HI CHOICE EXPORTS V. INCOME TAX OFFICER WARD 2

ITA/438/2011

AI Insights

The case involves HI-choice Exports Pvt. Ltd., which appealed against the judgment of the Tribunal that had favored the Income Tax Department. The primary legal questions revolved around the classification of interest income as 'business income' for the purpose of computing deductions under section 80IB of the Income Tax Act, and whether expenditures incurred to generate this interest income should be allowed under section 57(iii). Additionally, the independence of deductions under sections 80HHC and 80IB was questioned. The High Court of Rajasthan, referencing decisions from the Supreme Court and its own previous judgments, ruled in favor of the assessee, allowing the appeal.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 750944 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 11-09-2017
• Assessment Year: misc
• Other Referred Cases: Assistant Commissioner of Income Tax, Bangalore vs. Micro Labs Ltd., Mohan Fashions vs. ACIT, M/s Dhaddha Exports vs. The Assistant Commissioner of Income Tax, M/s Chordia Trading Corporation vs. The Income Tax Officer, Joint Commissioner of Income Tax vs. Mandideep Eng. & PKG. IND. (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ANUROOP SINGHI; ADITYA VIJAY
• Assessee Lawyers: SANJAY JHANWAR; ARCHANA
• Keywords: Business income; Deduction; Income from other sources; Interest income
• Section: 80HHC; 80IB; 80HH; 57(iii); 80-I

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 438 / 2011 HI-choice Exports Pvt. Ltd., Moti Singh Bhomion Ka Rasta , Johri Bazar, Jaipur, Aged About 55 Years, Through Its Director Mr. Ramesh Chand Baheti S/o Shri Late Sh. Ramvilas Baheti ----Appellant Versus The Income Tax Officer, Ward-2(2), NCRB, Statue Circle, Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. Sanjay Jhanwar with Ms. Archana For Respondent(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 11/09/2017 1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal preferred by the department. 2. This Court while admitting the matter framed the following questions of law:- “i) On the facts and circumstances of the case and in law the interest receipt of Rs. 1,57,331/- not constitute “business income” for the purpose of computation of deduction u/s 80IB of the Act. ii) When the interest income is not being considered as “income from business” and rather ‘income from other sources’, whether the corresponding interest expenditure incurred wholly and exclusively for generating such interest income should have been allowed u/s (2 of 3) [ITA-438/2011] 57(iii) of the Act? 3. However, on application being moved again, one additional question was allowed in view of the decision of the Supreme Court in case of Assistant Commissioner of Income Tax, Bangalore vs. Micro Labs Ltd. [2016] 380 ITR 1, which reads as under:- “Whether section 80HHC and 80IB of the IT Act, 1961 are independent of each other and therefore deductions under both the sections 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 contended that the issue no. 1 & 2 are covered by the decision of this Court in Tax Appeal No. 454/2008 (Mohan Fashions vs. ACIT), decided on 26th May, 2017, 10/2008 (M/s Dhaddha Exports vs. The Assistant Commissioner of Income Tax) decided on 5th July, 2017 & 323/2005 (M/s Chordia Trading Corporation vs. The Income Tax Officer) decided on 23rd November, 2016. 5. The third issue is covered by the decision of Supreme Court in case of Joint Commissioner of Income Tax vs. Mandideep Eng. & PKG. IND. (P) Ltd. [2007] 292 ITR 1 (SC) which is referred to larger Bench of this Court in Tax Appeal 437/2011 (Hi Choice Exports P. Ltd. vs. Income Tax Officer Ward 2) decided on 31st May, 2017 in case of assessee itself holding as under:- “4. Counsel for the appellant has relied upon the decision of the Supreme Court in Commissioner of Income Tax vs. Mandideep 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 (3 of 3) [ITA-438/2011] 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.” 6. In view of the above, the two issues are answered in favour of assessee in view of the decision referred above and third issue is also decided in favour of the assessee subject to SLP. 7. The appeal stands allowed. (VIJAY KUMAR VYAS)J. (K.S.JHAVERI)J. A.Sharma/110 "