The Commissioner Of Income Tax-8 v. M/S.flat Products Equipments (I) Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO. O. C. J. INCOME TAX APPEAL NO.1929 OF 2009 The Commissioner of Income Tax-8. ...Appellant. Vs. M/s.Flat Products Equipments (I) Ltd. ...Respondent. .... Mr.P.D.Shah with Mr. Jas Sanghavi i/b. PDS Legal for the Appellant.Ms.Suchitra Kamble for the Respondent. .....CORAM : DR.D.Y.CHANDRACHUD AND J.P.DEVADHAR, JJ. April 9, 2010. P.C. : The appeal has been admitted on the following substantial questions of law : “(1) Whether on the facts and in the circumstances of the case and in law, the ITAT is justified in holding that net amount of interest be deducted from the profit of the business to work out deduction u/s.80HHC of the Income Tax Act, 1961. -(2) Whether on the facts and in the circumstances of the case and in law, the ITAT is justified in holding that Sales Tax refund received by the assessee is to be treated as part of export business for the purpose to workout deduction u/s.80HHC of the IT act, 1961.” Counsel appearing on behalf of the Revenue and Counsel appearing on behalf of the Assessee are agreed in stating before the Court that the first question stands covered in favour of the Revenue and against the Assessee by the judgment of this Court dated 18/19[th] March 2010 in CIT vs.Asian Star Co.Ltd. (Income Tax Appeal 200 of 2009). In the circumstances, the first question of law is answered in favour of the Revenue and against the Assessee. In so far as the second question of law is concerned, the record before the Court shows that the CIT (Appeals) held that sales tax was liable to be excluded from the total turnover for the purpose of computing the deduction under Section 80HHC. Though the second question of law as framed pertains to a sales tax refund, it is evident from paragraph 4.1 of the order passed by the Assessing Officer on 28 February 2005 that the issue was not relating to the sales tax refund, but the exclusion of sales tax in the amount of Rs.64,71,369/- from the total turnover for the deduction under Section 80HHC. Against the order of the CIT (Appeals) holding that sales tax was liable to be excluded from the total turnover, no appeal was filed by the Revenue. It is common ground between Counsel appearing on behalf of the Revenue and Counsel appearing on behalf of the Assessee that ITA 668/Mum/06 filed before the Tribunal for Assessment Year 2002-03 was of the assessee. Consequently, the issue as to whether the sales tax was liable to be excluded from the total turnover did not fall for determination before the Tribunal, there being no appeal by the Revenue against the order of the CIT (Appeals). The grounds of appeal raised by the Assessee, a copy whereof is on the record would show that as a matter of fact, it was the assessee who has raised grounds of appeal in so far as the first question is concerned. In that view of the matter, the discussion of the Tribunal in paragraph 8 of its judgment is on a point which did not arise for determination by the Tribunal. We also clarify that the position in law that the sales tax is liable to be excluded from the total turnover for the purpose of Section 80HHC is now settled in view of the judgment of Division Bench of this Court in CIT vs., Sudarshan Chemicals Industries Ltd., (2000) 245 ITR 769 and by the judgment of the Supreme Court in CIT vs. Laxmi Machine Works, (2007) 290 ITR 667. For the reasons aforesaid, the appeal filed by the Revenue shall have to be allowed and is accordingly allowed in so far as the first question of law is concerned. The appeal shall stand disposed of in these terms. There shall be no order as to costs. ( Dr.D.Y.Chandrachud, J.) ( J.P.Devadhar, J.)