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

ITA/843/2010HC Punjab & HaryanaPHHC01093819201021 April 2016Author: MR. JUSTICE RAMENDRA JAIN,MR. JUSTICE JITENDRA CHAUHAN3 pages
AI SummaryWithdrawn

What were the facts?

The Commissioner of Income Tax-II, Ludhiana (appellant-revenue) filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated January 29, 2010, passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench (A), Chandigarh. The appeal pertained to the assessment year 2002-03 and concerned M/s Avon Cycles Ltd. (respondent-assessee). The appeal raised several substantial questions of law concerning additions made by the Assessing Officer and subsequent deletions by the ITAT, including issues related to foreign travel expenditure, interest-free advances, re-computation of profits for Section 80HHC deduction, and the treatment of DEPB entitlements under Sections 28(iiid) and 28(iiie).

What did the High Court hold?

The appeal was dismissed as not pressed. The appellant-revenue, citing CBDT Circulars No. 21/2015 and 279/Misc/M-142/2007-ITJ (Part), stated that they did not wish to press the appeal as the tax effect involved was less than Rs. 20 lacs. The revenue prayed for liberty to file an application for revival of the appeal if something survived therein. The Court granted this liberty. It was clarified that the withdrawal of the appeal by the revenue would not be taken as an affirmation of the Tribunal's order on merits, and the legal issues raised were left open to be adjudicated in an appropriate case. Therefore, no specific findings were made by the High Court on the substantial questions of law.

What were the issues?

The Tribunal had to decide nine substantial questions of law. The primary questions revolved around: 1. Whether the Tribunal was justified in deleting an addition of Rs. 20,797/- for foreign travel expenditure of the director's wife for non-business purposes. 2. Whether the Tribunal was justified in deleting an addition of Rs. 1,00,106/- on account of interest-free advances to parties, despite the company having raised substantial funds from financial institutions and paying interest. 3. Whether the Tribunal was justified in directing the Assessing Officer to re-compute business profits by including 10% of interest and dividend income for Section 80HHC deduction. 4. Whether the Tribunal was right in not holding that the total sale consideration of DEPB, including premium, represents profit chargeable under Sections 28(iiid) and 28(iiie). 5. Whether the Tribunal was right in not holding that profit on transfer of DEPB entitlement represents the entire amount inclusive of premium. 6. Whether the Tribunal was right in holding that 'profit' under Sections 28(iiid) and 28(iiie) means the difference between the sale price and face value of DEPB, ignoring that the entire amount is profit. 7. Whether the Tribunal was right in deducting the face value of DEPB from sale price for calculating profit under Sections 28(iiid) and 28(iiie), treating face value as cost. 8. Whether the Tribunal was right in holding that 'profit' under Sections 28(iiid) and 28(iiie) requires artificial cost interpolation by deducting face value from sale proceeds for Section 80HHC deduction. 9. Whether the Tribunal failed to appreciate that Section 80HHC deduction was rightly computed as per the amendment by the Taxation Law (Amendment) Act, 2005. The revenue's contentions were not explicitly detailed as the appeal was not pressed. The assessee's arguments were also not recorded.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80HHC,Section 28(iiid),Section 28(iiie)

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH 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 c

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 80HHC

All 989 judgments and leading authorities on Section 80HHC →

Recent GST High Court judgments

Search GST case law →