COMMISSIONER OF INCOME TAX V. M/S. MILMET LABORATORY PVT.LTD

TAXAP/1043/2006

AI Insights

The case involves the Commissioner of Income Tax appealing against M/s. Milmet Laboratory Pvt. Ltd. concerning the exclusion of sales tax and excise duty from the total turnover in the computation of deduction under Section 80HHC of the Income Tax Act. The ITAT had partly allowed the assessee's appeal, which led to the revenue's appeal to the Gujarat High Court. The main legal questions pertained to the interpretation of what constitutes 'total turnover' under Section 80HHC and the treatment of other income under the principle of netting. The High Court's decision relied heavily on precedents set by the Supreme Court, affirming the lower authorities' rulings.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 728651 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 30-11-2013
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax Vs. Lakshmi Machine Works, Lalsons Enterprises Vs. DCIT (Delhi) (SB), ACG Associated Capsules Pvt. Ltd. Vs. Commissioner of Income Tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S N SOPARKAR; SWATI SOPARKAR
• Assessee Lawyers: MAUNA BHATT
• Keywords: Deduction; Excise Duty; Income Tax; Netting; Sales Tax; Total Turnover
• Section: 80HHC

Judgement Text

"O/TAXAP/1043/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1043 of 2006 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To 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 Versus M/S. MILMET LABORATORY PVT.LTD ================================================================ Appearance: MRS MAUNA M BHATT, ADVOCATE for the Appellant MR SN SOPARKAR, SENIOR ADVOCATE for the Respondent MRS SWATI SOPARKAR, ADVOCATE for the Respondent ================================================================ CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and Page 1 of 4 O/TAXAP/1043/2006 JUDGMENT HONOURABLE MR.JUSTICE R.P.DHOLARIA Date : 30/11/2013 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1] Feeling aggrieved and dissatisfied with the judgment and order dated 17.02.2006 passed by the learned Income Tax Appellate Tribunal (hereinafter referred to as “the ITAT”) in ITA No.1438/Ahd/2001 for A.Y. 1997-98, by which the learned ITAT has partly allowed the said appeal preferred by the assessee, the revenue has preferred the present appeal to consider the following substantial questions of law. [A] Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) directing to exclude sales tax and excise duty from the total turnover for the purpose of computing deduction under Section 80HHC? [B] Whether the Appellate Tribunal has substantially erred in law and on facts in directing the Assessing Officer not to exclude 90% of other income amounting to Rs.1,54,033/- on the principle of netting ? [2] Heard Manish Bhatt, learned counsel appearing on behalf of the appellant – revenue and Mr.S. N. Soparkar, learned senior advocate appearing on behalf of the respondent – assessee. [3] At the outset, it is required to be noted that so far as the question No(A) i.e. whether the Appellate Tribunal is right in law and Page 2 of 4 O/TAXAP/1043/2006 JUDGMENT on facts in confirming the order passed by the CIT(A) directing to exclude sales tax and excise duty from the total turnover for the purpose of computing deduction under Section 80HHC is concerned, the same is squarely covered by the decision of the Hon’ble Supreme Court in the case of Commissioner of Income Tax Vs. Lakshmi Machine Works, reported in [2007] 290 ITR 667 (SC) by which it is held by the Hon’ble Supreme Court that excise duty and sales tax also cannot form part of the “total turnover” under section 80HHC(3) of the I.T. Act. It is required to be noted that the issues / questions raised in the present appeal are for the period prior to insertion of section 80HHC(3) of the Income Tax Act. Applying the ratio laid down by the Hon’ble Supreme Court in the case of Commissioner of Income Tax Vs. Lakshmi Machine Works (supra), the question No.(A) is held against the revenue. [4] Now so far as question No.(B) i.e. whether the Appellate Tribunal has substantially erred in law and on facts in directing the Assessing Officer not to exclude 90% of other income amounting to Rs.1,54,033/- on the principle of netting is concerned, it is required to be noted that as such, the learned ITAT has relied upon the decision of the Special Bench of ITAT in the case of Lalsons Enterprises Vs. DCIT (Delhi) (SB), reported in 89 ITD 25. It is reported that the said decision 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 said Page 3 of 4 O/TAXAP/1043/2006 JUDGMENT decision, the Hon’ble Supreme Court has held 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 80 HHC for determining the profits of business. Under the circumstances, as such, it cannot said that the learned ITAT has committed any error in relying upon the decision of the Special Bench of ITAT in the case of Lalsons Enterprises Vs. DCIT (Delhi) (SB) (supra). Applying the ration laid down by the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. Vs. Commissioner of Income Tax (supra) to the facts of the present case, the question No.(B) is answered against the revenue. [5] In view of the above, the present appeal deserves to be dismissed and accordingly is dismissed. (M.R.SHAH, J.) (R.P.DHOLARIA,J.) vijay Page 4 of 4 "