Madras H.C : The order under s. 154 was wrong as the issue was a debatable one, when the issue has been clearly settled by orders of the High Court and Supreme Court

High Court Of Madras

CIT vs. Adyar Gate Hotel Ltd.

Section 80HHD, 260A

Asst. Year 1996-97 & 1997-98

P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.

Tax Case (Appeal) Nos. 768 & 769 of 2007

21st June, 2007

Counsel Appeared :

J. Narayanasamy, for the Appellant

JUDGMENT

P.D. Dinakaran, J. :

The above tax case appeals are directed against the order of the Tribunal in ITA Nos. 1520 and 1521/Mad/2002, dt. 31st May, 2006, for the asst. yrs. 1996-97 and 1997-98, respectively, raising the following substantial question of law.

“Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the order under s. 154 was wrong as the issue was a debatable one, when the issue has been clearly settled by orders of the High Court and Supreme Court ?”

The brief facts that led to the filing of the above appeals are as under. The assessee is engaged in the business of running hotels. For the asst. yrs. 1996-97 and 199798, the assessee filed the returns claiming relief under s. 80HHD of the Act and the same was allowed by the AO. Finding that the deduction under s. 80HHD was computed including the interest earned on short-term deposits, the AO passed an order of rectification that the interest received is taxable under the head “Income from other sources”. Hence, the assessee filed appeals before the CIT(A). The CIT(A) dismissed the appeals on the ground that the AO had rightly rectified the assessment. On further appeals preferred by the assessee before the Tribunal, the Tribunal, holding that the AO has exceeded in his jurisdiction while acting under s. 154 of the Act, as the issue was a debatable one, allowed the appeals. Hence, the present appeals. In CIT vs. Sharp Industries (2006) 282 ITR 336 (Mad), where the claim of the assessee therein with regard to deduction under ss. 80HHC and 80-I of the Act was disallowed under s. 154 of the Act, this Court has held that the claim of the assessee could not be disallowed in a proceeding under s. 154 of the Act, especially when the interest income was included in the profit of the business. Applying the ratio laid down in the decision cited supra, we do not find any substantial question of law arises for our consideration. Accordingly, these appeals are dismissed. Consequently, Misc. Petn. No. 1 of 2007 is also dismissed.

[Citation : 294 ITR 155]

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