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of <h1>Tribunal decision upheld on exclusion of interest from business profits for deduction</h1> <h3>Commissioner of Income Tax Madurai. Versus Madura Coats Ltd.</h3> Commissioner of Income Tax Madurai. Versus Madura Coats Ltd. - [2020] 422 ITR 390 (Mad) Issues Involved:1. Whether the assessment order was erroneous or prejudicial to the revenue due to the exclusion of 90% of the interest from business profits.2. Whether the assessment order was erroneous as it followed a judicial pronouncement without the assessing officer applying his mind to the nature of the interest received.Issue-wise Detailed Analysis:1. Erroneous or Prejudicial Assessment Order:The High Court examined whether the assessment order was erroneous or prejudicial to the revenue due to the exclusion of 90% of the interest from business profits. The Appellate Tribunal had allowed the respondent-assessee's appeals, noting that the assessment order was not erroneous or prejudicial since it followed the decision in the case of Chinnapandi, which required 90% of the interest to be excluded from business profits for the purpose of deduction under Section 80-HHC. The Tribunal also noted that on the date of the assessment order, the decision in Chinnapandi was binding, and the assessing officer had diligently followed it. The High Court upheld this view, stating that the assessment order could not be deemed erroneous or prejudicial to the revenue as it adhered to a legally permissible course.2. Application of Mind by Assessing Officer:The High Court addressed the issue of whether the assessment order was erroneous due to the assessing officer not applying his mind to the nature of the interest received. The Tribunal found that the assessing officer had followed the jurisdictional High Court's decision in Chinnapandi, which was the prevailing law at the time. The Tribunal emphasized that the assessing officer had not committed an error by adhering to this decision. The High Court supported this conclusion, referencing the Supreme Court's ruling in Malabar Industries Co. Ltd., which stated that an order is not erroneous if the assessing officer adopts one of the permissible legal courses. The High Court concluded that the assessment order was neither erroneous nor prejudicial to the revenue, as the assessing officer had followed a judicial pronouncement.Conclusion:The High Court dismissed the appeals filed by the Commissioner of Income Tax, affirming the Tribunal's decision that the assessment orders were not erroneous or prejudicial to the revenue. The Court emphasized that the assessing officer had followed the binding judicial precedent at the time, and the orders were therefore legally sound. The questions of law raised by the appellant were answered against the Commissioner of Income Tax, and the appeals were dismissed with no cost.
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