SUZLON ENERGY LIMITED V. DEPUTY COMMISSIONER OF INCOME TAX

TAXAP/1478/2007

AI Insights

The case involves Suzlon Energy Limited, the appellant, contesting an order by the Income Tax Appellate Tribunal, which reversed a decision by the CIT (Appeals) that had allowed the deduction under section 80IA of the Income Tax Act. The primary legal issue was whether the Tribunal was correct in not allowing the 'Netting Off' of interest income against interest expenditure. The High Court's decision referenced the Supreme Court's ruling in ACG Associated Capsules Pvt. Ltd. vs. CIT, which supported the assessee's position. The court found that the Tribunal's decision was inconsistent with this precedent and thus restored the CIT(A)'s decision in favor of the assessee.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 753710 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 24-12-2014
• Assessment Year: misc
• Other Referred Cases: ACG Associated Capsules Pvt. Ltd. vs. CIT [2012] 343 ITR 89 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NITIN MEHTA
• Assessee Lawyers: VAIBHAVI PARIKH
• Keywords: Assessment; Deduction; Income Tax; Interest Expenditure; Interest income; Netting Off
• Section: 143(3); 80HHC; 80IA

Judgement Text

"O/TAXAP/1478/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1478 of 2007 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 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 ? ================================================================ SUZLON ENERGY LIMITED....Appellant(s) Versus DEPUTY COMMISSIONER OF INCOME TAX....Opponent(s) ================================================================ Appearance: MS VAIBHAVI PARIKH, ADVOCATE FOR MR TUSHAR P HEMANI, ADVOCATE for the Appellant(s) No. 1 MR NITIN K MEHTA, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and Page 1 of 5 O/TAXAP/1478/2007 JUDGMENT HONOURABLE MR.JUSTICE K.J.THAKER Date : 24/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘C’ (hereinafter referred to as ‘the Tribunal’) dated 28.02.2007 in ITA No. 841/Ahd/2002 for the Assessment Year 1998-99, the assessee has preferred the present Tax Appeal for consideration of the following substantial question of law which was framed while admitting this appeal: Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in not allowing the ‘Netting Off’ of interest income against interest income against interest expenditure? 2. The assessment order under section 143(3) of the I.T. Act, 1961 was passed in respect of the assessee. During the course of assessment proceedings, the assessing officer noticed that the assessee had claimed deduction u/s 80IA of I.T Act. The Assessing Officer rejected the claim of the assessee for deduction u/s 80IA treating interest income as ‘other income’. On appeal the CIT (Appeals) allowed the same and directed the Assessing Officer to modify the deduction u/s 80IA of the Act on the ground that the interest on fixed deposits was placed with the banks in the form of margin money against which the appellant was issued LCs without Page 2 of 5 O/TAXAP/1478/2007 JUDGMENT which the appellant could not have imported WTGS. 3. On appeal before the Tribunal by the revenue, by impugned order, Tribunal allowing the appeal, reversed the order passed by CIT(A). Being aggrieved and dissatisfied with the impugned order passed by the Tribunal, the assessee has preferred the present Tax Appeal for consideration of the aforesaid substantial question of law. 4. The issue involved in the present Tax Appeal is now not res integra in view of the decision of the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. vs. CIT reported in [2012] 343 ITR 89 (SC) wherein the Hon’ble Supreme Court has held that for the purpose of Section 80HHC of the Income Tax Act, 1961 it is not the entire amount received by the assessee on sale of DEPB credit but the sale value less the face value of the DEPB that will represent profit on transfer of DEPB credit by the assessee. It is also held that if any quantum of any receipt of the nature mentioned in clause (1) of Explanation (baa) has not been included in the profits of business of an assessee as computed under the head ‘Profits and gains of business or profession’, ninety per cent of such quantum of the receipt cannot be deducted under Explanation (baa) to section 80HHC. 5. Mr. Mehta, learned advocate on behalf of the revenue is not in a position to dispute the above and is not in a position to show and/or point out any contrary decision. In fact this Court in the case of this very assessee i.e. Suzlon Energy Ltd has already answered the present question of law in favour of the assessee vide judgement and order dated 21.11.2014 Page 3 of 5 O/TAXAP/1478/2007 JUDGMENT rendered in Tax Appeal No. 1437 of 2005. 6. Having heard learned advocates appearing on behalf of the assessee and the revenue and the question posed for consideration before us reproduced hereinabove and considering the decision of the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd (Supra), the question, which is raised in the present appeal is required to be answered in favour of the assessee. We are not giving any elaborate reasons for the same as in the case of ACG Associated Capsules Pvt. Ltd (Supra) it is held by the Hon’ble Supreme Court that ninety percent of not the gross rent or gross interest but only the net interest or net rent which had been included in the profits of business of the assessee as computed under the head “Profits and gains of business or profession” was to be deducted under clause (1) of Explanation (baa) to section 80HHC for determining the profits of the business. Accordingly, the question is answered in the negative i.e. against the revenue and in favour of the assessee. 7. In view of the above, we hold that the Tribunal was not right in law in not allowing the ‘Netting Off’ of interest income against interest income against interest expenditure and consequently the impugned judgment and order passed by the Tribunal is quashed and set aside. The order passed by CIT(A) is restored. Hence, the present Tax Appeal is allowed. (K.S.JHAVERI, J.) Page 4 of 5 O/TAXAP/1478/2007 JUDGMENT (K.J.THAKER, J) divya Page 5 of 5 "