THE COMMISSIONER OF INCOME TAX Vs. DELUXE ENTERPRISES

JUDGEMENT

(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 custome Rs. 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, and held that the assessee was entitled to deduction in respect of the interest received from custome Rs. 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 custome Rs. 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 debto Rs. 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.