The Commissioner Of Income Tax, ... vs M/S Deluxe Enterprises
2008 Latest Caselaw 1937 Del

     *             THE HIGH COURT OF DELHI AT NEW DELHI

                                          Judgment delivered on: 03.11.2008

+              ITA 1270/2008

%              03.11.2008

THE COMMISSIONER OF INCOME
TAX, DELHI-VIII                                         ...   Appellant

                                    - versus -


M/S DELUXE ENTERPRISES                                    ... Respondent

Advocates who appeared in this case:

For the Appellant : Mr Subhash Bansal

CORAM:-

HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE RAJIV SHAKDHER

1. Whether Reporters of local papers may be allowed to see the judgment ?

2. To be referred to the Reporter or not ?

3. Whether the judgment should be reported in Digest ?

BADAR DURREZ AHMED, J (ORAL)

1. This appeal under Section 260A of the Income Tax Act,

1961 has been filed against the order dated 22.02.2008 passed by the

Income Tax Appellate Tribunal in ITA No. 4022/Del/2007 pertaining

to the assessment year 2003-2004. The only question raised before the

Tribunal by the revenue in its appeal from the order passed by the CIT

(Appeals), pertains to the issue of computing the deduction under

Section 80-IB. According to the Assessing Officer the amount of

Rs 15,01,072/-, which was received by the assessee from its customers

on account of interest towards delayed payments, could not be regarded

as part of profits and gains arising from an industrial undertaking. He,

therefore, disallowed the said amount.

2. The Commissioner of Income Tax (Appeals) as well as the

Tribunal have held in favour of the assessee and against the revenue.

The Tribunal noted the decision of the Gujarat High Court in Nirma

Industries Limited v. Deputy CIT: 283 ITR 402 (Guj) and held that the

assessee was entitled to deduction in respect of the interest received

from customers on account of delayed payments. While the decision of

the Gujarat High Court in Nirma Industries (supra) was in respect of

the provisions of Section 80-I, the material provisions of 80-I and 80-

IB are the same for the purposes of the present appeal. After noting the

said decision, the Tribunal concluded that the interest received from

customers on delayed payments took the character of sale consideration

and would, therefore, constitute part of the profits and gains derived

from the industrial undertaking.

3. In Nirma Industries Limited (supra) it was held that while

computing the special deduction under Section 80-I, interest received

from trade debtors towards late payment of sale consideration is to be

included in the profits of the industrial undertaking. We are in full

agreement with the ratio laid down by the Gujarat High Court in Nirma

Industries Limited (supra) as also the conclusions arrived at by the

Tribunal after following the same. The ratio is clearly applicable to the

facts of the present case as also to the provisions of Section 80 -IB with

which the present appeal is concerned.

4. The Tribunal has also noted that since the CIT (Appeals) had

not given a finding that the payments to the extent of Rs 15,01,072/-

had been received by way of interest from customers on late payment

of sale consideration, it was necessary that the same be verified. For

this purpose, the Tribunal directed that the Assessing Officer shall

verify the facts in this regard and allow the deduction if interest had

been received on account of late payment of sale consideration. The

Tribunal allowed the payments subject to this verification.

5. We see no reason to interfere with the order passed by the

Tribunal. No substantial question of law arises for our consideration.

The appeal is dismissed.

BADAR DURREZ AHMED, J

RAJIV SHAKDHER), J November 03, 2008 SR