RAJESH BINDAL, J. - (1.) INCOME -tax Appellate Tribunal, Chandigarh Bench "A" Chandigarh (for short 'the Tribunal'), in ITA No. 798/Chd/2001 for the asst. yr. 1998 -99 raising the following substantial questions of law : (i) Whether on the facts and the circumstances of the case, the Hon'ble Tribunal was right in law in holding that sales - tax, and Central sales -tax be excluded from the total turnover of the assessee while computing deduction under s. 80HHC ? (ii) Whether on the facts and circumstances of the case, the Hon'ble Tribunal was right in law in directing not to reduce 10 per cent of the interest income from the profit of business for the purpose of computation of deduction under s. 80HHC of the IT Act ?
(2.) WHILE issuing notice, the question No. 1 was not considered to be a question of law as the same was found to be Vardhman Polytex Ltd. [reported at (2006) 203 CTR (P&H) 397 - -Ed.] and accordingly notice was issued to the assessee only with reference to question No. 2, which we proceed to deal with for final disposal, with the consent of counsel for the parties.
(3.) THE assessee in the present case is engaged in the business of manufacture, trading and export of cotton yarn, assessee had declared income of Rs. 6,33,18,491 as interest under the head 'Income from other sources'. During the assessment claim of the assessee that interest income shown by it under the head income from other sources is in fact income chargeable under the head income from business and profession. This claim was sought to be made by the period prescribed for filing of revised return. It was claimed that the assessee should be given the benefit of it for calculation of deduction under s. 80HHC of the Act but the claim made by the assessee was not accepted by the AO and the interest income was reduced while computing income from business and profession and the same was separately assessed under the head 'Income from other sources'. The income so determined under the head income from business and profession only was considered for the purpose of calculating deductions under s. 80HHC of the Act. Aggrieved against the order of assessment, the assessee preferred an appeal before the Commissioner of Income -tax (Appeals) [for short, 'the CIT(A)']. Before the CIT(A) it was admitted by the assessee that the interest income was shown in the return as income from other sources. However, the CIT(A) accepted the plea raised by the assessee and held that the interest income declared by the assessee in the return, as income from other sources, is to be treated as business income for the purpose of calculation of deduction under s. 80HHC of the Act and thereafter referring to Expln. (baa) thereof, directed the AO to exclude 90 per cent of such income. Aggrieved against the order passed by the CIT(A) on this issue, Revenue went in appeal before the Tribunal raising following ground of appeal : "The learned CIT(A) has further erred both in law and on fact of the case in holding that interest income of Rs. 6,33,18,491 is business income as against income from other sources taken by the AO for the purposes of computing deduction under s. 80HHC.";