TMI Blog2007 (9) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... r the loans obtained from them should be deducted from the interest received from them and only the net amount should be taken. The Commissioner of Income-tax (Appeals) dismissed the appeal on that issue. The assessee filed a further appeal before the Income-tax Appellate Tribunal. The Tribunal held that since there was bound to be an expenditure directly relatable in earning such income, only the net amount of interest should be taken. Aggrieved by the order of the Tribunal, the present appeal is filed. Held that- held that- while computing such profits and under the head ‘Profit and gain of business or profession’ if any receipt by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature is included i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) on the ground that the interest earned from the sister concern is part of the appellant's business profits and therefore the same cannot be reduced. As an alternative plea, it was contended that the interest paid to the sister concern for the loans obtained from them should be deducted from the interest received from them and only the net amount should be taken. The Commissioner of Income-tax (Appeals) dismissed the appeal on that issue. The assessee filed a further appeal before the Income-tax Appellate Tribunal. The Tribunal held that since there was bound to be an expenditure directly relatable in earning such income, only the net amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "profits of the business" for the purpose of that section. That clause reads thus: "(baa) 'profits of the business' means the profits of the business as computed under the head 'Profits and gains of business or profession' as reduced by- (1) ninety per cent. of any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch office, warehouse or any other establishment of the assessee situate outside India." 6. The said clause does not refer to net interest. It refers, inter alia, to the interest included in the profits and gains of the business or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd has been considered by the Division Bench of this court in the case of K. S. Subbiah Pillai and Co. (India) P. Ltd. v. CIT [2003] 260 ITR 304, wherein after extracting the Explanation, the court held that the clause (baa) does not refer to net inter est. It refers, inter alia, to the interest included in the profits and gains of the business or profession. The court further held that clause (baa) under the Explanation to section 80HHC defines profits of the business as computed under the head "Profits and gains of business or profession". The deductions to be made are from the amount of profit so computed and not from the amount computed under any other head of income of that asses see. The reference to "such profits" in sub-clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot from the amount computed under any other head of income of that assessee. No reference to net interest is mentioned in the said clause. What was to be seen was the nature of receipt as contemplated under the clause. Once the receipt of the interest is known, 90 per cent, of the same is to be reduced from the profits without deducting any amount. In order to come to the conclusion, the court has relied on the decision of K. S. Subbiah Pillai and Co. (India) P. Ltd. v. CIT [2003] 260 ITR 304 (Mad) and the Punjab and Haryaria High Court judgment in the case of Rani Paliwal v. CIT [2004] 268 ITR 220. 10. The Delhi High Court judgment in CIT v. Shri Rain Honda Power Equip [2007] 289 ITR 475 has considered the two decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as business income. 11. But the facts of the present case, as stated earlier, the appellate authority has not regarded the interest income as business income. Thus, the reliance of the Delhi High Court judgment in CIT v. Shri Ram Honda Power Equip [2007] 289 ITR 475 by the assessee would not advance its case any further. In view of the binding decision of this court in K. S. Subbiah Pillai and Co. ( India ) P. Ltd's case [2003] ITR 304 (Mad) and the Chinnapandi's case [2006] 282 ITR 389 (Mad), the first question of law is answered in the negative. The second question of law does not arise for consideration as nothing of that sort was discussed and finding was given by the authorities. Hence the order of the Tribunal is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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