HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 10 / 2008 M/S Dhaddha Exports, 1387, Ganesh Bhawan, Partaniyon Ka Rasta, Johari Bazar, Jaipur, in state of Rajasthan, through Shri Vimal Chand Dhadda, Partner. ----Appellant Versus Assistant Commissioner Of Income Tax, Circle-I, Jaipur, Earlier Known as Joint Commissioner of Income, Special Range-1, Jaipur Having its Office at New Central Revenue Building, Statue Circle, Bhagwandass Road, Jaipur. ----Respondent For Appellant(s) : Mr. Siddarth Ranka For Respondent(s) : Mr. Anuroop Singhi HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 05/07/2017 1. By way of this appeal, appellant has assailed judgment and order of Tribunal whereby Tribunal has partly allowed appeal of assessee. 2. This Court while admitting matter vide order dated 20 th August, 2008, framed following questions of law:- 1. Whether on facts and in circumstances of case learned Tribunal was justified in holding interest received at Rs. 13,20,900/- is not income from business and it is income from other sources and that lending of funds from assessee s business, is not part of business activity and therefore, ineligible for deduction under Section 80 HHC of Income Tax Act, 1961 on such amount of interest? (2 of 8) [ITA-10/2008] 2. Whether on facts and in circumstances of case, learned Tribunal was justified in not deleting interest u/s 234-B and interest u/s 234-C of Income Tax Act when there was no specific directions to charge interest in assessment order dated 31/12/1999? 3. Again further question was framed on 1st June, 2017. Whether on facts and in circumstances of case and in law, ld. Tribunal was justified in not allowing/netting of interest paid at Rs. 1,34,850/- against interest earned and in taxing entire interest earned of Rs. 13,20,900/- as Income from Other Sources? 4. brief facts of case are that appellant-assessee is partnership firm and derives income by way of export of precious and semi-precious stones. assessee is 100% exporter. During previous year relevant to year under appeal, total turnover of appellant was Rs. 82,25,583/- and entire turnover was by way of exports. appellant- assessee maintains one set of books of account and has common Bank account. said books of account are supported by supporting record and even audited by Chartered Accountant. audit report u/s 44 AB and u/s 80 HHC of I.T. Act was also obtained and such reports were furnished on assessment record, as in past years. appellant- assessee is being assessed to income tax for last several years. appellant-assessee furnished return of income declaring income of Rs. 10,67,450/- on 27.10.1997. profit as per Profit and Loss Account was shown at Rs. 40,75,275/-. Chartered Accountant computed deduction (3 of 8) [ITA-10/2008] under Section 80 HHC of I.T. Act at Rs. 33,78,871/- vide report of 4.10.1997. 5. Counsel for respondent has relied upon decision of this Court in Tax Appeal No. 329/2005 in case of M/s Chordia Trading Corporation vs. Income Tax Officer decided on 23 rd November, 2016, wherein speaking for bench, this court observed as under:- 5. Counsel for appellant contended that in view of decision of Supreme Court in case of ACG Associated Capsules (P) Ltd. vs. Commissioner of Income Tax, Central-IV, Mumbai reported in (2012) 343 ITR 89 where in respect of quantum, Supreme Court held as under: 1. Section 80HHC of Income Tax Act, 1961- Deduction-Exporters-Assessment year 2003-04- Whether expression included any such profit in clause (baa) to section 80HHC would mean only such receipts by way of brokerage, commission, interest, rent, charges or any other receipt which are included in profits of business as computed under head 'profit and gains of business or profession'- Held, yes- Whether therefore, if any quantum of receipt of nature mentioned in clause (1) of Explanation (baa) is allowed as expenses under sections 30 to 44D and is not included in profits of business as computed under head 'Profits and Gains of Business or Profession , ninety per cent of such quantum of receipts cannot be reduced under clause (1) Explanation (baa) from profits of business -Held, yes- Whether therefore, ninety per cent of net gross rent of gross interest but only net interest or net rent, which has been included in profits of business of assessee as computed under head 'Profit and Gains of Business of Profession', is to be deducted under clause (1) of Explanation (baa) to section 80HHC for determining profits of business- Held, yes [In favour of assessee] 2. Section 80HHC, read with sections 28(iiid), of Income Tax Act,1961- Deductions -Exporters- Assessment year 2003-04- Whether not entire amount received by assessee on sale of DEPB by assessee under (4 of 8) [ITA-10/2008] section 28(iiid) for purpose of Explanation (baa) to section 80HHC- held, yes [In favour of assessee]. 