Commissioner of Income Tax v. Cosmos International

RAJIV SHAKDHER, J.

BADAR DURREZ AHMED, J.

November 27 , 2008

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REPORTABLE * IN THE HIGH COURT OF DELHI : NEW DELHI + ITA No. 643/2008 % Judgment reserved on : 19.11.2008 Judgment delivered on : 27.11.2008 COMMISSIONER OF INCOME TAX DELHI-XI, NEW DELHI ..... Appellant versus M/S COSMOS INTERNATIONAL ..... Respondent Advocates who appeared in this case: For the Revenue : Ms Prem Lata Bansal For the Respondent : None CORAM : Hon'ble Mr.Justice Badar Durrez Ahmed Hon'ble Mr. Justice Rajiv Shakdher 1. Whether the Reporters of local papers may be allowed to see the judgment ? 2. To be referred to Reporters or not ? 3. Whether the judgment should be reported in the Digest ? Rajiv Shakdher, J. 1. This is an appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the "Act") against judgment dated 07.09.2007 passed by the Income Tax Appellate Tribunal (hereinafter referred to as the "Tribunal") in ITA No. 3967/Del/2006 pertaining to the assessment year 2003-04. 2. The Revenue is aggrieved by the impugned judgment, in so far as, the Tribunal held that interest income on fixed deposits earned by the assessee be treated as "business income", as against, "income from other sources". The consequent effect of which would be that the assessee would be required to deduct 90% of such interest from the "profits of the business" under Section 80HHC of the Act. 3. At this stage, it may be noted that we had issued notice in the appeal by our order dated 02.07.2008. As per the service report, the respondent has been served. Despite, service of notice, the respondent has chosen not to put in an appearance before this Court. This has left us with no alternative but to proceed to decide the present appeal in the absence of the respondent and/or its authorised representative. 4. The learned counsel for the revenue, Ms Prem Lata Bansal has contended before us, that the impugned judgment of the Tribunal deserves to be set aside in view of the fact that it is contrary to the judgment of this Court passed in the case of Commissioner of Income Tax v Shri Ram Honda Power Equip: (2007) 298 ITR 475. We have examined the orders passed by the authorities below and upon perusal of the same, we have come to the conclusion that the submission of the learned counsel for the Revenue has to be accepted. Before we delve into the reasons for coming to such a conclusion the following brief facts, which are necessary for disposal of the present appeal, require to be noted:- 5. On 31.10.2003 the assessee had filed his return of income for the assessment year 2003-04 declaring a total income of Rs 35,16,882. On 6.5.2004 the return of the assessee was processed under Section 143(1) (a) of the Act. However, as it transpires, that the assessee"s return was picked up for scrutiny and accordingly, a notice under Section 143(2) of the Act dated 12.10.2004 was issued, and duly served, on the assessee. During the course of scrutiny it was revealed, inter alia, that the assessee had received interest on fixed deposit amounting to Rs 1,51,869/- which, the assessee had, shown as "business income". 6. The Assessing Officer by an order dated 09.1.2006 came to the conclusion that the interest income earned on the fixed deposit had to be treated as "income from other sources" and accordingly, deduction under Section 80HHC of the Act, on the interest income, was disallowed. 7. Aggrieved by the same, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [hereinafter referred to as the "CIT(A)"]. The CIT (A) in the operative part of its order dated 07.09.2006 held as follows: "……Therefore, in view of the facts and the legal position the assessee is not entitled to get deduction u/s 80-HHC on account of interest income generated out of fixed deposits in the bank. However only 90% of such interest is to be deducted from the profits of the business in view of the specific provision contained in section 80HHC……" 8. Aggrieved by the decision, the Revenue preferred an appeal before the Tribunal, on the ground tha