Delhi High Court
Pr. Commissioner Of Income Tax vs American Express India Pvt. Ltd. on 27 August, 2018
$~6
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ INCOME TAX APPEAL No. 422/2018
Date of decision: 27th August, 2018
PR. COMMISSIONER OF INCOME TAX ..... Appellant
Through Mr. Raghvendra Singh, Jr. Standing Counsel
versus
AMERICAN EXPRESS INDIA PVT. LTD. ..... Respondent
Through Nemo.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE CHANDER SHEKHAR
SANJIV KHANNA, J. (ORAL):
Impugned order dated 6th October, 2017 passed by the Income Tax
Appellate Tribunal (Tribunal, for short) dismisses the appeal preferred by
the Revenue against the order passed by the Commissioner of Income Tax
(Appeals) deleting penalty imposed by the Assessing Officer under Section
271(1)(c) of the Income Tax Act, 1961 (Act, for short).
2. Penalty under Section 271(1)(c) of the Act was imposed by the
Assessing Officer in relation to return of income filed by the assessee-
American Express India Private Limited (respondent-assessee, for short) in
respect of Assessment Year 2002-03 on the ground that while computing
deduction under Section 10B of the Act they had wrongly netted the interest
ITA No. 422/2018 Page 1 of 4
earned on the income tax refund of Rs.1,52,29,404/- against the interest
paid. The interest paid on the income tax refund should have been treated as
income from other sources and could not have been netted or set off from
the interest paid to compute the deduction under Section 10B of the Act.
3. In the present appeal, we are not concerned with computation of
quantum of deduction under Section 10B of the Act. The question relates to
discharge or satisfaction of onus under Explanation 1 to Section 271 (1)(c)
of the Act.
4. It is an accepted and admitted position that the respondent-assessee, a
100% export oriented unit, was engaged in business of accounting data
processing for its various customers, including American Express World
Wide. The respondent-assessee did not have any other business income and
was claiming deduction under Section 10B from Assessment Years 1996-97
to 2005-06.
5. On the question of netting of interest earned on the income tax refund
against interest paid, the stand of the respondent-assessee was that deduction
under Section 10B was to be computed in terms of formula prescribed in the
Section. Reliance was placed on decisions under Section 80HHC of the Act
to draw distinction between Section 10B and Section 80I/80HH of the Act.
Netting of interest taxable under the head "income from business" was
permissible and allowed for computation of deduction under Section 80HHC
of the Act. Some decisions of the Tribunal were relied upon. It was stated
that the respondent-assessee had to pay interest on account of overdraft
facility, which they had to avail only to pay the income tax demand. Ergo,
in absence of any income other than exempt income under Section 10B of
ITA No. 422/2018 Page 2 of 4
the Act, interest earned on the income tax refund was directly linked and
connected with the business income of the respondent-assessee.
6. The respondent-assessee in the quantum/assessment proceedings had
succeeded before the Commissioner of Income Tax (Appeals), which
decision was reversed by the Tribunal holding that the interest earned on the
income tax refund was to be taxed under the head "income from other
sources" and was not eligible for deduction under Section 10B of the Act.
7. There is no dispute or debate that the respondent-assessee had
specifically declared and stated in the income tax return that they had netted
the interest received on the income tax refund from the interest paid for the
purpose of computing deduction under Section 10B of the Act. Material
facts were clearly disclosed, and not concealed and withheld.
8. The Tribunal has referred to the decision of the Supreme Court in MAK
Data Private Limited versus CIT, (2013) 359 ITR 593 (SC) and decision of
the Delhi High Court in CIT versus Zoom Communication Private Limited,
(2010) 327 ITR 510 (Delhi), to accept that the respondent-assessee had
discharged the onus to establish its bona fide while making claim for
deduction/exemption under Section 10B of the Act by netting of interest
received from Income Tax Department, from interest paid to the bank to
make payment of tax to the Income Tax Department. Clearly, there was a
connect and link between the interest paid to the bank, which was business
expenditure, and interest received from the Income Tax Department.
Referring to factual matrix, the Tribunal has accepted the reasoning and
finding given by the Commissioner of Income Tax (Appeals) that the
conduct of the respondent-assessee in netting of income received from
ITA No. 422/2018 Page 3 of 4
interest paid was bona fide. The said finding is a finding of fact and no
substantial question of law arises.
9. In view of the aforesaid factual background, we do not think that the
order passed by the Tribunal upholding the order of the Commissioner of
Income Tax (Appeals) deleting penalty under Section 271(1)(c) requires
interference. The appeal has no merit and is dismissed in limine, without
any order as to costs.
SANJIV KHANNA, J.
CHANDER SHEKHAR, J.
AUGUST 27, 2018
b/VKR
