Commissioner Of Income Tax v. Nachmo Knitex Ltd

O/TAXAP/883/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 883 of 2006 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA ================================================================ 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 ? 4Whether 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 ? ================================================================ COMMISSIONER OF INCOME TAX Versus NACHMO KNITEX LTD ================================================================ Appearance: MR.VARUN K.PATEL, ADVOCATE for the Appellant MR SN SOPARKAR, SENIOR ADVOCATE for the RespondentMRS SWATI SOPARKAR, ADVOCATE for the Respondent ================================================================ CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA Date : 30/11/2013 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1]Feeling aggrieved and dissatisfied with the judgment and order dated 19.09.2005 passed by the learned Income Tax Appellate Tribunal (hereinafter referred to as “the ITAT”) in ITA No.1488/Ahd/2000 for A.Y. 1996-97, by which the learned ITAT has partly allowed the said appeal preferred by the assessee, the revenue has preferred the present appeal to consider the following substantial questions of law. [A] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was right in upholding the order of the CIT(A) directing to exclude sales-tax while computing total turnover for the purpose of deduction under Section 80HHC of the I.T. Act?law, the Appellate Tribunal was right in upholding the order of the CIT(A) directing to exclude sales-tax while computing total turnover for the purpose of deduction under Section 80HHC of the I.T. Act? [B] Whether the Appellate Tribunal is right in law and on fact in directing to exclude 90% of the net interest income as against the gross interest of Rs.2,13,31,237/- adopted by the Assessing Officer for the purpose of granting deduction u/s.80HHC?in directing to exclude 90% of the net interest income as against the gross interest of Rs.2,13,31,237/- adopted by the Assessing Officer for the purpose of granting deduction u/s.80HHC? [2]Heard Varun K. Patel, learned advocate appearing on behalf of the appellant – revenue and Mr.S. N. Soparkar, learned senior advocate appearing on behalf of the respondent – assessee. [3]At the outset, it is required to be noted that so far as the [B] Whether the Appellate Tribunal is right in law and on fact in directing to exclude 90% of the net interest income as against the gross interest of Rs.2,13,31,237/- adopted by the Assessing Officer for the purpose of granting deduction u/s.80HHC?in directing to exclude 90% of the net interest income as against the gross interest of Rs.2,13,31,237/- adopted by the Assessing Officer for the purpose of granting deduction u/s.80HHC? [2]Heard Varun K. Patel, learned advocate appearing on behalf of the appellant – revenue and Mr.S. N. Soparkar, learned senior advocate appearing on behalf of the respondent – assessee. [3]At the outset, it is required to be noted that so far as the question No(A) i.e. whether the Appellate Tribunal was right in upholding the order of the CIT(A) directing to exclude sales-tax while computing total turnover for the purpose of deduction under Section 80HHC of the I.T. Act is concerned, the same is squarely covered by the decision of the Hon’ble Supreme Court in the case of Commissioner of Income Tax Vs. Lakshmi Machine Works, reported in [2007] 290 ITR 667 (SC) by whichit is held by the Hon’ble Supreme Court that excise duty and sales tax also cannot form part of the “total turnover” under section 80HHC(3) of the I.T. Act. It is required to be noted that the issues / questions raised in the present appeal are for the period prior to insertion of section 80HHC(3) of the Income Tax Act. Applying the ratio laid down by the Hon’ble Supreme Court in the case of Commissioner of Income Tax Vs. Lakshmi Machine Works (supra), the question No.(A) is held against the revenue. [4]Now so far as question No.(B) i.e. whether the Appellate Tribunal is right in law and on fact in directing to exclude 90% of the net interest income as against the gross interest of Rs.2,13,31,237/- adopted by the Assessing Officer for the purpose of granting deduction u/s.80HHC is concerned, it is required to be noted that as such, the learned ITAT has relied upon the decision of the Special Bench of ITAT in the case of Lalsons Enterprises Vs. DCIT (Delhi) (SB), reported in 89 ITD 25. It is reported that the said decision has been approved by the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. Vs. Commissioner of Income Tax, reported in [2012] 343 ITR 89 SC. In the said decision, the Hon’ble Supreme Court has held that 90% of not the gross interest but only the net interest, which has been included in the profits of the business of the assessee as computed under the heads “Profits and gains of business or profession” is to be deducted under clause (1) of Explanation (baa) to Section 80 HHC for determining the profits of business. Under the circumstances, as such, it cannot said that the learned ITAT has committed any error in relying upon the decision of the Special Bench of ITAT in the case of Lalsons Enterprises Vs. DCIT (Delhi) (SB) (supra). Applying the ration laid down by the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. Vs. Commissioner of Income Tax (supra) to the facts of the present case, the question No.(B) is answered against the revenue. [5]In view of the above, the present appeal deserves to be dismissed and accordingly is dismissed. (M.R.SHAH, J.) (R.P.DHOLARIA,J.)