COMMISSIONER OF INCOME TAX vs. M/S. MILMET LABORATORY PVT.LTD

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1] Feeling aggrieved and dissatisfied with the judgment and order dated 17.02.2006 passed by the learned Income Tax Appellate Tribunal (hereinafter referred to as “the ITAT”) in ITA No.1438/Ahd/2001 for A.Y. 1997-98, by which the learned ITAT has partly allowed the said appeal preferred by the assessee, the revenue has preferred the present appeal to consider the following substantial questions of law. [A] Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) directing to exclude sales tax and excise duty from the total turnover for the purpose of computing deduction under Section 80HHC? [B] Whether the Appellate Tribunal has substantially erred in law and on facts in directing the Assessing Officer not to exclude 90% of other income amounting to Rs.1,54,033/- on the principle of netting ? [2] Heard Manish Bhatt, learned counsel appearing on behalf of the appellant – revenue and Mr.S. N. Soparkar, learned senior advocate appearing on behalf of the respondent – assessee. [3] At the outset, it is required to be noted that so far as the question No(A) i.e. whether the Appellate Tribunal is right in law and O/TAXAP/1043/2006 JUDGMENT on facts in confirming the order passed by the CIT(A) directing to exclude sales tax and excise duty from the total turnover for the purpose of computing deduction under Section 80HHC is concerned, the same is squarely covered by the decision of the Hon’ble Supreme Machine Works, reported in [2007] 290 ITR 667 (SC) by which it is held by the Hon’ble Supreme Court that excise duty and sales tax also cannot form part of the “total turnover” under section 80HHC(3) of the I.T. Act. It is required to be noted that the issues / questions raised in the present appeal are for the period prior to insertion of section 80HHC(3) of the Income Tax Act. Applying the ratio laid down by the Hon’ble Supreme Court in the case of Commissioner of [4] Now so far as question No.(B) i.e. whether the Appellate Tribunal has substantially erred in law and on facts in directing the Assessing Officer not to exclude 90% of other income amounting to Rs.1,54,033/- on the principle of netting is concerned, it is required to decision has been approved by the Hon’ble Supreme Court in the Income Tax, reported in [2012] 343 ITR 89 SC. In the said O/TAXAP/1043/2006 JUDGMENT decision, the Hon’ble Supreme Court has held 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 ration laid down by the Hon’ble Supreme Court in the case of ACG [5] In view of the above, the present appeal deserves to be dismissed and accordingly is dismissed. (M.R.SHAH, J.) (R.P.DHOLARIA,J.)

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