The deduction within the meaning of explanation (baa) was permissible only on gross interest and not net interest.

K. Raviraja Pandian, J.

The revenue has filed the appeal framing the following questions of law :

“1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the reduction of 90% of the receipts from interest should be taken into account after adjustment of expenses for the purpose of computing the profits of the business under section 80HHC.

2. Whether on the facts and in the circumstances of the case, the Tribunal was right in equating income from commission, rent, brokerage to income from interest with respect to incurring of expenditure?”

2. The material facts of the case proceed as follows : The assessee filed return of income claiming deduction under section 80HHC of the Income Tax Act, 1961. The assessing officer finalised the assessment after, inter alia, deducting 90% interest received for the purpose of 80 HHC deduction. Aggrieved by the assessment order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) on the ground that the interest earned from the sister concern is part of the appellants business profits and therefore the same cannot be reduced. As an alternative plea, it was contended that the interest paid to the sister concern for the loans obtained from them should be deducted from the interest received from them and only the net amount should be taken. The Commissioner of Income Tax (Appeals) dismissed the appeal on that issue. The assessee filed a further appeal before the Income Tax Appellate Tribunal. The Tribunal held that since there was bound to be an expenditure directly relatable in earning such income, only the net amount of interest should be taken. Aggrieved by the order of the Tribunal, the present appeal is filed.

3. Learned counsel for the revenue submitted that the Tribunal has erred in bringing a new concept of “net interest”, which is not contemplated under the statute. In an enactment, more so, in a fiscal enactment, the statutory provision has to be interpreted, having regard to the terminology employed in the provision. It is impermissible for the Tribunal to add or delete some words into or from the provision for the purpose of interpretation. The terminology employed in clause (baa) of the explanation to Section 80HHC is very clear to the effect that any receipt by way of brokerage, commission, interest, rent, charges or any other receipt of similar nature included in such profit. So, the incorporation of net interest by the Tribunal is erroneous and the order so made has to be set aside. However, the learned counsel appearing for the assessee has submitted that in the absence of any clear terminology as to whether the term interest denotes gross or net interest, having regard to the scheme of the Act, it has to be construed only as a net interest and netting of interest is permissible. For that purpose, he relied on a decision of the Delhi High Court in the case of CIT v. Shri Ram Honda Power Equip, (2007) 289 ITR 475.

4. We heard the argument of the learned counsel on either side and perused the materials on record.

5. The explanation to Section 80HHC in clause (baa) defines “profits of the business” for the purpose of that section. That clause reads thus :

“(baa) ‘profits of the business’ means the profits of the business as computed under the head ‘Profits and gains of business or profession’ as reduced by—

.(1) ninety per cent. of any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits ; and

.(2) the profits of any branch office, warehouse or any other establishment of the assessee situate outside India.”

The said clause does not refer to net interest. It refers, inter alia, to the interest included in the profits and gains of the business or profession.

6. From the appellate order, it could be seen that the receipt of the income has not been