HI CHOICE EXPORTS P LTD V. INCOME TAX OFFICER WARD 2

ITA/437/2011

AI Insights

The case involves Hi Choice Exports P Ltd, an appellant company engaged in the export of readymade garments, contesting the decision of the Income Tax Officer regarding the computation of deductions under Sections 80HHC and 80IB of the Income Tax Act, 1961. The primary legal issue was whether the deductions under these sections should be computed independently on the gross total income or on a reduced balance after considering the other deduction. The tribunal had partly allowed the assessee's appeal while allowing the department's appeal, leading to the current appeal before the High Court. The court referenced a Supreme Court decision which supported the appellant's position, despite the matter being referred to a larger bench.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 750956 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 31-05-2017
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Mandideep Eng. & PKG. India (P) Ltd. (2007) 292 ITR 1 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SAMEER SHARMA; ANIL MEHTA
• Assessee Lawyers: SANJAY JHANWAR; ARCHANA
• Keywords: Deduction; FDR; Income tax appeal; Industrial Undertaking; Interest income; Reassessment
• Section: 147; 148; 80HHC; 80IB

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 437 / 2011 Hi Choice Exports P Ltd ----Appellant Versus Income Tax Officer Ward 2 ----Respondent _____________________________________________________ For Appellant(s) : Mr. Sanjay Jhanwar with Ms. Archana For Respondent(s) : Mr. Sameer Sharma for Mr. Anil Mehta _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR Judgment 31/05/2017 1. By way of this appeal, the appellant has assailed the judgment and order of the tribunal whereby tribunal has partly allowed the appeal of the assessee as well as allowed the appeal of the department. 2. The facts of the case are that the appellant company derives income from export of readymade garments. The original return of income claiming deduction u/s 80IB and 80HHC of the Act was filed on 30.10.2001. Subsequently the reassessment proceeding were initiated and the case of the appellant was reopened u/s 147/148 of the Act. 2.1 The appellant claimed the deduction simultaneously u/s 80HHC and 80IB of the Act, on the profit of business eligible for deduction. The Assessing Officer disallowed the said claim and computed the deduction u/s 80HHC on the eligible profits after (2 of 3) [ITA-437/2011] reducing from the same the amount of deduction allowed u/s 80IB of the Act. 2.2 During the impugned year had an interest income amounting to Rs.33,595/- on account of FDR’s kept with the bank. The said FDR’s have been made in favour of AEPC a/c Hi-choice Export Pvt. Ltd. solely and exclusively for the purpose of its business, for obtaining quota being the prerequisite for exporting the garments after borrowing funds from the bank on which interest was charged by the bank. That the aforesaid income on account of interest on FDR being intrinsically linked with the carrying on of the business of the appellant, the appellant claimed deduction u/s 80IB of the Act. The Assessing Officer excluded the income of Rs.33,595/- on account of interest on FDR from the business income of the appellant for the purpose of computation of deduction u/s 80IB of the Act, on the ground that the direct nexus between the income and industrial undertaking has not been established. 3. This court while admitting the appeal on 9.5.2017 framed following substantial question of law:- \"whether Section 80HHC and 80IB of the IT Act, 1961 are independent of each other and therefore deductions under both the secitions on the gross total income is to be computed independently and not on the reduced balance after taking into account the other deduction?\" 4. Counsel for the appellant has relied upon the decision of the Supreme Court in Commissioner of Income Tax vs. Mandideep (3 of 3) [ITA-437/2011] Eng. & PKG. India (P) Ltd. reported in (2007) 292 ITR 1 (SC) wherein it has been held as under:- \"Section 80HH and 80-I are independent of each other and therefore a new industrial unit can claim deduction under both the sections on the gross total income independently.\" 5. However, counsel for the respondent has pointed out that the same matter is referred to larger bench. 6. In our considered opinion, the issue is answered in favour of the assessee as on today on the basis of decision of the Supreme Court which has upheld the decision of this court. 7. Subject to the reference to the larger bench, the issue is answered in favour of the assessee. The appeal stands allowed. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. Brijesh 119. "