1. This appeal by the assessee filed under section 260A of the Income-tax Act, 1961 (for short, “the Act”) is directed against the order dated September 26, 2002, passed by the Income-tax Appellate Tribunal (hereinafter referred to as “the Tribunal”), whereby the appeals filed by the Revenue against the order of the Commissioner of Income-tax (Appeals) (for brevity, the “CIT (Appeals)”) were allowed and the claim of the assessee rejected.
2. According to learned counsel for the appellant, the following three substantial questions of law are involved in the appeal and, therefore, the same deserves to be admitted:
“(i) Whether the Tribunal, on the facts and in the circumstances of the case, erred in law in not dismissing the appeals of the Department/Revenue in view of the Board's Circular No. F. No. 279/126/98-ITJ, dated March 27, 2000;?
(ii) Whether, on an application of the correct principles of law and in view of the judicial pronouncements of the Supreme Court and High Court(s), was the Tribunal justified in law in holding that the income of the assessee-appellant on account of temporary leasing of asset for commercial exploitation was taxable under the head ‘Property income’ and not ‘Business income’?
(iii) Whether on a correct and proper interpretation of the provisions of section 80HHC of the Act and application thereof to the facts and circumstances of the case, was the Tribunal legally correct in holding that the claim for deduction in respect of income from FDRs was not sustainable despite contrary and consistent view having been expressed by the Bombay High Court in the case of CIT v. Paramount Premises (P.) Ltd., [1991] 190 ITR 259 and Commissioner Of Income-Tax v. Nagpur Engineering Co. Ltd., [2000] 245 ITR 806 against which the S.L.P of the Department/Revenue stood dismissed as reported in Commissioner Of Income-Tax v. Nagpur Engineering Co. Ltd., [2000] 244 ITR (St.) 54?”
3. Having heard learned counsel for the appellant, we are of the view that none of the questions raised is a question of law much less a substantial question of law and, therefore, the appeal deserves to be dismissed.
4. As regards question No. (i), it is urged that in view of the Board's Circular No. F-279/126/98-ITJ, dated March 27, 2000, the appeals filed by the Department were not maintainable because the tax effect did not exceed Rs. 1,00,000 in each assessment year and, therefore, according to the circular, the Department could not prefer an appeal. From the perusal of the order of the Tribunal, it is clear that no such plea was raised before the Tribunal and, therefore, we are not allowing the assessee to raise this plea for the first time before us.
5. In any case, the Board's circular is only an instruction issued to the income-tax authorities not to file appeals where the tax effect is less than Rs. 1,00,000. The Tribunal is not bound by any such instruction and once the Department files an appeal, the Tribunal was bound to decide the same on the merits. This question, in our opinion, is not a question of law.
Re. (ii):
6. The assessee had purchased land with building for Rs. 46,60,000 on April 11, 1992, and a total investment of Rs. 14,80,319 had been made during the relevant assessment year for further construction of the building. This property was let out to its sister concern, M/s. Swati H/L Industries, in which the assessee's husband and her sons were partners. Its income was shown under the head, “Business income”. The assessing authority treated this income as “rental income” since the property had been leased out and the same was taxed under the head, “Property income.” The Commissioner of Income-tax (Appeals) reversed the finding and the Tribunal, in appeal, affirmed the finding of the Assessing Officer. Since the property had been leased out to the sister concern and the assessee was receiving rent therefrom, the assessing authority as well as the Tribunal were right in holding that the income received by way of rent, could not be treated as “business income” particularly when leasing out of such properties was not the business of the assessee. This issue also does not involve any substantial question of law.
Re. (iii):
7. This issue relates to the inclusion of interest as part of the assessee's “business income” for working out the deduction claimed under section 80HHC of the Act. The total interest received by the assessee during the relevant assessment year was Rs. 6,33,454 and the total interest paid by the assessee was Rs. 4,12,982. The Assessing Officer was of the view that 90 per cent of the gross amount of interest of Rs. 6,33,454 was liable to be deducted from the profits of the business for the purpose of deduction. He, therefore, reduced the quantum of deduction under section 80HHC of the Act accordingly. The Commissioner of Income-tax (Appeals), however, took a different view in appeal and allowed 90 per cent, of the amount of interest to be deducted after deducting a sum of Rs. 4,12,982 which had been paid by the assessee as interest during the assessment year. The Tribunal again affirmed the view of the Assessing Officer holding that 90 per cent, of the interest that was deductible for the claim under section 80HHC of the Act was from the gross interest received by the assessee and that the amount of interest paid by the assessee could not be deducted therefrom. A plain reading of clause (baa) of Explanation to section 80HHC of the Act makes this aspect quite clear and we are of the view that the Tribunal was right in disallowing the claim of the assessee in this regard.
8. Since no substantial question of law arises, the present appeal is dismissed.