Eastman Industries v. The Commissioner of Income-tax (Central), Ludhiana and another
[Citation -2020-LL-0205-70]

Citation 2020-LL-0205-70
Appellant Name Eastman Industries
Respondent Name The Commissioner of Income-tax (Central), Ludhiana and another
Court HIGH COURT OF PUNJAB & HARYANA
Relevant Act Income-tax
Date of Order 05/02/2020
Assessment Year 1991-92
Judgment View Judgment
Keyword Tags profits and gains of business or profession • application of money • claim of deduction • loans and advances • interest received • interest income • total turnover • interest paid • income earned • lease income • lease money • sister concern
Bot Summary: AVNEESH JHINGAN, J. The assessee is in appeal under Section 260A of the Income Tax Act, 1961 against the order dated 25.7.2000 passed by the Income Tax Appellate Tribunal, Chandigarh Bench partly allowing the appeal of the assessee. Whether in the facts and circumstances of the case, the interest income of Rs.21,97,071/- and lease income of Rs.52,532/- having being put within the domain of income from other sources is legally sustainable as the said had been derived on advance and deposit made. Certain additions were made and the income earned from leasing and interest on loans and advances given to sister concerns were considered as income under the head 'income from other sources'. In appeal before the Tribunal, partial relief was given on 25.7.2000 the claim of deduction of lease income and interest income under Section 80HHC of the Act was rejected, hence the present appeal. As regards question, learned counsel for the appellant conceded that MANOJ KUMAR 2020.02.06 11:06 I attest to the accuracy and authenticity of this document High Court,Chandigarh ITA No. 56 of 2001 3 the lease income and interest income from loans and advances to the sister concerns will come in the domain of 'income from other sources'. The income earned from interest and lease money is not income under the head 'profits and gains of business or profession'. The lease money and interest income is not income from the business, rather it is income from application of money which might have been earned from business or profession.


ITA No. 56 of 2001 [1] IN HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 56 of 2001 Date of decision: February 05, 2020 M/s Eastman Industries Appellant v. Commissioner of Income Tax (Central), Ludhiana and another Respondents CORAM: HON'BLE MR. JUSTICE AJAY TEWARI HON'BLE MR. JUSTICE AVNEESH JHINGAN Present: Mr. Sunil Kumar Mukhi, Advocate for appellant. Mr. Rajesh Kumar Katoch, Senior Standing Counsel and Ms. Pridhi Jaswinder Sandhu, Junior Standing Counsel for revenue. AVNEESH JHINGAN, J. assessee is in appeal under Section 260A of Income Tax Act, 1961 (for short, 'the 1961 Act') against order dated 25.7.2000 passed by Income Tax Appellate Tribunal, Chandigarh Bench (for short, 'the Tribunal') partly allowing appeal of assessee. Following substantial questions of law have been claimed in appeal: (a) Whether in facts and circumstances of case, order Annexures P-1, P-2 and P-3 are legally sustainable ? (b) Whether in facts and circumstances of case, addition of Rs. 2,17,546/- made to be total turnover MANOJ KUMAR 2020.02.06 11:06 I attest to accuracy and authenticity of this document High Court,Chandigarh ITA No. 56 of 2001 [2] declared is legally sustainable. same being based on mere presumptions and conjectures which cannot form basis for adjudication? (c) Whether in facts and circumstances of case, addition of Rs. 2,17,546/- to total turnover declared is legally sustainable in as much as income allegedly liable to be included could have been Rs. 3,36,067/-, same having not been verified. (d) Whether in facts and circumstances of case, interest income of Rs.21,97,071/- and lease income of Rs.52,532/- having being put within domain of income from other sources is legally sustainable as said had been derived on advance and deposit made. relevant facts are that assessee filed income tax return for year 1991-92 declaring income of 24,20,000/-. assessee was trader and dealing in export of cycle parts. assessment was finalised on 16.3.1993 under Section 143(3) of Act. Certain additions were made and income earned from leasing and interest on loans and advances given to sister concerns were considered as income under head 'income from other sources'. appeal was dismissed by Appellate Authority vide order dated 31.3.1994. In appeal before Tribunal, partial relief was given on 25.7.2000, however, claim of deduction of lease income and interest income under Section 80HHC of Act was rejected, hence present appeal. Learned counsel for appellant did not press questions (a) to (c) . As regards question (d), learned counsel for appellant conceded that MANOJ KUMAR 2020.02.06 11:06 I attest to accuracy and authenticity of this document High Court,Chandigarh ITA No. 56 of 2001 [3] lease income and interest income from loans and advances to sister concerns will come in domain of 'income from other sources'. However, it is argued that assessee had paid interest on certain loans availed, hence there should be setting off/adjustment of interest received and paid, it is thereafter that net amount be considered for deduction under Section 80HHC of Act. Reliance is placed on decision of Supreme Court in M/s ACG Associated Capsules (P) Ltd. v. Commissioner of Income Tax, (2013) 343 ITR 89. contention raised though is not directly covered by question framed but as same has been dealt with by Tribunal and is therefore being adjudicated. contention lacks merit. Once it is accepted that income from lease and interest income is income from other sources, there is no question of it being eligible under Section 80HHC of Act. provision deals with deductions in respect of profits retained for export business. income earned from interest and lease money is not income under head 'profits and gains of business or profession'. In facts of present case, there is no question of setting off/adjusting interest on debit side and on credit side of profit and loss account. interest paid by assessee is directly linked with business and would be dealt with while calculating income from business or profession. lease money and interest income is not income from business, rather it is income from application of money which might have been earned from business or profession. In such circumstances, there would be no question of netting/setting off interest paid vis-a-vis MANOJ KUMAR 2020.02.06 11:06 I attest to accuracy and authenticity of this document High Court,Chandigarh ITA No. 56 of 2001 [4] interest received. Tribunal rightly rejected contention of assessee. Reliance on M/s ACG Associated Capsules (P) Ltd.'s case (supra) does not enhance case of appellant. Apex Court was dealing with Clause (baa) of Explanation to Section 80HHC of Act and it was in that context it was held that expression included in such profits in Clause (1) of Explanation (baa) would include receipts by way of brokerage, commission, interest, rent, charges or any other receipt which are included in profits of business as computed under head profits and gains of business or profession . Further, that if such type of receipts are allowed as expenses and not included in profits of business, ninety per cent of such quantum of receipts cannot be reduced under Clause (1) of Explanation (baa) to Section 80HHC of Act. In present case, interest received and lease money is not even includable in profits and gains determined under head profits and gains of business or profession . appeal is dismissed. (AVNEESH JHINGAN) (AJAY TEWARI) JUDGE JUDGE February 05, 2020 mk Whether speaking/reasoned: Yes/No Whether reportable: Yes/No MANOJ KUMAR 2020.02.06 11:06 I attest to accuracy and authenticity of this document High Court, Chandigarh Eastman Industries v. Commissioner of Income-tax (Central), Ludhiana and another
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