SPRINGER NATURE TECHNOLOGY AND PUBLISHING SOLUTIONS PRIVATE LIMITED,PUNE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1), PUNE

ITA 418/PUN/2023Status: DisposedITAT Pune10 February 2025AY 2017-1833 pages
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What did the Tribunal hold?

The Tribunal held that the interest income earned by the assessee from fixed deposits with RBL Bank is not eligible for exemption under section 10AA of the Income Tax Act, 1961. The Tribunal reasoned that the source of the impugned interest is the fixed deposits themselves, and these deposits do not have any direct nexus with the export activity of the SEZ unit. The Tribunal followed the decision of the Hon'ble Supreme Court in India Comnet International Vs. ITO, which referred to the decision of the Hon'ble Madras High Court in CIT Vs. Menon Impex (P.) Ltd., establishing that a direct nexus between the interest and the industrial undertaking is required for exemption under section 10A/10AA. The Tribunal also applied a stricter interpretation as explained by the Hon'ble Supreme Court in Wipro Ltd. The Tribunal distinguished the case laws relied upon by the assessee, including CIT Vs. Hewlett Packard Global Soft Ltd. and PCIT Vs. NTT Data Global Delivery Services Ltd., finding them distinguishable on facts and law, particularly noting that the Supreme Court decision in India Comnet International was not brought to the notice of the Delhi High Court in the latter case. Grounds 1, 2, and 3 raised by the assessee were dismissed. Regarding Ground No. 4 concerning double disallowance, the Assessing Officer was directed to verify the claim and allow relief if found correct, thus allowing Ground No. 4 for statistical purposes.

What were the facts?

The assessee, Springer Nature Technology and Publishing Solutions Pvt. Ltd., filed an appeal against the order of the Commissioner of Income Tax (Appeals) [NFAC] for Assessment Year 2017-18. The appeal stemmed from an assessment order passed under section 143(3) of the Income Tax Act, 1961. The core dispute revolves around the disallowance of a claim for deduction under section 10AA of the Act on interest income of INR 1,79,01,588 earned on short-term deposits. The assessee claimed this interest as 'profits of business of the undertaking' eligible for deduction, while the revenue authorities classified it under 'Income from Other Sources' and disallowed the deduction. The assessee also raised a ground regarding double taxation of this interest income.

What were the issues?

1. Whether the interest income earned on short-term deposits, amounting to INR 1,79,01,588, can be classified as 'profits of business of the undertaking' for the purpose of computing deduction under section 10AA of the Income Tax Act, 1961, as contended by the assessee, or if it is taxable under the head 'Income from Other Sources' as held by the revenue. Assessee's arguments: The interest income earned on short-term deposits made from surplus export proceeds is eligible for deduction under section 10AA as it is earned in the ordinary course of business. The deposits are temporary in nature, indicating an intention to park surplus funds rather than make long-term investments. Reliance is placed on the decision of the Hon'ble Karnataka High Court in CIT vs. Hewlett Packard Global Soft Ltd. The assessee also argues that the Pune Tribunal's reliance on Menon Impex (P) Ltd. was factually incorrect as it mischaracterized it as a jurisdictional High Court decision and distinguished Hewlett Packard Global Soft Ltd. incorrectly. Revenue's arguments: The interest income from fixed deposits does not have a direct nexus with the industrial undertaking's business activities and is therefore not eligible for deduction under section 10AA. Reliance is placed on the Supreme Court's decision in India Comnet International Vs. ITO, which upheld the principle that there must be a direct nexus between the interest and the industrial undertaking, as laid down by the Madras High Court in CIT Vs. Menon Impex (P.) Ltd.

Which sections of the Income-tax Act were involved?

Section 10AA,Section 143(3),Section 250

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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE

Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE

For Appellant: Shri Vishal Kalra – AR
For Respondent: Shri Keyur Patel, IRS –CIT(DR)
Hearing: 19/12/2024

PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the assessee against the order of ld.Commissioner of Income Tax(Appeals) [NFAC] for Assessment Year 2017-18 dated 14.02.2023 passed u/sec.250 of the Income Tax Act, 1961, emanating from assessment order under section 143(3) of the Act, dated 05.12.2019 for A.Y.2017-

18.

The Assessee has raised the following grounds of appeal : “The Appellant objects to the order dated February 14, 2023 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, New Delhi

The order continues below.

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