6. Counsel for department has relied on decision of this Court in case of Kushal Kishore Agarwal vs. Income Tax Officer & Ors. in DB Income Tax Appeal No.124/20026, decided on 09.11.2016 and in case of Dhadda Exports vs. I.T.O. Jaipur in DB Income Tax Appeal No.62/2003, decided on 08.09.2016. 9. Taking into consideration contention which has been raised and finding of AO, we are of opinion that in view of clause (baa) of Section 80 HHC, assessee is entitled to get net income under Section 80 HHC. In that view of matter, issues No.1 to 3 all are answered in favour of assessee and against department. Since issues are No.1 to 3 are decided in favour of assessee, issues No. 4 and 5 being consequential, counsel for parties do not press these issues and issues No.4 & 5 are not pressed. 6. He has also relied upon three decisions of Allahabad High Court in case of Commissioner of Income Tax vs. Oswal Exports [2014] 369 ITR 630, Commissioner of Income Tax-UU, Kanpur vs. Deep Awadh Hotels (P) Ltd. [2013] 350 ITR 185 and one from Himachal Pradesh in case of Commissioner of Income Tax, Shimla v. Ruchira Papers Ltd. [2013] 259 CTR 153. 7. Taking into consideration issue No. 2 regarding interest Mr. Singhi has relied upon decision of this Court in case of Dhadda Exports vs. ITO (DBITA No.62/2003), Jaipur passed on 8th September, 2016 wherein in para 8, 9 & 10 it has been observed as under:- 8. From record, as interest is not business income, in that view of matter, discretion of Division Bench which was (5 of 8) [ITA-10/2008] sought by counsel for appellant is not applicable to facts of present case. 9. appellant was not in position to establish that before AO or CIT (Appeals) or Tribunal he has attempted to show this as business income. 10. Counsel for appellant has taken us through finding recorded by AO and CIT (A) as well as oral and documentary evidence on record on point of interest and business income. income involved is not business income, therefore, naturally they will not be entitled to benefit under Section 80HHC and view taken by Tribunal is required to be upheld and for same, issue is answered in favour of Department and against assessee. 8. He has also relied upon in another decision of this Court in case of CIT Jaipur vs. M/s R.A. Buildcon (P) Ltd. (DBITA No.74/2004) passed on 17th January, 2017 wherein in para 9 & 10 it has been observed as under:- 9.Taking into consideration observations made by Supreme Court in case of Commissioner of Income Tax Delhi vs. Bhagat Construction Company (P) Ltd. reported in (2015) 60 taxmann. Com 334 (SC), while considering earlier decision of Supreme Court in para 8 & 9 observed as under:- 8. It will be seen that under provisions of Section 234B, moment assessee who is liable to pay advance tax has failed to pay such tax or where advance tax paid by such assessee is less than 90 percent of assessed tax, assessee becomes liable to pay simple interest at rate of one per cent for every month or part of month. Shri Guru Krishna is right in stating that levy of such interest is automatic when conditions of Section 234B are met. 9. We are of view that facts of present case are squarely covered by decision contained in Kalyankumar Ray s case (supra) inasmuch as it is undisputed that Form I.T.N.S.150 contained calculation of interest payable on tax assessed. This being (6 of 8) [ITA-10/2008] case, it is clear that as per said judgment, this Form must be treated as part of assessment order in wider sense in which expression has to be understood in context of Section 143, which is referred to in Explanation 1 to Section 234B. 10. In that view of matter, in view of decision of Supreme Court and Gujarat High Court, issue is required to be answered in favour of department against assessee. 