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TMI Blog2007 (9) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... of the business under section 80HHC? 2. Whetehr on the facts and in the circumstances of the case, the Tribunal was right in equating income from commission, rent, brokerage to income from interest with respect to incurring of expenditure?" 2. The material facts of the case proceed as follows: The assessee filed a return of income claiming deduction under section 80HHC of the Income- tax Act, 1961. The Assessing Officer finalised the assessment after, inter alia, deducting 90 per cent. interest received for the purpose of section 80HHC deduction. Aggrieved by the 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 appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee has submitted that in the absence of any clear terminology as to whether the term interest denotes gross or net interest, having regard to the scheme of the Act, it has to be construed only as a net interest and netting of interest is permissible. For that purpose, he relied on a decision of the Delhi High Court in the case of CIT v. Shri Ram Honda Power Equip [2007] 289 ITR 475. 4. We heard the argument of learned counsel on either side and perused the materials on record. 5. The Explanation to section 80HHC in clause (baa) defines "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 ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges, etc., would normally be assessable under the head of "Income from other sources". It might also be in certain circumstances assessable under the head of "business". It further observed that under whatever head the income is computed, the concept was that for earning an income like brokerage, commission, interest, there could be some expenditure, which was directly relatable and was expended in earning such income and on that basis, it is concluded that the netting is permissible. 8. The question similar to the one in the case on hand 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of section 80HHC of the Act mean the profits of the business as computed under the head "Profits and gains of business or profession". While computing such profits under the head "Profits and gains 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 in such profits, the same has to be reduced by 90 per cent. from the profits computed as aforesaid. The deductions to be made are from the amount of profits so computed and not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that this court while considering Chinnapandi's case [2006] 282 ITR 389 (Mad) has followed the decision of K. S. Subbiah Pillai and Co. (India) P. Ltd. 's case [2003] 260 ITR 304 (Mad) and held that the deduction within the meaning of Explanation (baa) was permissible only on gross interest and not net interest, without noticing that in K. S. Subbiah Pillai and Co. (India) P. Ltd. 's case [2003] 260 ITR 304 (Mad), the interest receipt was treated as income from other sources and not 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 Equi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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