THE COMMISSIONER OF INCOME TAX-V V. M/S KAJAL EXPORTS

TAXAP/1374/2008

AI Insights

The case revolves around the interpretation of Section 80HHC of the Income Tax Act, 1961, specifically concerning the deduction of interest receipts. The Commissioner of Income Tax appealed against the ITAT's decision, which allowed M/S Kajal Exports to deduct the net interest (after offsetting interest paid) from the profits of the business for the assessment year 1996-97. The ITAT had relied on the Delhi Special Bench's decision in Lalsons Enterprises Vs. DCIT, which was supported by the Supreme Court's ruling in ACG Associated Capsules Pvt. Ltd. The High Court of Gujarat, after considering the legal precedents and arguments, dismissed the appeal, affirming the ITAT's decision.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 699060 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 30-11-2013
• Assessment Year: misc
• Other Referred Cases: Lalsons Enterprises Vs. DCIT, ACG Associated Capsules Pvt. Ltd vs. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RULE UNSERVED
• Assessee Lawyers: MAUNA BHATT
• Keywords: Assessing Officer; Deduction; Gross interest; Income Tax; Interest receipt; Net Interest
• Section: 80HHC; 80IA; 80HH; 80I

Judgement Text

"O/TAXAP/1374/2008 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1374 of 2008 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH ­Sd/ and HONOURABLE MR.JUSTICE R.P.DHOLARIA ­ Sd/­ ============================================= 1. Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2. To be referred to the Reporter or not ? NO 3. Whether their Lordships wish to see the fair copy of the judgment ? NO 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 ? NO 5. Whether it is to be circulated to the civil judge ? NO ============================================= THE COMMISSIONER OF INCOME TAX­V....Appellant(s) Versus M/S KAJAL EXPORTS....Opponent(s) ============================================= Appearance: MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1 RULE UNSERVED for the Opponent(s) No. 1 ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA Date : 30/11/2013 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Income Appellate Tribunal (hereinafter referred to as the ITAT) passed in ITA No.955/AHD/2000 dated 20.1.2006 for AY 1996­97, the revenue has preferred present Tax Page 1 of 3 O/TAXAP/1374/2008 JUDGMENT Appeal. 2.0. At the outset, it is required to be noted that while admitting the present Tax Appeal, the Division Bench of this Court has framed the following the substantial question of law. Whether the Appellate Tribunal is right in law and on facts in holding that, for the purpose of applying Explanation (baa) below sub­section (4B) of Section 80HHC and while reducing 90% of the receipt by way of interest from the profits of the business, it is only the 90% of net interest remaining after allowing a set off of interest paid, which has a nexus with the interest receipt that may be reduced and not 90% of the gross interest and thereupon restoring the matter to the Assessing Officer ? 3.0. Heard Shri M.R. Bhatt, learned Senior advocate for the appellant­ revenue. 4.0. Considering the impugned judgment and order passed by the learned ITAT and while directing Assessing Officer to recompute the deduction under Section 80HH, 80I and 80IA of the Income Tax Act, 1961 holding that the interest is eligible thereon, the learned ITAT has relied upon the decision of the ITAT Delhi Special Bench in the case of Lalsons Enterprises Vs. DCIT reported in (89 ITD 25). It is reported that the decision of the Special Bench in the case of Lalsons Enterprises (supra) has been approved by the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd vs. Commissioner of Income Tax reported in (2012) 343 ITR 89(SC). In the case of ACG Associated Capsules Pvt. Ltd (supra) it is held by the Hon’ble Supreme Court in the said decision that 90% of not the gross interest but only the net interest, which has been included in the profits of the business of the assessee as computed under the heads “Profits and gains of business or profession” is to be deducted under clause (1) of Explanation (baa) to Section Page 2 of 3 O/TAXAP/1374/2008 JUDGMENT 80HHC for determining the profits of business. 5.0. Applying the law laid down by the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd (supra) the question of law raised in the present appeal is held against the Revenue. Consequently present appeal deserves to be dismissed and is accordingly dismissed. No costs. sd/­ (M.R.SHAH, J.) sd/­ (R.P.DHOLARIA,J.) Kaushik Page 3 of 3 "