The Commissioner of Income Tax, Cochin vs M/s. Harrisons Malayalam Ltd., Wellington Island, Cochin - 3

K. Vinod Chandran, J

The above appeals filed by the Revenue are with respect to the assessment years 1989-90 and 1988-89. For both the years, the assessee, engaged in the business of plantation, claimed deduction u/s 32AB of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The amounts claimed as deduction included interest income under various heads, being from investments, income tax refund, etc., replanting subsidy, sale of old trees, and so and so forth. The assessing officer disallowed the same, holding that these incomes were from other sources and that it could not be included under the head "profits and gains of business or profession", as understood u/s 32AB of the Act. In the year 1989-90 (I.T.A.No.129 of 2001) both the appellate authorities held against the Revenue and directed the deduction to be granted to the petitioner. In the assessment year 1988-89 (I.T.A.No.92 of 2002) while the first appellate authority rejected the claim; the Tribunal reversed it, directing the assessing officer to allow the claim. In the impugned orders to arrive at the said finding, different benches of the Tribunal had placed reliance on the decision of the Tribunal in Kil Kothagiri Tea and coffee Estate Company Ltd. as also the decision of this Court in the case of Commissioner of Income Tax Vs. Appollo Tyres Ltd., . Though a number of questions are framed as questions of law in the above appeals, we are of the opinion that the question of law arising from the order of the Tribunal is the following:

Whether on the facts and in the circumstances of the case income from other sources, like interest income from investments, re-planting subsidy, sale of old and unyielding trees, etc. could be considered to be "profits of eligible business or profession" entitled to deduction from the total income chargeable to tax under the head "profits and gains of business or profession"; when such income of an assessee is chargeable to tax and can such profits held to be computed in accordance with the requirements of Schedule II of the Companies Act?

A Full Bench of this Court had considered this issue in the decision reported in Parry Agro Industries Ltd. Vs. Commissioner of Income Tax, . Identical questions arose in the said case on a reference made by a Division Bench doubting the correctness of another Bench decision in Commissioner of Income Tax Vs. Kil Kothagiri Tea and Coffee Estate Co. Ltd., . Kil Kothagiri decision (supra) had upheld the decision of the Tribunal, which is referred to in the impugned Annexure-C orders in the present appeals. The Full Bench overruled the Division Bench decision of this Court in Kil Kothagiri case (supra) and held that the rent income, interest income and sundry receipts income are not entitled for deduction as "profits of eligible business income" for computing the income u/s 32AB of the Act. Specific reference was also made to the decision of the Hon''ble Supreme Court in Apollo Tyres Ltd. Vs. Commissioner of Income Tax, Kochi, in which, according to the Full Bench, the Supreme Court had found on facts that the Tribunal and the High Court had come to the conclusion that the investment in the UTI by the assessee Company; which was the subject matter of dispute therein, was in the course of its business and was intertwined and interlaced with the assessee''s business of manufacture and sale of tyres. The Full Bench had also explained that the words "profits of business or profession computed in accordance with the requirements of Parts II and III of the Sixth schedule to the Companies Act" in sub-section (3)(a) would only indicate that the legislature wanted to restrict the deduction to the profits from the business or profession of the assessee and did not want to include income from all other sources of the assessee, as well. The question of law framed above has been answered in favour of the Revenue and against the assessee by the above referred Full Bench judgment. Respectfully following the above decision of the Full Bench of this Court, we allow these appeals; and restore the orders of the assessing authority setting aside both the appellate orders in I.T.A.No.129 of 2001 and setting aside the Tribunal order in I.T.A.No.98 of 2002.