COMMISSIONER OF INCOME-TAX vs. THEMIS CHEMICALS LTD.,

ITR/28/1998HC GujaratGJHC24024386199815 April 2008Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MR. JUSTICE Z.K.SAIYED7 pages
AI SummaryRemanded

What were the facts?

This case concerns Assessment Year 1992-93 and involves a reference to the High Court by the Income Tax Appellate Tribunal at the instance of the revenue. The assessee, Themis Chemicals Ltd., claimed deduction under Section 80HHC. The Assessing Officer's computation for this deduction included various items, notably interest received. The Commissioner (Appeals) upheld the Assessing Officer's working, stating that interest is to be reduced for computing the deduction under Section 80HHC, referencing Explanation (baa). The assessee appealed to the Tribunal, arguing that the interest received was during the course of business and should be netted against interest paid, and only the net balance should be excluded. The Tribunal directed that only the net amount of interest received and paid should be considered.

What did the High Court hold?

The High Court held that the reference could not be answered due to the absence of basic facts. The Court noted that Explanation (baa) to Section 80HHC defines 'profits of the business' as profits computed under the head 'Profits and gains of business or profession', reduced by certain items, including receipts of a similar nature to brokerage, commission, interest, etc. The Court found that neither the Tribunal, the Commissioner (Appeals), nor the Assessing Officer had recorded a finding on whether the profits of business, as computed under the head 'Profits and gains of business or profession', included the interest received by the assessee. The Court emphasized that a finding on whether the interest was included in the profits of business under that head was a prerequisite. Therefore, the Court returned the reference unanswered, leaving it open for the Tribunal to first record the correct facts and then make a correct finding.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Hon'ble Tribunal was legally justified in holding that the interest on FDRs treated as income from other sources should be reduced by the interest paid in relation to the borrowings for business of exports in order to allow higher relief u/s. 80HHC of the I.T. Act? Assessee's Contention: The assessee contended that the interest amount of Rs. 12,94,672/- was received during the course of business, and since the assessee also paid a large amount of interest to banks and financial institutions, only the net balance of interest should be excluded for the purpose of computation under Section 80HHC. Revenue's Contention: The revenue, through its reference to the High Court, implied that the interest on FDRs was treated as 'income from other sources' and questioned the Tribunal's decision to reduce it by interest paid on borrowings for business of exports to allow higher relief under Section 80HHC. The revenue argued that the Court should proceed on the footing that interest on FDRs was treated as 'Income from Other Sources' as suggested by the question.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 80HHC,Section 28

AI-generated summary — verify with the full judgment below

ITR/28/1998 1/7 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 28 of 1998 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MR.JUSTICE Z.K.SAIYED ===================================================== 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 ===================================================== COMMISSIONER OF INCOME-TAX - Applicant(s) Versus THEMIS CHEMICALS LTD., - Respondent(s) ============================================================== Appearance : MR MANISH R BHATT for Applicant(s) : 1, MR KH KAJI for Respondent(s) : 1, ===================================================== CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MR.JUSTICE Z.K.SAIYED Date : 15/04/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

ITR/28/1998 2/7 JUDGMENT 1

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