THE INCOME TAX OFFICER vs. SEJAL GEMS

PDF · subscribers
TAXAP/1208/2008HC GujaratGJHC24025583200830 November 2013Bench: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE R.P.DHOLARIA5 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court modified the ITAT's common judgment and order dated 30/11/2007. While acknowledging the Supreme Court's decision in ACG Associated Capsules Pvt. Ltd. vs. Commissioner of Income-Tax, which was conceded by the assessee and not disputed by the Revenue, the Court held that for the purpose of working out deduction under Section 80HHC of the Income Tax Act, net receipts of labour charges are to be included. The Assessing Officer was directed to pass consequential orders accordingly. The issue of whether the reopening was void was not explicitly decided by the High Court, as the appeals were disposed of based on the concession regarding the treatment of labour charges for Section 80HHC calculation.

What were the facts?

The assessee, Sejal Gems, is in dispute with the Revenue (Income Tax Officer) concerning assessment years 1996-1997 to 1999-2000. The Assessing Officer (AO) reopened assessments under Section 148 and held that gross labour receipts formed part of the assessee's turnover, impacting the deduction under Section 80HHC. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the assessee's appeals, deeming the reopening void. The Revenue appealed to the Income Tax Appellate Tribunal (ITAT), which upheld the CIT(A)'s decision regarding the exclusion of labour charges from turnover for Section 80HHC calculation, dismissing the Revenue's appeals. The Revenue then filed appeals before the High Court.

What were the issues?

1. Whether, on the facts and circumstances and in law, the Income Tax Appellate Tribunal was right in concluding that receipts of labour charges do not constitute part of the total turnover for working out deduction under Section 80HHC of the Income Tax Act? Assessee's Contentions: The assessee conceded that the ITAT's view that labour charges do not constitute part of total turnover for Section 80HHC deduction cannot be sustained, in light of the Supreme Court's decision in ACG Associated Capsules Pvt. Ltd. vs. Commissioner of Income-Tax. However, the assessee argued that only net receipts of labour charges should be excluded for claiming deduction under Section 80HHC, relying on the same Supreme Court decision. Revenue's Contentions: The Revenue's counsel could not dispute the submission made by the assessee's counsel regarding the Supreme Court's decision in ACG Associated Capsules Pvt. Ltd.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 148

AI-generated summary — verify with the full judgment below

O/TAXAP/1208/2008 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1208 of 2008 With TAX APPEAL NO. 1209 of 2008 With TAX APPEAL NO. 1210 of 2008 With TAX APPEAL NO. 1213 of 2008 With TAX APPEAL NO. 1215 of 2008

FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH Sd/- and HONOURABLE MR.JUSTICE R.P.DHOLARIA Sd/- ================================================================ 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 ================================================================ THE INCOME TAX OFFICER....Appellant(s) Versus SEJAL GEMS....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 MS SB SOPARKAR, SR.ADVOCATE for the Opponent(s) No. 1 ================================================================ Page 1 of 5

O/TAXAP/1208/2008 JUDGMENT CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA

Date : 30/11/2013

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.00. As common question of law and facts arise in this group of appeals, and as such challenging the common impugned Judgement and Order passed by the learned Income Tax Appellate Tribunal and the same are with respect to same assessee but with respect to different Assessment Years, all these appeals are heard, decided and disposed of by this common Judgement and Order. 2.00. The dispute is with respect to same assessee but with respect to Assessment Years 1996-1997 to 1999-2000. 2.01. The AO held that the gross labour receipt do form part and parcel of the turnover of the assessee and accordingly the same is required to be incorporated in the amount of the total turnover and accordingly total amount of deduction under section 80HHC came to be made by taking gross amount of the labour receipts. 2.02. It is required to be noted that the AO reopened the assessment proceedings within a period of four years and thereafter in the reassessment proceedings under section 148 of the Income Tax Act, 1961 (hereinafter referred to as “the I.T. Act) recomputed the deduction under section 80HHC of the IT Act. Page 2 of 5

O/TAXAP/1208/2008 JUDGMENT 2.03. On appeals, the learned CIT(A) allowed all the appeals preferred by the assessee by holding the reopening to be void. 2.04. Feeling aggrieved and dissatisfied with the respective orders passed by the CIT(A) in holding the reopening to be void, the revenue preferred appeals before the Income Tax Appellate Tribunal (hereinafter referred to as “the ITAT”) and the learned ITAT by common judgement and order dated 30/11/2007 has upheld that the receipt of labour charges do not constitute part of the total turnover for working out deduction under section 80HHC of the IT Act and has consequently dismissed all the appeals. 2.05. Feeling aggrieved and dissatisfied with the impugned Common Judgement and Order passed by the learned ITAT, the revenue has preferred all these appeals. 2.06. While admitting all these appeals, the Division Bench has framed the following substantial questions of law :- “Whether on the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal is right in coming to the conclusion that receipts of labour charges do not constitute part of the total turnover for working out deduction under Section 80HHC of the Income Tax Act?” 3.00. Having heard Mr.Sudhir Mehta, learned counsel appearing on behalf of the appellant - revenue and Mr.S.N. Soparkar, learned counsel appearing on behalf of the Page 3 of 5

O/TAXAP/1208/2008 JUDGMENT respondent – assessee and considering the issue involved, we are of the opinion that the substantial question of law framed by this Court framed while admitting these appeals are required to be framed as under :- “Whether on the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal is right in coming to the conclusion that receipts of labour charges do not constitute part of the total turnover for working out deduction under Section 80HHC of the Income Tax Act? If yes, to what extent?” 4.00. Heard Mr.Sudhir Mehta, learned counsel appearing on behalf of the appellant - revenue and Mr.S.N. Soparkar, learned counsel appearing on behalf of the respondent – assessee, in respective appeals. 5.00. Mr.Mr.S.N. Soparkar, learned counsel appearing on behalf of the respondent – assessee in respective appeals has fairly conceded that in view of decision of the Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. Vs. Commissioner of Income-Tax, reported in [2012] 343 ITR 89 (SC), the view taken by the learned ITAT while passing the impugned Judgement and Order that receipts of the labour charges do not constitute part of the total turnover for working out deduction under section 80HHC of the IT Act, cannot be sustained. However, has submitted that while working out the deduction under section 80HHC of the IT Act, net is to be excluded for claiming deduction under section 80HHC of the IT Act. In support of his above submission, he has relied upon the decision of the Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. (supra). Page 4 of 5

O/TAXAP/1208/2008 JUDGMENT 6.00. Mr.Sudhir Mehta, learned counsel appearing on behalf of the revenue is not in a position to dispute that in the case of ACG Associated Capsules Pvt. Ltd. (supra), the Hon'ble Supreme Court has taken the view as submitted by Mr.Soparkar, learned counsel appearing on behalf of the assessee. 7.00. In view of the above, the common impugned judgement and order dtd. 30/11/2007 passed by the learned tribunal is hereby modified to the extent holding that for the purpose of working out deduction under section 80HHC of the IT Act, net receipts of labour charges are to be included. Now, the Assessing Officer shall pass consequential orders accordingly. With this, all these appeals are disposed of. Sd/- (M.R.SHAH, J.) Sd/- (R.P.DHOLARIA,J.) Rafik. Page 5 of 5

More judgments on Section 80HHC

All 1,083 judgments and leading authorities on Section 80HHC →

Recent GST High Court judgments

Search GST case law →