SHIPRA SHIP BUILDERS PVT. LTD. vs. ASSTT. COMMISSIONER OF INCOME TAX

TAXAP/1281/2006HC GujaratGJHC24038251200601 December 2014Author: HONOURABLE MR. JUSTICE KS JHAVERI,HONOURABLE MR. JUSTICE K.J.THAKER7 pages
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Facts

The assessee, Shipra Ship Builders Pvt. Ltd., engaged in shipbuilding, filed its return for Assessment Year 1998-99. The Assessing Officer made an addition of Rs. 9,86,430. The CIT(A) partly allowed the assessee's appeal. The revenue appealed to the Income Tax Appellate Tribunal (ITAT), which allowed the revenue's appeal by its order dated 06.02.2006. The assessee has filed the present appeal before the High Court challenging the ITAT's order. The dispute pertains to the taxability of Rs. 9,86,430, which arose from a mandatory pre-condition deposit towards the supply of raw material.

Held

The High Court held that the question of law was concluded by its previous decision in Tax Appeal No. 186 of 2003 and other allied matters. The Court referred to observations within that judgment, which stated that interest from deposits made under the insistence of financial institutions, for the purpose of business (like purchasing new machinery or for raw material supply), cannot be treated as income from other sources but must be seen as part of the assessee's business income. The Court found that the deposit in the present case was directly linked to the business purpose. Therefore, the interest earned on such deposits cannot be termed as income from other sources. The appeal was answered in favour of the assessee and against the revenue.

Key Issues

1. Whether, on the facts, the Tribunal was right in law in holding that interest of Rs. 9,86,430, arising from a mandatory pre-condition deposit towards the supply of raw material, is taxable as 'income from other sources'? (Question of law) Assessee's Contention: The assessee argued that the Tribunal erred in reversing the CIT(A)'s order. The assessee relied on an unreported decision of the High Court in Tax Appeal No. 186 of 2003 and allied matters, decided on 14.10.2014, contending that the present appeal is covered by that decision and should be allowed. Revenue's Contention: The revenue's advocate was not in a position to distinguish the decision relied upon by the assessee.

Sections Cited

Section 143(3)

AI-generated summary — verify with the full judgment below

O/TAXAP/1281/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1281 of 2006

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI

and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 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 ? ================================================================ SHIPRA SHIP BUILDERS PVT. LTD.....Appellant(s) Versus ASSTT. COMMISSIONER OF INCOME TAX....Opponent(s) ================================================================ Appearance: MR RK PATEL, ADVOCATE for the Appellant(s) No. 1 MR. P.G. DESAI, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTI

The order continues below.

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