* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 17.02.2014
+ ITA 284/2013
ANAND KUMAR .....Appellant
Through: None.
Versus
COMMISSIONER OF INCOME TAX-VIII, NEW DELHI AND ANR.
.....Respondents
Through: Sh. Kamal Sawhney, Sr. Standing
Counsel.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE R.V. EASWAR
MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)
%
1. Even after second call, no one has appeared for the appellant.
Learned counsel for the Revenue is present. The matter has been taken
up for hearing.
2. This is an appeal under Section 260A of the Income Tax Act,
1961 ("the Act"), against an order of the Income Tax Appellate
Tribunal ("ITAT") dated 22.10.2012 for the Assessment Year 1998-99.
3. Anand Kumar, the assessee in this case, filed a return of income
for the AY 1998-99 declaring an income of `7,66,512/- claiming
interest on Fixed Deposit Receipts ("FDRs") which were pledged with
banks to avail credit export facilities as "business income", thus
claiming a deduction for the entire interest under Section 80HHC of
the Act, claiming to be a 100% exporter. The Assessing Officer
("AO") passed an order under Section 143(3) of the Act dated
28.2.2001, assessing the income of interest from the FDRs as "income
ITA 284/2013 Page 1
from other sources" under Section 56. On appeal, this order was
confirmed by the CIT (Appeals) by an order dated 24.1.2002. The
ITAT reversed this finding, holding that the interest was "business
income". The Revenue appealed to the High Court under Section
260A, and this Court restored the matter to the file of the AO for the
exercise to be re-done in view of the ruling of the Court in CIT v. Shri
Ram Honda Power Equipment Ltd., 289 ITR 475 (Delhi), which was
held to cover the substantial question of law said to arise in the case.
Subsequently, on remand, the AO, by an order under Section 143(3) of
the Act, dated 27.10.2008, held that the interest on FDRs was "income
from other sources" and not "business income". Aggrieved by this
order, the assessee appealed to the CIT (Appeals), which upheld the
order of the AO. This was again carried in appeal to the ITAT, leading
to the impugned order.
4. The gist of the assessee's contentions is that in the preceding
AY, 1997-98, the interest on the FDRs pledged with the banks was
considered by the AO to be "income from business". However, in the
course of that assessment, although the interest was held to be
"business income", netting was disallowed. The CIT (Appeals) in that
year allowed netting of interest. The matter subsequently went in
appeal to the ITAT and finally this Court. This Court, in its order
dated 19.1.2007, held that:
"[i]t was correctly noted by the ITAT that the AO having
accepted the interest income as business income, the only
question that required consideration was whether deduction
should be of 90% of the gross interest or net interest. The
Court also confined the question of law only to this issue."
ITA 284/2013 Page 2
5. The assessee's argument in the appeal memorandum is that
since the AO, and the subsequent authorities, in the previous AY had
held, on the same facts, the income from interest to be "business
income", consistency must be maintained and income, in the AY
under consideration, too, is to be considered as "business income".
6. The ITAT, in the present AY 1998-99, in the impugned order,
considered these arguments as to the previous assessment in AY 1997-
98, and held as follows:
"4... a confusion has been created by stating that the
decision rendered in the assessee's own case pertaining to
assessment year 1997-98, has been followed by Hon'ble
High Court in assessment year 1998-99 i.e. assessment year
under consideration. Since the assessee failed to represent
his case before the Asessing Officer but (sic) verily the
matter was discussed at length before the learned
CIT(Appeals). But in the interest of justice, we find it
justifiable to restore the matter back to the file of the
Assessing Officer so that he can reconsider the decision of
Hon'ble High Court dated 27.7.2007 for assessment year
1998-99 and the judgment/order dated 19.1.2007 rendered
in ITA No. 596/2004 allegedly pertaining to the assessment
year 1997-98 and the decision in the case of Shri Ram
Honda Power Equipment (supra) and thereafter re-
determine the issue in question. With the above
observations, we restore the entire appeal to the file of the
learned Assessing Officer and allow the same for statistical
purposes. We are refraining from making any observation
on the legal fact whether the decision of Shri Ram Honda
(supra) covers and (sic) don't cover the facts and issues of
the case."
7. The ITAT, therefore, has not gone into the merits of the case,
nor the issue of consistency as alleged by the assessee or the
ITA 284/2013 Page 3
applicability of the decision in Shri Ram Honda (supra). The AO had
in the second round of assessment in the order under Section
143(3) dated 27.10.2008 not discussed the applicability of the decision
in Shri Ram Honda (supra), as required by the terms of the remand in
the first round of litigation, albeit due to the assessee's failure to
represent before the AO. While the CIT (Appeals) did deal with the
application of the judgment in Shri Ram Honda, the ITAT has taken a
liberal and beneficial view of the matter by remanding the case to the
AO to reconsider the assessment in light of that decision and the
conclusions reached as regards interest income in previous years, as
the order dated 27.10.2008 was silent on that question. The ITAT has
not made any findings in the impugned order, let alone determined or
discussed any issue of fact or law (one way or the other) relevant to
the assessment of interest income in this case.
8. For the above reasons, the Court finds that no substantial
question of law arises, and ITA 284/2013 is accordingly dismissed.
S. RAVINDRA BHAT
(JUDGE)
R.V. EASWAR
(JUDGE)
FEBRUARY 17, 2014
ITA 284/2013 Page 4
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