COMMISSIONER OF INCOME TAX-II, LUDHIANA V. M/S AVON CYCLES LTD.

ITA/843/2010

AI Insights

The case involves the Commissioner of Income Tax-II, Ludhiana as the appellant and M/s Avon Cycles Ltd. as the respondent. The appeal was filed under Section 260 A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Chandigarh, which had made several rulings on various tax-related issues for the assessment year 2002-03. The issues included the deletion of certain additions made by the assessing officer regarding foreign travel expenses, interest-free advances, and the computation of profits for deduction under section 80HHC. The appellant, however, decided not to press the appeal due to the low tax effect involved, as per the recent circulars from the Central Board of Direct Taxes.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 729122 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 21-04-2016
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ALOK MITTAL
• Assessee Lawyers: ZORA KLAR
• Keywords: DEPB; Interest Free Advances; Profit computation; Tax effect; Tax effect; Foreign traveling expenditure
• Section: 80HHC; 260-A; 28 (iiid); 28(iiie)

Judgement Text

" ITA No. 843 of 2010 (O&M) -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 843 of 2010 (O&M) Date of Decision: 21.04.2016 The Commissioner of Income Tax-II, Ludhiana .......Appellant Versus M/s Avon Cycles Ltd. ......Respondent CORAM: HON'BLE MR. JUSTICE RAJESH BINDAL HON'BLE MR. JUSTICE HARINDER SINGH SIDHU Present: Mr. Zora Singh Klar, Advocate for the appellant. Mr. Alok Mittal, Advocate for the respondent. RAJESH BINDAL,J. This appeal has been filed under Section 260 A of the Income Tax Act, 1961 (for short 'the Act'), against the order dated 29.1.2010 passed by the Income Tax Appellate Tribunal, Chandigarh Bench (A), Chandigarh, in ITA No. 466/Chd/2007, for the assessment year 2002-03, raising the following substantial questions of law: (i)Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in deleting the addition of Rs. 20,797/- being the expenditure incurred on foreign traveling of the director's wife for non-business purposes? (ii) Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in deleting the addition of Rs.1,00,106/- made by the assessing officer on account of interest free advances to the parties though the company has raised huge funds from financial institutions and paying interest on the same? REEMA SAINI 2016.04.26 14:44 I attest to the accuracy and authenticity of this document High Court, Chandigarh ITA No. 843 of 2010 (O&M) -2- (iii) Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in directing the assessing officer to re-compute the profits of business by including 10% of the interest and dividend income as profits of business for working out deduction under section 80HHC of the Act? (iv) Whether on the facts and circumstances of the case, the ITAT was right in law in not holding that the total sale consideration inclusive of face value of DEPB and premium amount received thereof represents profit chargeable under section 28(iiid) and 28 (iiie) of the Income Tax Act, 1961? (v) Whether on the facts and circumstances of the case, the ITAT was right in law in not holding that profit on transfer of DEPB entitlement represents the entire amount inclusive of premium of sale of such DEPB? (vi) Whether on the facts and circumstances of the case, the ITAT was right in law in holding that the word “profit” referred to in Section 28 (iiid) and 28(iiie) of Income Tax Act, 1961 means the difference between the sale price of DEPB and the fact value of DEPB ignoring the facts that entire amount represent the profit in the hands of assessee? (vii) Whether on the facts and circumstances of the case the ITAT was right in law in deducting the face value of DEPB from sale price of DEPB for calculating profit under section 28(iiid) and 28 (iiie) of Income Tax Act, 1961 as if the face value is the cost incurred by the assessee to acquire the DEPB? REEMA SAINI 2016.04.26 14:44 I attest to the accuracy and authenticity of this document High Court, Chandigarh ITA No. 843 of 2010 (O&M) -3- (viii) Whether on the facts and circumstances of the case the ITAT was right in law in holding that the word profit referred to in sections 28(iiid) and (iiie) of the Income Tax Act, 1961 requires any artificial cost to be interpolated to the extent that the face value of DEPB/DFRC should be deducted from the sale proceeds for the purpose of determination of deduction under section 80HHC of the Income Tax, 1961? (ix) Whether on the facts and circumstances of the case the ITAT has failed to appreciate that deduction u/s 80HHC of the Income Tax Act, 1961 was rightly computed in accordance with amendment made by the Taxation Law (Amendment) Act, 2005 with retrospective effect from 1.4.1998? Learned counsel for the appellant-revenue submitted that in view of circular No.21/2015 dated 10.12.2015 read with circular No.279/Misc/M-142/2007-ITJ (Part) dated 8.3.2016, issued by Central Board of Direct Taxes, he does not wish to press the present appeal, as the tax effect involved is less than ` 20 lacs. However, he prays that liberty be granted to the revenue to file an application for revival of the appeal in case something survives therein. Dismissed as not pressed with liberty as prayed for. It is however, clarified that withdrawal of the appeal by the revenue shall not be taken as affirmation of order of the Tribunal on merits. The legal issue as claimed by the revenue is left open to be adjudicated in an appropriate case. (RAJESH BINDAL) JUDGE (HARINDER SINGH SIDHU) 21.04.2016 JUDGE reema REEMA SAINI 2016.04.26 14:44 I attest to the accuracy and authenticity of this document High Court, Chandigarh "