Rickman Aluminium Pvt. Ltd. vs Income Tax Officer

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K.S. Jhaveri, J.—By way of both these appeals, the appellant of Tax Appeal No. 358/2006 has challenged the judgment and order dated 28.6.2005 passed in ITA No. 2982/Ahd/2003 for AY 1997-98, whereas, the appellant of Tax Appeal No. 359/2006 has challenged the judgment and order dated 28.6.2005 passed in ITA No. 2983/Ahd/2003 for AY 1998-99.

While admitting these appeals on 4.9.2006, in both these appeals, the following substantial question of law has been framed by this Court:

"Whether on facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that while computing deduction u/s. 80IA of the Income Tax Act, 1961, interest received from trade debtors towards late payment of sales consideration is required to be excluded from the profits of the industrial undertaking as the same cannot be said to have been derived from the business of the industrial undertaking?"

Facts of Tax Appeal No. 358/2006:

The return of income was filed on 30.11.1997 declaring total income at Rs. NIL. The same was processed u/s. 143(1)(a) on 5.3.1998 at the total income of Rs. 14,96,270/-. An order u/s. 154 of the Act has been passed and total income has been revised at Rs. NIL. Later on, verification of case record reveals that there was an escapement of income. Therefore, assessment for AY 1997-98 was reopened. Notice under section 148 of the Act was issued on 5.4.1999. The same was served upon the assessee Company on 9.4.1999. In pursuance to notice issued u/s. 148 of the Act, the assessee company has filed return of income on 7.5.1999 declaring total income at Rs. NIL. Further notice u/s. 143(2) of the Act was issued on 25.1.2002. Details were called for vide notice dated 13.2.2002 issued in terms of provisions of section 143(2)/ 142(1) of the Act. After considering the material on record, the assessment order came to be passed.

Facts of Tax Appeal No. 359/2006

The return of income was filed on 30.11.1998 showing total income of Rs. NIL. The return was processed u/s. 143(1)(a) on 15.2.1999 at NIL income. The notice u/s. 143(2) was issued on 17.6.1999 picking up the case in scrutiny. A notice under sec. 142(1) was issued on 31.8.99 calling for specific details. Thereafter, after considering the material on record, the assessment order came to be passed. Against the said order, an appeal before the CIT(A) has been preferred which came to be partly allowed except in AY 1998-99 he appeal came to be dismissed. Against which, an appeal before the Income-tax Appellate Tribunal came to be preferred by the assessee which came to be dismissed. Hence, both these appeals before this Court by the assessee.

Heard the learned advocates appearing for the parties and considered the submissions. The learned advocate appearing for the appellant has contended that the issue has come up for consideration before this Court in the case of Nirma Industries Limited Vs. Deputy Commissioner of Income Tax, , which is held in favour of assessee. In the said case, this Court has held as under:

"Held, that when one reads the opening portion of section 80-I of the Act it is clear that the words used are "gross total income of an assessee includes any profit and gains derived from an industrial undertaking." Once this is the position then, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the prescribed percentage is to be allowed. The same item of receipt could not be treated differently, once while computing the gross total income and secondly, at the time of computing deduction under section 80-I. When the assessee enters into a contract for sale of its product it could either stipulate (a) that interest at the specified rate would be charged on the unpaid sale price and added to the outstanding till the point of time of realisation, or (b) that in case of delay the payment for sale of products worth Rs. 100 to carry the sale price of Rs. 102 for the first month''s delay and so on. In sum and substance these are only two modes of realising sale consideration, the object being to realise the sale proceeds at the earliest and without delay. The purchaser pays a higher sale price if it delays payment of the sale proceeds. In other words, this is a converse situation to offering a cash discount. Thus, in principle, in reality, the transaction remains the same and there is no distinction as to the source. While computing the special deduction under section 80-I, interest received from trade debtors towards late payment of sale consideration is to be included in the profits of the industrial undertaking."

The learned advocate appearing for the Revenue is not in a position to dispute the same. In view of the fact that the issue involved in these appeals is governed by the decision of this Court, we are not giving any elaborate reasonings. Hence, the question framed in both these appeals are answered in favour of the assessee and against the Revenue. Both these Tax Appeals are allowed accordingly.