- (1.) In this group of petitions, the issue involved is the same and therefore all the petitions are being decided together. The dispute relates to the assessment years 1997-98, 1998-99 and 2000-01 under the Income Tax Act. For facility, the facts stated in Writ Petition No.197 of 2010, M/s Sheikh Abdullah & Sons vs. Union of India, through Secretary Ministry of Finance, New Delhi and others for the assessment year 1997-98 and Income Tax Appeal No.215 of 2015, Principal Commissioner of Income Tax, Varanasi vs. M/s Sheikh Abdullah and Sons for the assessment year 1997-98, is being taken into consideration.
(2.) The assessee is engaged in the business of manufacture and sale of carpet. In his return, the assesseee claimed that interest earned on Exchange Earned Foreign Currency Account Term Deposit Receipt (EEFCTDR) was exempted under Section 10(15)(iv)(e) of the Income Tax Act (hereinafter referred to as the "Act") and was not taxable. The assessing officer rejected the contention of the assessee and computed the deduction under Section 80HHC of the Act after reducing the said interest from business profit. The assessee filed an appeal which was rejected. The Tribunal by its order dated 3.4.2006 allowed the appeal and remanded the matter again to the assessing authority for reconsideration on the question of interest earned on EEFCTDR under Section 10(15)(iv)(e) of the Act. Pursuant to the direction of the Tribunal, the assessing officer passed a fresh assessment order under Section 143(3) of the Act dated 11.2.2007 and granted exemption on interest earned by the assessee under Section 10(15)(iv)(e) of the Act. Thereafter, the Commissioner of Income Tax passed an order dated 3.3.2008 under Section 263 of the Act holding that the order of the assessing officer was pre-judicial to the interest of the revenue holding that the assessing officer had not made the inquiry as mandated by the Tribunal nor inquiry was conducted in conformity with the provisions of Section 10(15)(iv)(e) of the Act The Commissioner of Income Tax accordingly cancelled the assessment order and directed the assessing officer to carry out the fresh assessment after making due inquiry on the issue of Section 10(15)(iv)(e) of the Act. The assessee, being aggrieved, filed an appeal before the Tribunal which was rejected by an order dated 24.7.2008. The Tribunal not only confirmed the order of the Commissioner of Income Tax, but also held that the order of the assessing officer was not in conformity with the direction of the Tribunal and was also pre-judicial to the interest of revenue.
(3.) Based on the order dated 3.3.2008, passed by the Commissioner of Income Tax, under Section 363 of the Act, as affirmed by the order of the Tribunal, the assessing officer passed a fresh assessment order dated 29.12.2008 after making due inquiry and, after considering the directions of the Tribunal as contained in its order dated 3.4.2006. The assessing officer after considering the provision of Section 10(15)(iv)(e) of the Act held that the conditions prescribed in Section 10(15)(iv)(e) of the Act had been satisfied by the assessee, and therefore, the assessee was entitled for interest exemption under Section 10(15)(iv)(e) of the Act, but, could not claim such amount under Section 80HHC.;