COMMISSIONER OF INCOME TAX Vs. PUNJAB STAINLESS STEEL IND.
LAWS(DLH)-2007-1-210
HIGH COURT OF DELHI
Decided on January 19,2007

COMMISSIONER OF INCOME TAX Appellant
VERSUS
Punjab Stainless Steel Ind. Respondents

JUDGEMENT

- (1.) FRAMED by the Court in the present appeal for consideration : "1. Whether Tribunal was legally correct in holding that assessee is entitled to reduce interest paid by it from the interest received by it while calculating deduction under s. 80HHC r/w Expln. (baa) of the IT Act ?
(2.) WHETHER Tribunal was legally correct in holding that the sale proceeds of scrap received by the assessee were not to be included in the income while computing deduction under s. 80HHC - 2. The facts of the present case are that the AO treated the interest income as business income but did not allow netting of interest. As a result, he directed 90 per cent of the interest income be deducted from the business profits although allowed the assessee's appeal and held that the AO had erred in reducing from the profits 90 per cent of the interest for computing deduction under s. 80HHC.
(3.) IN the appeal by the Department to the Tribunal the ground urged in this regard (as set out in para 3 of the impugned was made to the finding of the AO that the interest income was business income. This also was not the question on which this appeal was admitted by this Court. Therefore the only question that arises in the present case whether netting should be allowed. [reported as CIT vs. Shri Ram Honda Power Equip (2007) 207 CTR (Del) 689 - -Ed.] of which the present appeal forms part, we hold that netting should be allowed since the interest income has been treated as business income. Therefore we have answered the first question in the affirmative and against the Revenue. As regards the second question, we hold that the Tribunal was right in its conclusion that the income from the sale of scrap generated during the manufacture of goods which are entirely exported, was not incidental to the export activity and could not be treated as business income. Therefore this income was rightly not included for the purposes of computation for deduction under s. 80HHC. Therefore question No. 2 is also answered in the affirmative and against the Revenue. Accordingly the appeal is dismissed with no orders as to costs.;


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