MADHAV MARBLES and GRANITESLTD. vs. A.C.I.T.CIRCLE-2 UDAIPUR

ITA/147/2007HC RajasthanRJHC01023991200729 January 2013Author: VINEET KOTHARI,V K MATHUR11 pages
AI SummaryDismissed

What were the facts?

The assessee, Madhav Marbles & Granites Ltd., is engaged in manufacturing and exporting granite and marble products through three units. For Assessment Year 2003-04, Unit-II claimed exemption under Section 10B. The assessee claimed deduction under Section 80HHC on profits from Unit-I (Granite tiles) but ignored the loss from Unit-III (Marble slabs and tiles). The Assessing Officer disallowed this, holding that the loss from Unit-III must be adjusted against the profit of Unit-I. The CIT(A) allowed the assessee's claim, relying on an ITAT Delhi decision. The Revenue appealed to the ITAT, which allowed the Revenue's appeal, following the Supreme Court's decision in IPCA Laboratory Ltd. The assessee then filed an appeal before the High Court.

What did the High Court hold?

The High Court held that the controversy was no longer res integra and was squarely dealt with by the Supreme Court in IPCA Laboratory Ltd. (supra). The Court reasoned that different units of the same assessee company, even if engaged in manufacturing different goods, are not separate assessable units for the purposes of the Income Tax Act or Section 80HHC. The assessee, being a single corporate entity, must have its profits and losses considered holistically. The Supreme Court's decision in IPCA Laboratory Ltd. established that for computing deduction under Section 80HHC, profits and losses from different activities (self-manufactured goods exports and trading goods exports) must be clubbed, and any loss in one activity must be adjusted against the profit in the other to arrive at the net positive profit. The Court found that the profit of Unit-I (Granite) and Unit-III (Marble) could not stand on a different footing. Consequently, the ITAT was justified in allowing the Revenue's appeal by following the Supreme Court's precedent. The decision of the ITAT Delhi Bench in Easter Leather Products Pvt. Ltd. was held to be not good law in view of the Apex Court's ruling. The substantial questions of law were answered against the assessee.

What were the issues?

1. Whether the learned Tribunal erred in following the judgment in IPCA Laboratory Ltd. Vs. CIT (2004) 266 ITR 521 (SC) when the facts of that case were different from the present case, specifically regarding the existence of only one unit in IPCA Laboratory Ltd. versus multiple units in the present case, and whether the units in the present case were unconnected except for common ownership? 2. Whether, on the facts and in the circumstances of the case, the turnover and profits/losses of Unit No.1 and Unit No.3 could be clubbed together to determine the average profit/proportionate profits for the purpose of computing deductions under Section 80HHC? Assessee's contention: The assessee relied on the findings of the CIT(A) and the ITAT Delhi Bench decision in Easter Leather Products Pvt. Ltd. Vs. DCIT (1999) 68 ITD 358 (Del.), arguing that separate units with independent books of accounts should not have their profits and losses combined for Section 80HHC computation. Revenue's contention: The Revenue argued that the controversy was settled by the Supreme Court in IPCA Laboratory Ltd. (supra), and the ITAT was justified in denying the deduction without adjusting the loss of Unit-III against the profit of Unit-I, as both units belonged to the same assessee company.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80HHC,Section 10B,Section 80AB,Section 80B(5)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
D.B. Income Tax Appeal No.147/2007 Madhav Marbles & Granites Ltd. Vs. ACIT, Circle-2, Udaipur Judgment dated 29/01/2013 1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR ORDER D.B. Income Tax Appeal No.147/2007 Madhav Marbles & Granites Ltd. Vs. ACIT, Circle-2, Udaipur

Date of Order :::: 29

th January, 2013

PRESENT HON'BLE DR. JUSTICE VINEET KOTHARI HON'BLE MR. JUSTICE V.K. MATHUR REPORTABLE Mr. Sanjay Nahar, for the appellant-Assessee. Mr. K.K. Bissa, for the respondent- Revenue. BY THE COURT (Per Dr. Justice Vineet Kothari)

1.

The appellant-assessee has filed this appeal under Section 260A of the Income Tax Act, 1961 (for short, hereinafter referred to as 'Act') being aggrieved by the order of learned Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur dated 20.07.2007 for the Assessment Year 2003-04, whereby the learned ITAT following the decision of Hon'ble Supreme Court in the case of IPCA Laboratory Ltd. Vs. Deputy Commissioner of Income-Tax, Mumbai reported in (2004) 266 ITR 521 [SC] : 2004 106 (2) Bom. L.R. 406 (SC) held that the deduction under Section 80HHC (3C) can be allowed only, if there is a positive profit or income and if there is a loss

The order continues below.

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