M/S.PRINCE ALLOYS (P) LTD. vs. THE ASSISTANT COMMISSIONER OF INCOME

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ITA/47/2011HC KeralaKLHC01026395201123 February 2012Bench: 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. The 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. Therefore, 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 and the Supreme Court's decision in Pandian Chemicals Ltd. v. CIT. Consequently, the appeal filed by the assessee was dismissed.

What were the facts?

The assessee, M/s. Prince Alloys (P) Ltd., filed an appeal before the High Court of Kerala against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated January 19, 2011. The appeal concerned the assessment year 2005-06. The dispute revolved around the eligibility of interest income from short-term deposits for deduction under Section 80IB of the Income Tax Act. The assessee had previously received orders from the Additional Commissioner of Income Tax (March 31, 2008) and the Commissioner of Income Tax (Appeals) (January 6, 2009), which are part of the procedural history leading to the ITAT's decision.

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 turning on Section 80IB). Assessee's Contention: The assessee argued that the interest income was eligible for deduction under Section 80IB. (Specific arguments or precedents relied upon by the assessee are not recorded in the judgment). Revenue's Contention: The revenue contended that interest earned on short-term deposits is income from other sources and cannot be treated as business income of the industrial unit for the purpose of granting deduction under Section 80IB. The revenue relied on decisions in ACIT v. South India Produce Company (262 ITR 20) and Pandian Chemicals Ltd. v. CIT (262 ITR 278).

Which sections of the Income-tax Act were involved?

Section 80IB

AI-generated summary — verify with the full judgment below

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. 47 of 2011 ( ) ---------------------- AGAINST ORDER IN ITA.240/2009 DATED 19/01/2011 of I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT(S)/RESPONDENT: ----------------------- M/S.PRINCE ALLOYS (P) LTD., 9/78, 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) BY 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.47/2011 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.47 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

ITA No.47/2011 2 the Supreme Court in Pandian Chemicals Ltd. v. CIT, reported 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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