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IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 9TH DAY OF JUNE, 2015 PRESENT THE HON'BLE MR. JUSTICE MOHAN M SHANTANAGOUDAR AND THE HON’BLE MR. JUSTICE ARAVIND KUMAR ITA NO.432/2009 BETWEEN:
THE COMMISSINER OF INCOME-TAX
C.R.BUILDING, QUEENS ROAD,
BENGALURU.
THE DEPUTY COMMISSIONER OF
INCOME-TAX, CENTRAL CIRCLE-I(1),
C.R.BUILDING, QUEENS ROAD,
BENGALURU. …APPELLANTS
(BY SRI.K.V.ARAVIND, STANDING COUNSEL)
AND:
M/S.CRANE SOFTWARE INTERNAITONAL LTD. SHANKARANARAYANA BUILDINGS, BLOCK-I, 4TH FLOOR, 25, M.F.ROAD, BENGALURU-560 001 …RESPONDENT
(BY SRI.A.SHANKAR & M.LAVA, ADVOCATES)
THIS APPEAL IS FILED UNDER SECTION 26OA OF THE INCOME TAX ACT, 1961 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE IN ITA
NO.1406/BANG/2008 DATED 25.03.2009 CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE – I, BANGALORE.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, MOHAN M SHANTANAGOUDAR J, DELIVERED THE FOLLOWING :
JUDGMENT
The second Substantial question of law raised in this appeal is covered against the revenue by the Apex Court in the Case of ACG ASSOCIATED CAPSULES (P) LTD. vs. COMMISSIONER OF INCOME TAX reported in 343 ITR 89. Hence, the second substantial question of law is answered accordingly against the revenue.
The first substantial question of law reads thus: 1. Whether the Appellate Authorities were correct in holding that interest income earned from fixed deposits which was to fall within the head ‘Income from Business’ or ‘Income from Other Sources’ and consequently the same would affect the computation of deduction u/s 80HHE of the Act, was held to be a debatable issue, which cannot be rectified u/s 154 of the Act?
This appeal is filed by the revenue and the matter is for the Assessment Year 2003-04. The assessee
filed return of income on 28.11.2003 declaring the income of Rs.6,74,53,080/- for the Assessment Year 2003-04 and same was processed under Section 143(1) of the Income Tax Act, 1961 on 30.08.2005. Notice was issued under Section 143(2) and same was replied. Subsequently, assessment order came to be passed under Section 143(3) of the Income Tax Act, 1961 on 16.12.2005.
According to the revenue, on verification of records, it was found that the assessee - company was in receipt of interest on Fixed Deposits at Rs.2,28,80,959/- and TDS was also deducted. Hence, the revenue was of the impression that this being the income from other sources, needs to be reduced from the profit of business to arrive at the deduction under Section 80HHE. Thus, revenue has concluded that same has resulted in excess allowance of 80HHE. Accordingly, proceedings under Section 154 of Income Tax Act, 1961 were initiated and assessee was called upon to furnish its objection.
On re-appreciating the matter, order came to be passed under Section 154 of the Income Tax Act, 1961 as per Annexure-C dated 27.03.2007, whereunder it came to be held that assessee is not entitled to deductions under Section 80HHE of the Act. Appellate Commissioner set aside the order in Appeal No.ITA.No.17/DCIT.Central Circle.1(1)/BLR/CIT(A)-VI/2007-08 vide order dated 19.08.2008 by concluding that, from the records it is found that the Fixed Deposits from which the interest had been earned, has been given as security for Term Loans and Overdrafts in appellant’s business and payment of interest on such Overdrafts and Term Loans far exceeds the receipt of interest received on Fixed Deposits. Appellate Commissioner having concluded that the issue involved in the case was contentious one, annulled the order passed by the Assessing Authority under Section 154 of the Income Tax Act, 1961.
Said order of Appellate Commissioner is confirmed by the Tribunal.
We do not find any ground to interfere in the impugned order, inasmuch as, the question as to whether the interest received on Fixed Deposits kept apart for business purposes falls within the business income or income from other sources is debatable point. Such debatable point is beyond the scope of Section 154 of the Income Tax Act, 1961. At an earlier point of time, the Assessing Officer had taken one particular view, since two views were possible. Hence, this is not the case wherein the Authority would have exercised power under Section 154 of the Income Tax Act, 1961. Hence, appeal stands dismissed. Accordingly, substantial question of law is answered against the revenue.
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JUDGE
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JUDGE DR