M/S.PRINCE ROLLING (P) LTD. vs. THE ASSISTANT COMMR.OF INCOME TAX

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ITA/46/2011HC KeralaKLHC01026394201123 February 2012Author: HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was justified in its finding that the assessee is not entitled to deduction under Section 80IB on interest income received on short-term deposits. The Court reasoned that deduction under Section 80IB is admissible on business income earned by an industrial unit in a backward area. Interest earned on short-term deposits is classified as income from other sources, not as business income of the industry. Consequently, it cannot be treated as business income for the purpose of granting deduction under Section 80IB. The Court followed its own decision in ACIT v. South India Produce Company (262 ITR 20) and the Supreme Court's decision in Pandian Chemicals Ltd. v. CIT (262 ITR 278). The appeal filed by the assessee was dismissed.

What were the facts?

The assessee, M/s. Prince Rollings (P) Ltd., filed an appeal before the High Court of Kerala challenging an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated January 19, 2011. This order was passed for the assessment year 2005-06. The appeal concerns the denial of deduction under Section 80IB of the Income Tax Act on interest income earned from short-term deposits. The assessee had previously appealed to the Commissioner of Income Tax (Appeals), Kochi, whose order dated January 6, 2009, was also in favor of the revenue. Prior to that, the Additional Commissioner of Income Tax, Palakkad, had issued an order dated March 31, 2008, which initiated the dispute. The revenue is represented by the Assistant Commissioner of Income Tax, Circle-1, Palakkad.

What were the issues?

1. Whether the Tribunal was justified in holding that the assessee is not entitled to deduction under Section 80IB on interest income received on short-term deposits (a question of law). Assessee's Contention: The assessee contended that the interest income earned on short-term deposits should be eligible for deduction under Section 80IB as business income. Revenue's Contention: The revenue argued that interest earned on short-term deposits is income from other sources and not business income of the industrial unit, and therefore, it cannot be treated as business income for the purpose of granting deduction under Section 80IB. The revenue relied on decisions of the High Court in ACIT v. South India Produce Company and the Supreme Court in Pandian Chemicals Ltd. v. CIT.

Which sections of the Income-tax Act were involved?

Section 80IB

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HON'BLE MR. JUSTICE BABU MATHEW P.JOSEPH THURSDAY, THE 23RD DAY OF FEBRUARY 2012/4TH PHALGUNA 1933 ITA.No. 46 of 2011 ( ) ---------------------- AGAINST ORDER IN ITA.239/2009 DATED 19/01/2011 of I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT(S)/RESPONDENT: ----------------------- M/S.PRINCE ROLLINGS (P) LTD., ANAPPURAMKADU, KINASSERY P.O., PALAKKAD. BY ADVS.SRI.ANIL D. NAIR SRI.J.R.PREM NAVAZ SMT.NIVEDITA A.KAMATH RESPONDENT(S)/APPELLANT IN ITA: ------------------------------- THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, PALAKKAD, PIN - 678 001. BY SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 23-02-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA NO.46/2011 APPENDIX APPELLANT'S EXHIBITS ANNEXURE-A : COPY OF ORDER OF THE ADDL.COMMISSIONER OF INCOME TAX, PALAKKAD DATED 31/03/2008 FOR THE YEAR 2005-06 ISSUED TO THE APPELLANT. ANNEXURE-B : COPY OF ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), KOCHI FOR THE YEAR 2005-06 DATED 06/01/2009 ISSUED TO THE APPELLANT. ANNEXURE-C : COPY OF ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 19/01/2011 ISSUED TO THE APPELLANT. // TRUE COPY // PA TO JUDGE. jg C.N.RAMACHANDRAN NAIR & BABU MATHEW P. JOSEPH, JJ. .................................................................... I.T.A.No.46 of 2011 .................................................................... Dated this the 23rd day of February, 2012.

J U D G M E N T Ramachandran Nair, J. The only question raised is whether the Tribunal was justified in holding that the assessee is not entitled to deduction under Section 80IB on interest income received on short term deposits.

2.

We have heard Adv. Shri.Anil D. Nair appearing for the assessee and learned Standing Counsel for the respondent. Deduction on income admissible under Section 80IB is on the business income earned by the industrial unit in the backward area. Interest earned on short term deposit is income from other sources, and so much so, it cannot be treated as a “business income” of the industry for the purpose of granting deduction is the finding in large number of decisions including the decision of this Court in ACIT v. South India Produce Company, reported in 262 ITR 20 and that of W.A.No.46/2011 2 the Supreme Court in Pandian Chemicals Ltd. v. CIT, report e in 262 ITR 278. Following these decisions, we dismiss the I.T.Appeal filed by the assessee. (C.N.RAMACHANDRAN NAIR, JUDGE) (BABU MATHEW P. JOSEPH, JUDGE) jg

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