Premier Enterprises v. Deputy Commissioner of Income-tax
[Citation -2015-LL-0106]

Citation 2015-LL-0106
Appellant Name Premier Enterprises
Respondent Name Deputy Commissioner of Income-tax
Court HC
Date of Order 06/01/2015
Judgment View Judgment
Keyword Tags deduction under section 80hhc • export oriented unit • income from business • computing deduction • credit facility • interest earned • interest income • gross receipt • term deposit • term loan
Bot Summary: The Commissioner of Income-tax, allowed the appeal by treating the interest component earned from term guaranteed deposit and directed the Assessing Officer to treat the same as business income. The appellant-assessee did not choose to defend the matter and the Tribunal came to pass an ex parte order holding that there was no record to show that the deposit was made for the purpose of availing of credit facilities or that there was compulsion for making such deposit. For all purposes, the deposit so made by the appellant-assessee should be deemed to be a deposit made for the purpose of business and the interest earned from such deposit should be treated as business income. As is evident from the order of the Tribunal, the appellantassessee did not pursue the matter sincerely before the Tribunal but remained ex parte. The appellant-assessee should have appeared before the Tribunal and explained the above position, which he had done before the Commissioner of Income-tax as is evident from the reasoning as reflected in the order of the Commissioner of Income-tax. In spite of a finding by the Commissioner of Income-tax in his order about the need for deposit to be made for the purpose of availing of the credit facility, there is no reference to the above letter of the bank in the proceedings of the original authority or the Tribunal but a reference about that portion of the findings of the Commissioner of Income-tax is found in the order of the Tribunal. Since the primary document, which explains the nature of the transaction, which is for the purpose of availing of the credit facility, has not been considered by the Tribunal, in spite of a reference of the same in the order of the Commissioner of Income-tax and in view of the appellantassessee remaining ex parte, we feel it appropriate that the matter should be remitted back to the Tribunal to reconsider the issue afresh in the light of the abovesaid document, which has been considered by the Commissioner of Income-tax and held in favour of the appellant-assessee.


JUDGMENT judgment of court was delivered by R. Sudhakar J.-Aggrieved by order passed by Income-tax Appellate Tribunal in dismissing appeal filed by it, assessee is before this court challenging said order by filing present appeal. This court, vide order dated August 9, 2007, admitted appeal by framing following substantial questions of law: "(1) Whether, on facts and in circumstances of case, Tribunal is right in holding interest derived from deposit cannot be treated as income from business and, hence, same is excluded for purpose of calculating deduction under section 80HHC? (2) Whether, on facts and in circumstances of case, Tribunal is right in holding that gross receipt interest income would be taken into account for purpose of computing deduction under section 80HHC?" appellant-assessee is 100 per cent. export oriented unit doing export business in cotton fabrics. For assessment year 1994-95, assessee filed return of income on October 31, 1994, and same was processed under section 143(1)(a) of Income-tax Act. It was noticed that assessee had made certain fixed deposit in banks and had treated interest earned from said deposit as business income and claimed deduction under section 80HHC of Act. Therefore, Assessing Officer excluded interest earned out of those deposit from head "Business income" and treated same under head "Income from other sources" and recomputed income under section 80HHC of Act. Aggrieved by said order of Assessing Officer, assessee preferred appeal before Commissioner of Income-tax (Appeals). Commissioner of Income-tax (Appeals), allowed appeal by treating interest component earned from term guaranteed deposit and directed Assessing Officer to treat same as business income. Not being satisfied with said order, Department pursued matter before Tribunal. Before Tribunal, appellant-assessee did not choose to defend matter and, therefore, Tribunal came to pass ex parte order holding that there was no record to show that deposit was made for purpose of availing of credit facilities or that there was compulsion for making such deposit. Tribunal also further observed that deposit was not made pursuant to any requirement imposed by bank at time of sanctioning credit facilities. In present appeal, above finding of Tribunal is sought to be disproved by appellant-assessee by relying upon bank's letter dated August 2, 1989, where limit sanctioned term loan was sanctioned subject to certain conditions. Reliance is placed on condition No. 6 of said letter to drive home point that said fixed term deposit was made for purpose of availing of said credit facilities. Heard learned counsel appearing for appellant-assessee and learned standing counsel appearing for respondent-Department. appellant-assessee claims to be 100 per cent. export oriented unit, which fact is not in dispute. According to assessee, for purpose of availing of term loan of Rs. 21,40,000, bank required assessee to make term deposit of Rs. 15 lakhs. In support of said submission, reliance was placed by learned counsel for appellant-assessee on condition No. 6 of letter of bank, dated August 2, 1989, to stress that but for condition imposed by bank, there was no necessity for assessee-appellant to make term deposit. Condition No. 6, which is pertinent to decide case on hand, is extracted hereinbelow for better clarity: "6. Term deposit of Rs. 15 lakhs should be given as collateral security for term loan." Condition No. 6 as found in bank's letter makes it absolutely necessary for appellant-assessee to make term deposit of Rs. 15 lakhs for purpose of availing of credit facility. Therefore, for all purposes, deposit so made by appellant-assessee should be deemed to be deposit made for purpose of business and, therefore, interest earned from such deposit should be treated as business income. However, as is evident from order of Tribunal, appellantassessee did not pursue matter sincerely before Tribunal but remained ex parte. appellant-assessee should have appeared before Tribunal and explained above position, which he had done before Commissioner of Income-tax (Appeals) as is evident from reasoning as reflected in order of Commissioner of Income-tax (Appeals). However, in spite of finding by Commissioner of Income-tax (Appeals) in his order about need for deposit to be made for purpose of availing of credit facility, there is no reference to above letter of bank in proceedings of original authority or Tribunal but reference about that portion of findings of Commissioner of Income-tax (Appeals) is found in order of Tribunal. Tribunal was not in position to consider this document, in absence of assessee-appellant and, therefore, it fell in error in coming to conclusion that it is not business income eligible for benefit under section 80HHC of Act. Since primary document, which explains nature of transaction, which is for purpose of availing of credit facility, has not been considered by Tribunal, in spite of reference of same in order of Commissioner of Income-tax (Appeals) and in view of appellantassessee remaining ex parte, we feel it appropriate that matter should be remitted back to Tribunal to reconsider issue afresh in light of abovesaid document, which has been considered by Commissioner of Income-tax (Appeals) and held in favour of appellant-assessee. Accordingly, appeal is allowed by way of remand to Tribunal. Tribunal is directed to consider issue afresh in light of document, which was considered by Commissioner of Income-tax (Appeals) in favour of appellant-assessee, viz., letter of bank dated August 2, 1989, and pass orders thereon on merits and in accordance with law. However, there shall be no order as to costs. *** Premier Enterprises v. Deputy Commissioner of Income-tax
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