COMMISSIONER OF INCOME TAX Vs. JYOTI APPARELS

JUDGEMENT

(1.) FRAMED the following substantial question of law for determination :

(2.) HOWEVER , one other plea of Dr. Narayanan requires to be dealt with. This was on the principle of consistency. It is stated that the issue first arose in the asst. yr. 1990 -91, when in the absence of cl. (baa) the interest income could be claimed as business income. The CIT(A) had overruled the AO and held in favour of the assessee that this was "very closely connected with the export business." The Department had accepted this order and thereafter right upto asst. yr. 1996 -97 the income from the FDRs was treated as business income. However, in the asst. yr. 1997 -98 the (decision of) AO held that the interest income did not have nexus with the export business and could not be treated as business income. The CIT(A) reversed the AO and held that the past practice of allowing such interest as business income had to business income as the FDRs were made for the purpose of export business i.e. for overdraft facility and for obtaining export quota. Therefore such interest income had to be included in the profit of business under Expln. (baa) to s. 80HHC. For the asst. yr. 1998 -99 the AO once again held that interest income was not business income. This was upheld basis of the earlier orders of the Tribunal, on the principle of consistency. Dr. Narayanan has also handed over to us appeal and holding that the interest income from FDRs was business income. Thus for asst. yr. 1999 -2000 also the AO held against the assessee while the CIT(A) and the Tribunal have held in favour of the assessee.

(3.) WHILE the assessee may have a point on the issue of consistency, the change in the law brought about w.e.f. 1st interest income in the present cases should be treated as income from other sources for the purposes of s. 56 but also be allowable as deduction under Expln. (baa). That is not possible. As has been explained hereinabove, once a receipt is treated as income from other sources it goes out entirely from the ambit of s. 80HHC. In the facts of the present case, it must be held that the approach of the Department in the years previous to asst. yr. 1997 -98 was not in consonance with vs. Shri Ram Honda Power Equip. & Ors. (2007) 207 CTR (Del) 689 - -Ed.] of which these appeals formed part. We are of the view that, in the facts and circumstances of the present case, the AO was justified in taking a different view in the years 1997 -98 and 1998 -99. The Tribunal was therefore in error in allowing the deduction only on the principle of consistency.