High Court Of Madras
CIT vs. Abdul Rahman Industries
Section 80HHC
Asst. Year 1993-94
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) No. 39 of 2004
12th December, 2006
Counsel Appeared :
T. Ravikumar, for the Appellant : J. Balachander, for the Respondent
JUDGMENT
P.P.S. Janarthana Raja, J. :
This appeal is filed by the Revenue under s. 260A of the IT Act, 1961 in ITA No. 803/Mds/1998 passed by the Tribunal, Chennai, ‘C’ Bench. On 3rd Feb., 2004, this Court admitted this appeal and formulated the following substantial question of law : “Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessee was entitled to deduction under s. 80HHC in respect of Rs. 9,59,197 being unclaimed balances written back in the P&L a/c relating to the asst. yr. 1993-94 ?”
2. The brief facts leading to the above questions of law are as under : The assessee is a firm engaged in the business of manufacture of shoes and tannery and also export sales of shoe uppers. The relevant assessment year is 1993-94 and the corresponding accounting year ended on 31st March, 1993. The assessee filed return of income on 15th Dec., 1994 admitting the total income as nil. The Return was processed under s. 143(1)(a) of the IT Act (“Act” in short). The assessee did not furnish Form 10CCAC along with the return of income and hence the claim of the assessee firm for deduction under s. 80HHC of the Act, was rejected. Later the total income as per assessment under s. 143(1)(a) of the Act was determined at Rs. 10,89,460. Subsequently, the matter was taken up for scrutiny with the prior approval of the Dy. CIT. Notice under s. 143(2) of the Act was issued to the assessee and the assessment was completed under s. 143(3) of the Act, after making certain additions. While completing the assessment, the AO treated the sum of Rs. 9,59,197 as income under the head “other sources” and also computed the income as under : Total Income 9,59,197″ Aggrieved by the order, the assessee filed an appeal to the CIT(A). The CIT(A) dismissed the appeal and confirmed the order of the AO. Aggrieved by the order, the assessee filed an appeal to the Income-tax Appellate Tribunal (“Tribunal” in short). The Tribunal allowed the appeal and held that the income should be treated under the head “business” and on this basis, the assessee is entitled to the benefit under s. 80HHC of the Act.
Learned standing counsel appearing for the Revenue submitted that, since the assessee did not produce any details regarding the nature of “Sundry credit balances written back”, the AO is right in treating the said amount as income under the head “Other Sources” and consequently, the assessee is also not entitled to relief under s. 80HHC of the Act.
Learned counsel appearing for the assessee submitted that the authorities below failed to understand the fact that the sundry credit balances were only out of the business income and expenditure and hence the same should be assessed only under the head “business”. Heard the counsel. In the present case, the assessee rightly offered the sum of Rs. 9,59,197 as income for assessment which is not in dispute. In the case of CIT vs. T.V. Sundaram Iyengar and Sons Ltd. (1996) 136 CTR (SC) 444 : (1996) 222 ITR 344 (SC), the Supreme Court considered the similar issue and taken a view that, when the assessee himself transferred the amount from the credit balances standing in favour of the customers of the company to the P&L a/c of the company, the same is taxable as income of the assessee. There is no dispute regarding the taxability of the receipt. The only dispute is, how the said amount should be assessed—whether the said amount should be assessed under the head “Income from business” or under the head “Income from other sources”. There were credits appearing in the books on the basis of purchase of items from various suppliers and these suppliers were not paid. These unclaimed credit balances were brought to the P&L a/c and the same had emanated from trading transaction only. There is a finding given by the Tribunal that the said transaction is very much connected or closely linked with the assessee’s business activities. The receipt had arisen only out of ordinary trading transaction and hence it was rightly assessed under the head “business”. Therefore, we are of the view that the reasons given by the Tribunal are based on valid materials and evidence and hence we do not find any error or legal infirmity in the order of the Tribunal so as to warrant interference. Under the circumstances, we are of the view that the Tribunal is right in holding that the income should be assessed under the head “business” and also on this basis, the assessee is entitled to the benefit under s. 80HHC of the Act. Hence, we answer the question of law in favour of the assessee and against the Revenue and accordingly, the tax case is dismissed. No costs.
[Citation : 293 ITR 475]
