Nahar Spinning Mills Ltd. vs Commissioner of Income Tax

The appellant in present case has approached this Court by raising the following substantial questions of law:

6(1) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the service charges i.e., dyeing receipts and knitting receipts were liable to be included in the "Total turnover" while working out deduction u/s 80HHC of the Act?

(ii) Whether the decision of the Tribunal holding that the service charges i.e., dyeing charges and knitting receipts received by the assessee-company was liable to be included in the "Total turnover" while working out deduction u/s 80HHC of the Act is contrary to the principles of natural justice and judicial discipline and judicial impropriety?

(iii) Whether on the facts and circumstances of the case, the Tribunal was right in law in taking a view contrary to the view taken in the decision rendered by the same Bench in another group company case M/s. Oswal Woollen Mills Ltd. and the assessees own case and the decisions rendered by Kerala High Court in the case K. Rajinderanathan Nair?

(iv) Whether on the facts and circumstances of the case, the Tribunal was right in law in not allowing deduction u/s 80M of the Act to the assessee-company in respect of income distributed by PNB Mutual Fund which partakes the same character was in their hand and exempt u/s 80M of the Act?

(v) Whether on a correct and proper interpretation of the provisions of Section 80IA of the Act and application thereof to the facts and circumstances of the case, was the Tribunal legally correct in holding that the claim of deduction u/s 80IA in respect of interest income derived from its business, made by the appellant was not sustainable?

(vi) Whether on the facts and in circumstances of the case, the Tribunal has misdirected itself in law and as well as on facts in holding that the appellant was not entitled to deduction u/s 80IA of the Act claimed by the assessee?

(vii) Whether the finding returned and recorded by the Tribunal while holding that appellant was not entitled to deduction u/s 80IA by wrongly applying the earlier decision given in C.O. No. 130/Chd./1993 for assessment year 1990-91 which was in respect of Section 80IA of the Act?

(viii) Whether on the facts and circumstances of the case, the Tribunal has misdirected itself in law and as well as on facts in holding that donation of Rs. 10,000 given by the appellant to the institution recognized by Income Tax Exemption Certificate No. 68 under Rule 6, was not allowable as a deduction u/s 35 of the Act, which pertain to expenditure on Scientific Research?"

As far as question Nos.6 (i) to (iii) are concerned, counsel for the appellant states that for the assessment year 1992-93, the appellant had moved an application u/s 254(2) of the Income Tax Act (hereinafter referred to as the Act) before the Tribunal for rectification of the order and the same has already been accepted. He further states that as per his information, the department has accepted that order and no further appeal has been filed in that case. The counsel for the appellant submits that at this stage, he does not press these questions and he may be given liberty to move an application u/s 254(2) of the Act before the Tribunal. The counsel for the revenue does not have any objection to the submissions made by the counsel for the appellant as regards question Nos. 6(1) to (iii) are concerned.

Accordingly, we permit the appellant to move an application u/s 254(2) of the Act. As regards issue raised in question Nos. 6(1) to (iii) are concerned, if any such application is moved, the same shall be considered by the Tribunal in accordance with law.

As far as question at serial No. 6(iv) is concerned, reliance is placed on Commissioner of Income Tax Vs. Puja Investments Pvt. Ltd.,

Admitted to consider the substantial question of law as proposed in para 6(iv) of memo of appeal.

As far as question Nos. 6(v) to (vii) are concerned regarding the claim for deduction u/s 80IA of the Act are concerned, we are of the view that the Tribunal is right in rejecting the claim of the appellant. In this regard, a bare perusal of the provisions of Section 80IA shows that the income should derived from the industrial activity. Similar view has been expressed by Madras High Court in CIT v. Madras Motors Ltd./M.M. Forgings Ltd. , Madhya Pradesh High Court in Commissioner of Income Tax Vs. Paras Oil Extraction Ltd., , Gauhati High Court in North East Gases Pvt. Ltd. Vs. Commissioner of Income Tax, and Madras High Court in Commissioner of Income Tax Vs. N.S.C. Shoes, Thus, these questions cannot beheld to be substantial questions of law. So, we decline to entertain these questions.

As regards question No. 6(viii) is concerned, the claim of the petitioner-appellant is on account of deduction of a sum of Rs. 10,000 donated to 8th Asian Congress of Pediatrics for organizing a conference as the name itself suggests the conference related to Pediatrics which has no relation with the business of the appellant in any manner. A perusal of Section 35 of the Act shows that the deduction under that section can be allowed in case such Scientific Research is related to the business of assessee. That is not so in the present case. For the reason, we do not find that any illegality has been committed by the Tribunal while rejecting the claim of the appellant, hence reject the appeal on question No. 6(viii).

To sum up it is ordered that the appeal of the assessee is admitted only qua question No. 6(iv) referred to above.