COMMISSIONER OF INCOME TAX V. M/S AARVEE DENIMS & EXPORTS LIMITED

TAXAP/1793/2010

AI Insights

The case revolves around a tax appeal by the Commissioner of Income Tax against M/S Aarvee Denims & Exports Limited concerning the interpretation of Section 115JB of the I.T. Act, 1961. The core issue was whether the Appellate Tribunal erred in holding that the calculations for computing deduction under Clause (iv) of Section 115JB should be based on adjusted book profit rather than the income assessable under the head 'Profits and gains of business and profession'. The High Court of Gujarat, referencing the Supreme Court's decision in Ajanta Pharma Ltd. v. Commissioner of Income Tax, resolved the issue in favor of the respondent, emphasizing the distinction between 'eligibility' and 'deductibility' of profits as outlined in the relevant sections of the I.T. Act.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 729357 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 13-09-2012
• Assessment Year: misc
• Other Referred Cases: Ajanta Pharma Ltd. v. Commissioner of Income Tax (2010) 327 ITR 305
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SAURABH SOPARKAR; JAIMIN DAVE; BHOOMI THAKORE; SWATI SOPARKAR
• Assessee Lawyers: B HATT; MAUNA BHATT
• Keywords: Book profit; Deduction; Income Tax; Section 80HHC
• Section: 115JB

Judgement Text

"TAXAP/1793/2010 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1793 of 2010 For Approval and Signature: HONOURABLE MR.JUSTICE AKIL KURESHI HONOURABLE MS.JUSTICE HARSHA DEVANI ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 T o be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the 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 ? 5 Whether it is to be circulated to the civil judge ? ========================================= COMMISSIONER OF INCOME TAX - Appellant(s) Versus M/S AARVEE DENIMS & EXPORTS LIMITED - Opponent(s) ========================================= Appearance : MR MR BHATT, SR. COUNSEL with MRS MAUNA M BHATT for Appellant MR SAURABH SOPARKAR, SR. COUNSEL with MR JAIMIN DAVE & MS BHOOMI THAKORE with MRS SWATI SOPARKAR for Respondent ========================================= CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS.JUSTICE HARSHA DEVANI Date : 13/09/2012 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The present T ax Appeal has been admitted for consideration of the following substantial question of law : “ Whether on the facts and in the circumstances of the case and in law the Appellate Tribunal erred in holding that for computing deduction under Clause (iv) of Section TAXAP/1793/2010 2/3 JUDGMENT 115JB of the I.T. Act, 1961 the calculations are to be made with respect to adjusted book profit and not with respect to income assessable under the head “ Profits and gains of business and profession”?” 2. While further reading the learned counsel for the parties, we noticed that this issue is covered by the decision of the Apex Court in the case of Ajanta Pharma Ltd. v. Commissioner of Income Tax, reported in (2010) 327 ITR 305, wherein the question that the Supreme Court considered was : whether for determining the “book profits” in terms of section 115JB, the net profits as shown in the profit and loss account have to be reduced by the amount of profits eligible for deduction under section 80HHC or by the amount of deduction under section 80HHC? In context of such a question, the Apex Court has observed as under : “..... If the dichotomy between “eligibility” of profit and “deductibility” of profit is not kept in mind then section 115JB will cease to be a self-contained code. In section 115JB, as is section 115JA, it has been clearly stated that the relief will be computed under section 80HHC(3)(3A), subject to the conditions under sub-sections (4) and (4A) of that section. The conditions are only that the relief should be certified by the chartered accountant. Such condition is not a qualifying condition but it is a compliance condition. Therefore, one cannot rely upon the last sentence in clause (iv) of Explanation to section 115JB (subject to the conditions specified in sub- sections (4) and (4A) of that section) to obliterate the difference between “eligibility” and “deductibility” of profits as contended on behalf of the Department.” 3. Learned counsel for the revenue was also not in a position to dispute this position. The question is, therefore, TAXAP/1793/2010 3/3 JUDGMENT answered in the negative, that is, against the revenue and in favour of the assessee. The appeal, accordingly, stands disposed of with no order as to costs. [AKIL KURESHI, J.] [HARSHA DEVANI, J.] parmar* "