9. He has also relied upon decision of Gujarat High Court in case of Asstt. CIT vs. Norma Detergent Pvt. Ltd. decided on 16th February, 2016 wherein it has been held as under:- Considering totality of facts and on conjoint reading of aforesaid provisions of sections 143, 234B and 156 of Income Tax Act and when levy of interest under section 234B of Act is held to be mandatory and automatic, and same is on difference between advance tax paid and assessed tax and as observed hereinabove, A.O. has no discretion to levy any other interest other than provided under section 234B of Act. Thereafter, levy of interest under section 234 of Act would be consequential only and only arithmetically amount of interest is required to be calculated, we are of opinion that even in absence of any direction by A.O. while passing assessment order under section 143(3) of Income Tax Act, which according to under section only for determining assessed tax, there can be demand of levy and demand of interest under section 156 of Income Tax Act. It would have been different fact if A.O. had any discretion with respect to rate of interest and/or to levy any interest considering facts and circumstances of case. As observed hereinabove, as such, A.O. had no such discretion and moment he determines assessed tax and on eventuality as mentioned in section 234B, i.e. (I) assessee who is liable to pay advance tax under section 208 has failed to pay lsuch tax, or, where advance tax paid by such assessee under provisions of section 210 is less than 90% of assessed tax , assessee shall, be liable to pay (7 of 8) [ITA-10/2008] simple interest at rate of 1% for every month or part of month comprised in period from first day of April next following such financial year to date of determination of total income under sub-section (1) of section 143 and (ii) where regular assessment is made to date of such regular assessment, on amount equal to assessed tax, or, as case may be, on amount by which advance tax paid, as aforesaid, falls short of assessed tax. Under circumstances and considering sebsequent decisions of Hon ble Supreme Court in case of Anjum M.H. Ghaswala (supra) and in case of Karanvir Singh Gossal (supra), question of law posed for consideration of this Court is to be answered in favour of revenue and against assessee. 7.15. Now, so far as decisions of other High Courts, relied upon learned counsel appearing on behalf of assessee, which are referred to hereinabove, are concerned, it is required to be noted that in all such cases, concerned High Courts have relied upon decision in case of Rachi Club Ltd. (supra). However, in view of aforesaid two subsequent decisions of Hon ble Supreme Court and for reasons stated hereinabove, in respectful submission we are not in agreement with contrary view taken than what we are taking in present case. 7.16. Similarly, submissions on behalf of assessee that decision of Patna High Court in case of Rachi Club Ltd. (supra) came to be merged in decision of Hon ble Supreme Court in view of dismissal of SLP against said decision of Patna High Court in case of Rachi Club Ltd. (supra) and therefore, said decision is binding to this court is concerned, it is required to be noted that subsequent decision of Hon ble Supreme Court in case of Anjum M.H. Ghaswala (supra) is decision of bench consisting of Five Hon ble Judges and in sebsequent decision of Hon ble Supreme Court in case of Karanvir Singh Gossal (supra) had taken note of earlier decision in case of Anjum M.H. Ghaswala (supra), in which Hon ble Supreme Court has categorically laid down law that levy of interest under section 234B is mandatory and automatic and that it cannot be reduced [in case before Hon ble Supreme Court in case of Anjum M.H. Ghaswala (supra), which was with respect to power of Settlement Commission to reduce interest leviable under section (8 of 8) [ITA-10/2008] 234B of Act] and therefore, subsequent decision laying down aforesaid law is binding to this Court. 10. We have heard counsel for both sides. 11. Taking into consideration, we are of opinion that issue No. 1 & 3 will be decided together. interest income earned will be treated as income from other sources but expenses will be exempted after netting off in view of our decision as referred by Mr. Ranka Senior Counsel. Therefore, issue No.1 & 3 are partially answered in favour of assessee. 12. In our considered opinion, if there is assessment of tax liability, interest is not statutory liability. In that view of matter, contention of Mr. Ranka is required to be rejected. 13. In view of above, issue No. 2 is decided in favour of department and issue No. 1 & 3 as referred hereinabove are partially decided in favour of assessee. 14. appeal stands disposed of. (INDERJEET SINGH),J. (K.S. JHAVERI),J. A.Sharma/71 Dhaddha Exports v. Assistant Commissioner of Income-tax, Circle-I, Jaipur, Earlier Known as Joint Commissioner of Income, Special Range-1, Jaipur