C I T vs. M/S NAHAR SPINNING MILLS

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 15.5.2006 (Annexure A-4) passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in M.A. No. 341/Chandi/2005 arising out of ITA No. 698/Chandi/2000 for the assessment year 1997-98. 2. The appeal was admitted vide order dated May 30, 2007 for determination of the following substantial question of law:- “Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law in directing the AO to treat the receipts of Rs.7,99,88,954/- as per Singh Gurbachan 2014.05.07 14:29 I attest to the accuracy and integrity of this document High Court Chandigarh -2- explanation (baa) of Section 80HHC, for computing deduction u/s 80HHC, inspite of the fact that assessee himself has declared it as 'Income from Other Sources', which has been assessed by the AO under that head.”

The assessee derives income from manufacture and export of cotton yarn woollen hosiery garments and also trades in cotton yarn. The assessee filed its return of income for the assessment year 1997-98 on 1.12.1997 declaring income at ` 14,79,75,930/-. The Assessing Officer vide order dated 18.1.2000 (Annexure A-1) framed the assessment at ` 18,91,45,241/-. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) who vide order dated 9.6.2000 (Annexure A-2) partly allowed the appeal. Not feeling satisfied, the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 7.10.2005 (Annexure A-3) partly allowed the appeal. However, the claim of the assessee that interest income of ` 7,99,88,254/- be assessed as business income and computation of deduction under Section 80HHC of the Act be made accordingly was rejected. Against the said order dated 7.10.2005 (Annexure A-3), the assessee filed an application before the Tribunal who vide order dated 15.5.2006 (Annexure A-4) allowed the said application holding that the Assessing Officer should exclude 90% of the gross interest from the profits of the business for computation of deduction under Section 80HHC of the Act. Hence, the present appeal by the revenue.

Learned counsel for the parties are agreed that subsequent to the decision by the Tribunal for the assessment year in question, i.e. 1997-98, similar matter came up for consideration before the Tribunal in Singh Gurbachan 2014.05.07 14:29 I attest to the accuracy and integrity of this document High Court Chandigarh -3- the case of the assessee for the assessment year 2003-04 and in the case of sister concern M/s Nahar Exports Ltd., Ludhiana for the assessment year 2004-05, where the Tribunal following the judgment of the Hon'ble Apex Court in Hero Exports v. Commissioner of Income Tax (2007) 295 ITR 454 had adjudicated identical issue vide orders dated January 28, 2008, December 31, 2007, respectively. It was not disputed that the orders of the Tribunal referred to in para 4 above have become final as no further appeals have been carried against the same. It was, thus, prayed that order of the Tribunal dated 15.5.2006 be set aside and the matter be remitted to the Tribunal to pass fresh orders in accordance with law. Ordered accordingly. (AJAY KUMAR MITTAL) JUDGE March 6, 2014