TORRENT PHARMACEUTICALS LTD vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 8

TAXAP/2037/2010HC GujaratGJHC24027810201003 December 2013Author: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE R.P.DHOLARIA4 pages
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What did the High Court hold?

The High Court held that the substantial question of law raised by the assessee is to be answered in favour of the assessee. The Court relied on the decision of the Supreme Court in ACG Associated Capsules Pvt. Ltd. vs. Commissioner of Income-Tax, which held that for the purpose of deduction under Section 80HHC, net interest is to be excluded. The ITAT's decision to exclude gross interest was found unsustainable in light of this Supreme Court ruling. Consequently, the impugned judgment and order of the ITAT were quashed and set aside. The appeal was allowed. No costs were awarded.

What were the facts?

The assessee, Torrent Pharmaceuticals Ltd., filed its return of income for Assessment Year 2003-04. The Assessing Officer disallowed a deduction claimed under Section 80HHC in respect of interest income. The CIT(A) deleted this disallowance. The revenue appealed to the Income Tax Appellate Tribunal (ITAT). The ITAT, by its order dated 21/05/2010, allowed the revenue's appeal, holding that the assessee could not claim deduction under Section 80HHC for interest income not forming part of business income and that 90% of net interest income should be excluded for computing the deduction. The assessee has filed this Tax Appeal against the ITAT's order.

What were the issues?

1. Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in reducing eligible business profit, while granting deduction under Section 80HHC, by gross interest income of Rs.2,77,73,000/- as against net interest? (Question of law) Assessee's Contention: The assessee argued that the issue is settled by the Supreme Court in ACG Associated Capsules Pvt. Ltd. vs. Commissioner of Income-Tax, which held that net interest income is to be excluded for the purpose of deduction under Section 80HHC. The assessee contended that the ITAT's view of excluding gross interest is incorrect. Revenue's Contention: The revenue's counsel was not in a position to dispute the assessee's submission or point out any contrary decision.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 143(1)

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O/TAXAP/2037/2010 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 2037 of 2010

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA ====================================== 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 ? ====================================== TORRENT PHARMACEUTICALS LTD....Appellant(s) Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 8....Opponent(s) ====================================== Appearance: MR SN SO PARKAR for the Appellant(s) No. 1 MRS SWATI SOPARKAR, ADVOCATE for the Appellant(s) No. 1 MS PAURAMI B SHETH, ADVOCATE for the Opponent(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTIC

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