THE COMMISSIONER OF INCOME-TAX V. M/S BHARATH ELECTRONICS LTD

ITA/348/2007

AI Insights

The case involves the Commissioner of Income-Tax and the Joint Commissioner of Income-Tax as appellants, against Bharat Electronics Ltd. as the respondent. The core issue was whether certain incomes such as interest from staff advances, insurance claims, and medical recoveries should be considered as part of the business income for the purpose of claiming benefits under Section 80HHC of the Income Tax Act, 1961. The Tribunal had initially ruled in favor of the assessee, but the High Court set aside this decision, emphasizing that the assessee had already conceded these do not constitute business income.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 729100 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 18-12-2013
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Lakshmi Machine Works (2007) 290 ITR 667 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S PARTHASARATHI
• Assessee Lawyers: K V ARAVIND
• Keywords: Business income; Exemption Claim; Income tax appeal; Insurance Claim; Section 80HHC; Interest from Staff Advances; Medical Recoveries
• Section: 80HHC; 260-A

Judgement Text

" - 1 - IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 18TH DAY OF DECEMBER 2013 P R E S E N T THE HON’BLE MR. JUSTICE N. KUMAR A N D THE HON’BLE MRS. JUSTICE RATHNAKALA INCOME TAX APPEAL NO.348 OF 2007 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, C.R. BUILDING QUEENS ROAD, BANGALORE. 2. THE JOINT COMMISSIONER OF INCOME-TAX SPECIAL RANGE – 5, C.R. BUILDING QUEENS ROAD, BANGALORE. ... APPELLANTS (BY SRI K.V. ARAVIND, ADV.) AND: M/S. BHARAT ELECTRONICS LTD., OUTER RING ROAD, NAGAVARA, BANGALORE-560 045. ...RESPONDENT (BY SRI S. PARTHASARATHI, ADV.) THIS ITA IS FILED UNDER SEC.260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 15-09- - 2 - 2006 PASSED IN ITA NO.3128/BANG/2004, FOR THE ASSESSMENT YEAR 1998-1999, PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY ITAT BANGALORE IN ITA NO.3128/BANG/2004 DATED 15-09-2006 & CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE JOINT COMMISSIONER OF INCOME TAX, SPECIAL RANGE-5, BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL IS COMING ON FOR HEARING THIS DAY, N. KUMAR, J., DELIVERED THE FOLLOWING: - JUDGMENT This appeal is preferred by the revenue challenging the order passed by the Tribunal, holding that the interest from staff advances, insurance claim and medical recoveries are part of the business activity and therefore, they form part of the business income and it has to be included in claiming benefit of exemption under Section 80HHC of the Income Tax Act, 1961 as the income from the business profits. 2. The assessee company is a public company. It is a manufacturing concern, manufacturers and sells - 3 - professional grade electronic goods and components. Income of the assessee includes sales, income from services, sale of scraps, export benefit, income from investments, interest, transport receipts, rent receipts, recoveries from internal jobs, other dividends etc. Export sales were Rs. 2,500/- lakhs plus deemed exports Rs. 669 lakhs. The assessee claimed benefit under Section 80HHC of the Income Tax Act, to the extent of Rs. 13,23,285/-, a claim in respect of interest received from loan to employees, insurance claims and medical recoveries and other expenses also. It was rejected. Aggrieved by the said order, the assessee preferred an appeal. The first appellate authority dealing with the aforesaid claims held that the assessee itself has conceded in the written submissions on 20.03.2004, that the interest on staff advance, insurance claim and medical recovery do not represent business income of the assessee. Thus, 100% of these three 3 items ought to be excluded while working out eligible profits under Section 80HHC of the Income Tax Act. As regards item Nos. (d), (e) and (f), the assessee has not substantiated its stand and therefore, - 4 - he upheld the treatment of the assessing officer. Aggrieved by the said order, the assessee preferred an appeal. The Tribunal without properly considering this fact, that the assessee himself has conceded that he does not consider it as business income of the assessee has erroneously held that it represents the business income of the appellant. Therefore, the error is apparent on the face of the record and the order of the tribunal cannot be sustained. In the facts of this case, without going into the question as to whether the assessee is entitled to the benefit under Section 80HHC of the Income Tax Act, in respect of the claims and in view of his admission for the relevant assessment year, the Tribunal was not justified in granting the relief. In that view of the matter, the order of the Tribunal requires to be set aside. In the peculiar facts of this case, the substantial question of law would not arise for consideration. In the light of the aforesaid facts, question No.2 does not arise for consideration. The order of the tribunal is set aside. - 5 - 3. With regard to the first substantial question, it is not in dispute that the Apex Court has laid down law on the point in the case of COMMISSIONER OF INCOME TAX VS. LAKSHMI MACHINE WORKS REPORTED IN (2007) 290 ITR 667 (SC), that the sales tax does not form part of the total turnover for the purpose of computing deductions under Section 80HHC of the Income Tax Act. Hence, the substantial question of law is answered against the revenue and in favour of the assessee. Ordered accordingly. Sd/- JUDGE Sd/- JUDGE nvj "