Asstt.commissioner Of Income Tax v. Sonal Gems....opponent(S

O/TAXAP/759/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 759 of 2006 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ ASSTT.COMMISSIONER OF INCOME TAX....Appellant(s) Versus SONAL GEMS....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1RULE SERVED for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIandHONOURABLE MR.JUSTICE K.J.THAKER Date : 21/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.This Tax Appeal u/s.260A of the Income-tax Act, 1961 is filed against the judgment and order dated 02.12.2005 passed by the Income Tax Appellate Tribunal in ITA No.2767/AHD/2003 whereby, the appeal filed by the assessee was allowed. 2.Briefly stated, the facts are that the assessee-company is engaged in the business of manufacturing and import / export of diamonds. The assessee filed its return of income on 29.10.2001declaringtotalincomeof Rs.19,10,410/- for the Assessment Year 2001-2002. The assessment was taken under scrutiny and by order dated 31.12.2002, the income was determined at Rs.30,44,350/-. 3.Being aggrieved by the order passed by the A.O., appeal was preferred before the CIT(A). By order dated 10.04.2003, the CIT(A) dismissed the appeal. Against the said order of the CIT(A), appeal was preferred before the Appellate Tribunal. By impugned judgment and order dated 02.12.2005, the Appellate Tribunal allowed the appeal filed by the assessee. Hence, this appeal. 4. We have heard learned counsel for the Revenue. Though served, none appears on behalf of the assessee. The appeal was admitted vide order dated 10.11.2006, which reads as under; “Heard learned counsel for the appellant. The appeal is admitted in terms of the following questions:- (i) Whether on the facts and in the circumstances of the case, and in law, the Income Tax Appellate Tribunal is right in directing the Assessing Officer to allow deduction under Section 80HHC of the Income Tax Act on the export of rejected diamonds holding that turnover of rough and rejected diamonds is to be included while working out export turn over ignoring the clear provisions of Section 80HHC(2)(b)(ii) of the Income Tax Act under which unprocessed mineral and ores are not admissible for deduction under Section 80HHC of the Income-tax Act? (ii) Whether, on the facts and in the circumstances of the case, and in law, the Income Tax Appellate Tribunal is right in directing the Assessing Officer to allow deduction under Section 80HHC of the Income Tax Act by including Rs. 12,82,675/- received by the assessee on account of exchange rate of fluctuation without considering provisions of Rule 115 of the Income Tax Rules?ýý Issue notice to the other side. Paper book be filed within 3 months. List the appeal for final hearing after 3 months.” (ii) Whether, on the facts and in the circumstances of the case, and in law, the Income Tax Appellate Tribunal is right in directing the Assessing Officer to allow deduction under Section 80HHC of the Income Tax Act by including Rs. 12,82,675/- received by the assessee on account of exchange rate of fluctuation without considering provisions of Rule 115 of the Income Tax Rules?ýý Issue notice to the other side. Paper book be filed within 3 months. List the appeal for final hearing after 3 months.” 5.Insofar question no.1 is concerned, the same is already concluded by a decision of this Court rendered in Tax Appeal No.62/2006 decided on 28.09.2006, which is reproduced hereunder; “Heard learned counsel for the parties. The following questions are proposed for admission in this appeal: “A. Whetheronthefactsand circumstances of the case, and in law the Appellate Tribunal was justified in holding that the exchange rate difference pertaining to exports made in earlier years was `profits of business' within the meaning of Sec.80 HHC of the Act? B.Whether on the facts and in the circumstances of the case, and in law the Appellant Tribunal was justified in holding that the issue was squarely covered by the decision of the jurisdictional High Court in the case Hindustan Trading Corporation (160 ITR 15 (Guj) when the issue before the High Court in the said case was totally different? C.Whether on the facts and in the circumstances of the case, and in law the Appellate Tribunal was justified in holding that “any other receipt of a similar nature” as mentioned in explanation (baa) to Section 80HHC(4B) would not include receipt on account of exchange rate difference? D. Whetheronthefactsand circumstances of the case, and in law the Appellate Tribunal was justified in holding that the interest received on Fixed Deposits should be netted out of the purposes of computation of deduction u/s.80HHC? E. Whetheronthefactsand circumstances of the case, and in law the Appellate Tribunal was justified in holding that the export of rejected and rough diamonds are eligible for deduction u/s.80HHC of the Act? So far as Questions A, B and C are concerned, similar questions were considered in the case of Commissioner of Income Tax vs. Amba Impex (2006) 282 ITR 144 (Guj) and the matter was sent back to the Tribunal to decide the issue in the light of the decision in Amba Impex (supra). Therefore, we remit the matter back to the Tribunal so far as the issues raised in questions A, B and C are concerned. The Tribunal is directed to decide the issues afresh in light of our decision in Commissioner of Income Tax vs. Amba Impex (2006) 282 ITR 144 (Guj). So far as Question E is concerned, it relates to deduction under Section 80HHC on the rejected rough diamonds, which are exported. When admitted facts are that they are exported, they are eligible for deduction under Section 80HHC, therefore, no case is made out for admission of this appeal in case of Question E also. We, therefore, admit this appeal in terms of question D only, which reads as under: “Whether on thefactsand circumstances of the case, and in law the Appellate Tribunal was justified in holding that the interest received on Fixed Deposits should be netted out of the purposes of computation of deduction u/s.80HHC?” Issue notice to the other side. Paper Book be filed within three months. List the appeals for final hearing after three months.” So far as Question E is concerned, it relates to deduction under Section 80HHC on the rejected rough diamonds, which are exported. When admitted facts are that they are exported, they are eligible for deduction under Section 80HHC, therefore, no case is made out for admission of this appeal in case of Question E also. We, therefore, admit this appeal in terms of question D only, which reads as under: “Whether on thefactsand circumstances of the case, and in law the Appellate Tribunal was justified in holding that the interest received on Fixed Deposits should be netted out of the purposes of computation of deduction u/s.80HHC?” Issue notice to the other side. Paper Book be filed within three months. List the appeals for final hearing after three months.” 6.Insofar as question no.2 is concerned, the issue is already concluded by the judgment of the Apex Court rendered in the case of Commissioner of Income-Tax v. Priyanka Gems, [2014] 367 ITR 575 (Guj). In that case, the source of the income of the assessee was the export. On the basis of accrual, income was already reflected in the assessee’s account on the date of the export at the prevailing rate of exchange. Further, the income was earned merely on account of foreign exchange fluctuation. It was held that such income, therefore, was directly related to the assessee’s export business and could not be said to have been removed beyond the first degree and accordingly, the assessee was entitled to deduction u/s.80HHC. O/TAXAP/759/2006 JUDGMENT 7.Since the issues are already concluded vide the judgments rendered in the above cases, we are not assigning elaborate reasons while disposing of this appeal. 8.Accordingly, the questions raised in this appeal is answered in favour of the assessee and against the Revenue. The appeal stands disposed of accordingly. (K.S.JHAVERI, J.) (K.J.THAKER, J) Pravin/*