Following Substantial Question Of Law v. O/Taxap/1640/2009 Judgment

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1640 of 2009 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH sd/- and HONOURABLE MR.JUSTICE R.P.DHOLARIA sd/- =============================================COMMISSIONER OF INCOME TAX-II....Appellant(s)Versus MAYUR POLYPACK PVT LTD....Opponent(s) =============================================Appearance:MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1MRS SWATI SOPARKAR, ADVOCATE for the Opponent(s) No. 1 ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAHandHONOURABLE MR.JUSTICE R.P.DHOLARIA Date : 30/11/2013 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0.Feeling aggrieved and dissatisfied with the impugned judgment and order passed by learned Income Appellate Tribunal (hereinafter referred to as the ITAT) passed in C.O. No. 315 /AHD/ 2004 in ITA No. 3094/AHD/2004 for the AY 2001-02 dated 13.2.2008, Revenue has preferred present appeal. 2.0.At the time of admission, the Division Bench has framed the following substantial question of law. “Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) directing to reduce the net interest i.e. after reducing interest expenditure incurred by the assessee, for the purpose of Explanation (baa) to Section 80 HHC of the Act?” 3.0.Heard Shri Manish R. Bhatt, learned Senior advocate for the appellant- revenue and Shri S.N. Soparkar, learned Senior Advocate for the respondent- assessee. 5.0.Considering the impugned judgment and order passed by the learned ITAT and while directing Assessing Officer to recompute the deduction under Section 80HH, 80I and 80IA of the Income Tax Act, 1961 holding that the interest is eligible thereon, the learned ITAT has relied upon the decision of the ITAT Delhi Special Bench in the case of Lalsons Enterprises Vs. DCIT reported in (89 ITD 25). It is reported that the decision of the Special Bench in the case of Lalsons Enterprises (supra) 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 case of ACG Associated Capsules Pvt. Ltd (supra) it is held by the Hon’ble Supreme Court in the said decision 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 80HHC for determining the profits of business. 6.0.Applying the law laid down by the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd (supra) the question of law raised in the present appeal is held against the Revenue. Consequently present appeal deserves to be dismissed and is accordingly dismissed. No costs. sd/-(M.R.SHAH, J.) Kaushik sd/-(R.P.DHOLARIA,J.)