The Assessee filed appeals against the order of the Income Tax Appellate Tribunal, which dismissed the appeals for Assessment Years 1995-96, 1996-97, 1997-98. The Tribunal held that the Assessee could not challenge the validity of jurisdiction assumed by the Assessing Officer under Section 147 during the proceedings. The Tribunal relied on a precedent set by the Madras High Court in a previous case. The Assessee argued that the issue of validity of reassessment proceedings was not decided by the CIT (Appeals) after remand by the Tribunal. However, the Court found that the Assessee did not clearly raise the question of jurisdiction for reassessment under Section 147 before the authorities below. Therefore, the Court rejected the Assessee's contention and ruled in favor of the Revenue on this issue.Availability of Deduction under Section 80 HHC:Regarding the availability of deduction under Section 80 HHC on interest earned by the Assessee on bank deposits, the Tribunal decided against the Assessee based on a precedent set by the High Court. The Tribunal held that income earned from bank deposits cannot be considered as income from export, as there is no nexus between the interest income and export earnings. The Assessee argued that interest on bank deposits, if earned during the course of business, should be considered for the benefit under Section 80 HHC. The Court noted that in a later decision, it was held that interest on bank deposits earned in the ordinary course of business is taxable as business income and excluded from 'Income from Other Sources.' Therefore, the Court remitted the matter back to the Tribunal to reconsider this issue in light of the latest decisions of the Court.In conclusion, the High Court dismissed the appeals filed by the Assessee on the issue of validity of reassessment proceedings under Section 147 but remitted the matter back to the Tribunal for reconsideration on the availability of deduction under Section 80 HHC on interest earned by the Assessee on bank deposits.