COMMISSIONER OF INCOME TAX vs. AGRO ALLOYS MFG CO

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ITR/146/1985HC GujaratGJHC24012278198515 June 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA2 pages
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What did the High Court hold?

The High Court answered the question referred to it in the affirmative, in favour of the assessee and against the Revenue. The Court respectfully agreed with the view expressed in a similar reference (ITR No. 138 of 1985) made to the same Court. The reasoning is that for the purpose of calculating relief under Section 80HH, the gross profit of the assessee must be determined after including interest paid to the partners, even if such interest is disallowable under Section 40(b). The principle established is that for the purpose of computing the deduction under Section 80HH, the gross profit should be calculated by including disallowable interest paid to partners. The reference was disposed of with no order as to costs.

What were the facts?

This case involves an Income Tax Reference filed by the Revenue (Commissioner of Income Tax) against the assessee, M/s. The Agro Alloys Mfg Co. The reference was made at the instance of the Revenue to the High Court of Gujarat at Ahmedabad by the Income Tax Appellate Tribunal, Ahmedabad Bench "B", under Section 256(2) of the Income Tax Act, 1961. The core of the dispute concerns the calculation of relief under Section 80HH of the Income Tax Act, specifically whether gross profit should be determined after including interest paid to partners, which is disallowable under Section 40(b). The Revenue was represented by Mr. Mihir Joshi, while no one appeared for the assessee.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in concluding that for the purpose of calculating relief under Section 80HH of the Income-tax Act, 1961, the gross profit has to be determined after including interest paid by the assessee to its partners and disallowable under Section 40(b) of the I.T. Act, 1961? (Question of law) Contentions: Assessee: Not recorded. Revenue: Argued through Mr. Mihir Joshi. Relied on a similar question of law decided by the High Court in ITR No. 138 of 1985, where the Court held that for calculating relief under Section 80HH, gross profit should include interest paid to partners that is disallowable under Section 40(b).

Which sections of the Income-tax Act were involved?

Section 256(2),Section 80HH,Section 40(b)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 146 of 1985

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus M/S.THE AGRO ALLOYS MFG CO. -------------------------------------------------------------- Appearance: MR MIHIR JOSHI FOR MR RP BHATT for Applicant. NOTICE SERVED for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE A.R.DAVE and MR.JUSTICE D.A.MEHTA Date of decision: 15/06/2001 ORAL JUDGEMENT (Per : MR.JUSTICE A.R.DAVE) 1 At the instance of the Revenue the following question of law has been referred to this Court by the Income Tax Appellate Tribunal, Ahmedabad, Bench "B" under the provisions of section 256(2) of the Income Tax Act,1961. "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that for the purpose of calculating relief u/s. 80HH of the Income-tax,1961, the gross profit has to be determined after including interest paid by the assessee to its partners and disallowable u/s.40(b) of the I.T.Act,1961?".

Mr.Mihir Joshi, learned Advocate has appeared for the Revenue whereas nobody has appeared for the respondent assessee.

2.

It has been very fairly submitted by Mr.Mihir Joshi, learned Advocate appearing for the Revenue that a similar question of law had been referred to this Court in ITR No. 138 of 1985. This Court has opined in the said Reference that for the puropse of calculating the relief u/s. 80HH of the Act, the gross profit of the assessee has to be determined after including interest paid to the partners of the assessee which is disallowable u/s.40(b) of the Act. We are in respectful agreement with the view expressed by this Court in the said Reference.

3.

In the circumstances, we answer the question referred to us in the affirmative i.e. in favour of the assessee and against the Revenue. Reference thus stands disposed of with no order as to costs. (A.R.Dave,J) (D.A.Mehta,J)

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