M/S.tvs Motor Company Limited29, Haddows Road,Chennai – 600 006 v. Assistant Commissioner Of Income Tax,Company Circle – Iii(2), Chennai – 600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 29.01.2019 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARI AND THE HON'BLE DR.JUSTICE ANITA SUMANTH Tax Case No.1799 of 2008 M/s.TVS Motor Company Limited29, Haddows Road,Chennai – 600 006. .... Appellant/Appellant Vs .... Respondent/Respondent Assistant Commissioner of Income Tax,Company Circle – III(2), Chennai – 600 034. Tax Case Appeals filed under Section 260A of the IncomeTax Act, 1961 against the order of the Income Tax AppellateTribunal, Madras 'C' Bench, Chennai, dated 22.05.2008 made inITA No.792/Mds/2007 for the Assessment Year 2003-04, against theorder of the Commissioner of Income Tax (Appels)-VIII, dated29/1/2007, chennai in ITA.No.32/06-07-Tr6/A VIII against theorder of the Assistant Commissioner of Income Ax company circleIII(2), Chennai-34 dated 6.3.2006 in PA No/GIR No.32024 For Appellant : Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyar PadmanabhanFor Respondent : Mr.M.Swaminathan, Sr. Standing Counsel J U D G M E N T (Delivered by DR.ANITA SUMANTH,J) The assessee is in appeal before us challenging an order ofthe Income Tax Appellate Tribunal (in short 'Tribunal') dated22.05.2008 relating to Assessment Year 2003-04. 2. The following substantial questions of law have beenframed and admited by this Court for our adjudication: '1. Whether on the facts and circumstances of thecase, the Tribunal was right in law in holding thatscrap sales and labour charges should be included in thetotal turnover for the purpose of computation ofdeduction under section 80HHC of the Act? 2. Whether on the facts and circumstances of thecase, the Tribunal was right in law in holding that theappellat is not entitled to deduction under section80HHC of the Act in respect of the interest incomeearned out of business operations?' 3. Heard Mr.R.Vijayaraghavan, learned counsel appearing forthe appellant/assessee and Mr.M.Swaminathan, learned SeniorStanding Counsel appearing for the respondent/Revenue. 4. Both learned counsel concur that as far as questionNo.1 is concerned, the same has been considered by us andanswered in favour of the assessee in the case ofM/s.Rajapalayam Mills Ltd., V. The Deputy Commissioner ofIncome Tax (T.C.A.No.342 of 2009 dated 02.01.2019) following thedecision of the Supreme Court in the case of Commissioner ofIncome Tax VII, New Delhi V. Punjab Stainless steel Industries((2014) 15 SCC 129). 5. Accordingly, substantial question of law No.1 isanswered in favour of the assessee and against the Revenue. 6. As far as substantial question of law No.2 isconcerned, 90% of the interest income would have to be excludedfrom the ambit of the profits of the business in the computationof relief under section 80HHC of the Act in the light of clause(baa) under the Explanation to section 80HHC. 7. Having said so, the Supreme Court in the case of ACGAssociated Capsules (P) Ltd. V. Commissioner of Income Tax((2012) 67 DTR 205), settles the position that what requires tobe excluded from the profits of the business is only the net https://hcservices.ecourts.gov.in/hcservices/ figure of all items referred to in clause (baa) includinginterest. Thus, the net, and not gross interest, will bereduced in the computation of relief under section 80HHC. 8. The second substantial question of law is answered infavour of the Revenue and against the assessee. The re-computation, as aforesaid, will be effected by the AssessingAuthority within a period of three (3) months from the date ofreceipt of a copy of this order after affording an opportunityto the assessee in this regard. 9. This appeal is disposed of in the above terms with noorder as to costs. Sd/-Assistant Registrar(CS-VIII)//True copy//Sub Assistant RegistrarslTo 1. The Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai. 2. The Commissioner of Income Tax (Appeals) VIII, Chennai figure of all items referred to in clause (baa) includinginterest. Thus, the net, and not gross interest, will bereduced in the computation of relief under section 80HHC. 8. The second substantial question of law is answered infavour of the Revenue and against the assessee. The re-computation, as aforesaid, will be effected by the AssessingAuthority within a period of three (3) months from the date ofreceipt of a copy of this order after affording an opportunityto the assessee in this regard. 9. This appeal is disposed of in the above terms with noorder as to costs. Sd/-Assistant Registrar(CS-VIII)//True copy//Sub Assistant RegistrarslTo 1. The Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai. 2. The Commissioner of Income Tax (Appeals) VIII, Chennai 3. The Assistant Commissioner of Income Tax Company circle III(2), Chennai-34 Tax Case No.1799 of 2008 SSD(CO) GMY(07/03/2019)