Ii)Whether In The Facts And Circumstances Of The Case The Itat Was Right In Law In Holding That The Alleged Income From The Pass Book Scheme Is Taxable In The Y v. Cit (225 Itr 802)?

O/TAXAP/344/2002 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 344 of 2002 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 ? ================================================================ UNITED PHOSPHOROUS LIMITED....Appellant(s)Versus JT.COMMISSIONER OF INCOME TAX....Opponent(s) ================================================================ Appearance: MRS SWATI SOPARKAR, ADVOCATE for the Appellant(s) No. 1MR SUDHIR M MEHTA, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIandHONOURABLE MR.JUSTICE K.J.THAKER Date : 11/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.While admitting the appeal on 24.12.2001, the following questions of law were formulated for our determination; “(i) Whether, in the facts and circumstances of the case the ITAT was right in law in holding that the alleged income from Advance License Benefit Receivable ("ALBR" for short) is taxable in the year under consideration even though the said income has accrued to the appellant in the subsequent years? (ii)Whether in the facts and circumstances of the case the ITAT was right in law in holding that the alleged income from the Pass Book Scheme is taxable in the year under consideration? (iii)Whether in the facts and circumstances of the case the ITAT was right in law in holding that premium of leasehold land cannot be allowed on proportionate basis spread over the period of lease, which is totally contrary to the decision of Hon’ble the Supreme Court in the case of Madras Industrial Investment Corporation Limited v. CIT (225 ITR 802)? (iv)Whether, in the facts and circumstances of the case, the ITAT was right in law in allowing deduction u/s.80M after deducting management expenses from the gross dividend received when no such expenses have been incurred by the appellant? (v)Whether, in the facts and circumstances of the case, the ITAT was right in law in not granting set off of interest expenditure against interest income for the purpose of calculating deduction u/s.80HHC of the Act? (vi)Whether, in the facts and circumstances of the case, the ITAT was right in law in setting aside for fresh adjudication the issue of the levy of interest u/s 234B of the Act though it was not specifically levied in the body of the assessment order and therefore the same could not be levied?" 2.Briefly stated, the facts are that the assessee had filed its return of income for the A.Y. 1996-97 declaring total income at Rs.Nil on 28.11.1996. Vide order dated 24.03.1999, the A.O assessed the income of the assessee at Rs.19,84,30,202/-. The assessee challenged the said order by filing appeal before the CIT(A). The CIT(A) partly allowed the appeal vide order dated 15.03.2000. Against the said order, the assessee filed appeal before the Appellate Tribunal. The Appellate Tribunal, vide order dated 13.03.2002, partly allowed the appeal. Being aggrieved by the order passed by the Appellate Tribunal, the present appeal has been preferred. 3.We have heard learned counsel for both the sides. Insofar as 2.Briefly stated, the facts are that the assessee had filed its return of income for the A.Y. 1996-97 declaring total income at Rs.Nil on 28.11.1996. Vide order dated 24.03.1999, the A.O assessed the income of the assessee at Rs.19,84,30,202/-. The assessee challenged the said order by filing appeal before the CIT(A). The CIT(A) partly allowed the appeal vide order dated 15.03.2000. Against the said order, the assessee filed appeal before the Appellate Tribunal. The Appellate Tribunal, vide order dated 13.03.2002, partly allowed the appeal. Being aggrieved by the order passed by the Appellate Tribunal, the present appeal has been preferred. 3.We have heard learned counsel for both the sides. Insofar as questions no.(i) & (ii) are concerned, the issues are already concluded by the decision of the Apex Court in the case of Commissioner of Income-tax v. Excel Industries Ltd., [2013] 358 ITR 295 wherein, it has been held that where any real business income has not accrued but only hypothetical income has accrued to the assessee, then Section 28(iv) of the Act would not be applicable. In view of the principle propagated by the Apex Court, the questions no.(i) & (ii) are answered in favour of the assessee and against the Revenue. 4.Insofar as question no.(iii) is concerned, the issue is already concluded by the decision of Apex Court in the case of Deputy Commissioner of Income-tax v. Sun Pharmaceuticals Ind. Ltd., [2010] 329 ITR 479 (Guj). In that case, the Appellate Tribunal found that the land in question was not acquired by the assessee. It was held that merely because the deed was registered, the transaction in question would not assume a different character. The lease rent was very nominal and by obtaining the land on lease, the capital structure of the assessee did not undergo any change. It was further held that the assessee only acquired a facility to carry on business profitably by paying nominal lease rent and that the lease rent paid by the assessee to GIDC was allowable as revenue expenditure. In view of the above principle, the question no.(iii) is answered in favour of the assessee and against the Revenue. 5.Insofar as question no.(iv) is concerned, the assessee has claimed deduction u/s.80M. However, the assessee has not shown any management expenditure or office expenditure, which was necessary for earning dividend. The Apex Court in the case of CIT v. United General Trust Ltd., 200 ITR 488, has held that relief u/s.80M must be allowed on net dividend after deducting proportionate management expenditure. Similarly, in the case of Distributor, Vadodara Pvt. Ltd. v. Union of India, 156 ITR 120, the Apex Court held that relief u/s.80M was not available on gross amount of dividend without deduction of proportionate management expenditure. Accordingly, question no.(iv) is answered in favour of the assessee and against the Revenue. 6.Insofar as question no.(v) is concerned, the issue is already concluded by the decision of the Apex Court in the case of ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income-tax, [2012] 343 ITR 89 (SC) wherein, it has been held that for the purpose of Section 80HHC of the Act, it is not the entire amount received by the assessee on sale of DEPB credit but, the sale value less the face value of the DEPB that will represent profit on transfer of DEPB credit by the assessee. Accordingly, the question no.(v) is answered in favour of the assessee and against the Revenue. 6.Insofar as question no.(v) is concerned, the issue is already concluded by the decision of the Apex Court in the case of ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income-tax, [2012] 343 ITR 89 (SC) wherein, it has been held that for the purpose of Section 80HHC of the Act, it is not the entire amount received by the assessee on sale of DEPB credit but, the sale value less the face value of the DEPB that will represent profit on transfer of DEPB credit by the assessee. Accordingly, the question no.(v) is answered in favour of the assessee and against the Revenue. 7.Insofar as question no.(vi) is concerned, the Appellate Tribunal has placed reliance upon the decision of the Apex Court in the case of CIT v. Ranchi Club Ltd., 164 CTR 200 wherein, it was held that in the absence of any specific mention by the assessing authority in the assessment order in respect of charging interest u/s.234A and 234B, no interest could be recovered merely by way of demand notice. However, subsequently, by Finance Act, 2001, Sections 140A and 234A/B were amended retrospectively with effect from 01.04.1989. In light of the above scenario, the Appellate Tribunal remitted the matter to the A.O for deciding the same afresh. In our opinion, the view taken by the Appellate Tribunal is just and appropriate considering the amendment of Section 234A/B of the Act. Accordingly, question no.(vi) is answered in favour of the assessee and against the Revenue. 8.In view of the aforesaid, the appeal stands disposed of. (K.S.JHAVERI, J.) (K.J.THAKER, J) Pravin/*