COMMISSIONER OF INCOME TAX AHMEDABAD III vs. NIRMA LIMITED

O/TAXAP/1223/2014 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1223 of 2014

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 ? ================================================================ COMMISSIONER OF INCOME TAX AHMEDABAD III....Appellant(s) Versus NIRMA LIMITED....Opponent(s) ================================================================ Appearance: MR NITIN K MEHTA, ADVOCATE for the Appellant(s) No. 1 MR B S SOPARKAR, ADVOCATE for the Opponent(s) No. 1 RULE SERVED for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and Page 1 of 5

O/TAXAP/1223/2014 JUDGMENT HONOURABLE MR.JUSTICE K.J.THAKER

Date : 18/12/2014

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By way of this appeal, the Revenue has challenged the judgment and order dated 26.2.2014 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench “A” in ITA No. 558/Ahd/2005 for AY 2001-02. 2. While admitting this appeal on 5.12.2014, this Court has framed the following substantial questions of law: “(A) Whether the Appellate Tribunal is right in law and on facts in reversing the order of CIT(A) confirming the disallowance of Soda Ash Project Interest Expenses of Rs.21,70,47,967/ treating the same as expenditure of capital nature and rightly disallowed by the A.O. Under Section 36(1) (iii) of the Act ? (B) Whether Ld. ITAT was justified in not following the order of Hon’ble Gujarat High Court in the case of Atul Intermediates which held that deduction u/s. 80HHC is to be computed on eligible business profit only after reducing therefrom portion of profit on which deduction has already been availed by assessee under section 80IA of the Act“ 3. The facts of the present case are that the Page 2 of 5

O/TAXAP/1223/2014 JUDGMENT return of income filed on 31.10.2001, declaring total income of Rs. 51,76,36,605/-. In the return of income, the assessee company has claimed deduction under sec. 80IA, 80HHC & 80G of the IT Act. The adjusted book profit of the assessee company was Rs. 266,69,34,380/-. As the income tax payable on the total income computed as per the provisions of the IT Act was less than 7.5% of the assessee company’s book profit, the book profit was deemed to be the total income of the assessee u/s. 115JB. Tax @ 7.5% of Rs. 20,00,20,079/- and surcharge @ 13% of Rs. 2,60,002,610/- was charged on the income u/s. 115JB. The return was picked up for scrutiny and the notice u/s. 143(2) dated 29.8.2002 was served on the assessee company on the same date. Subsequently,

notice

u/s.

142(1)

dated 11.12.2003, 9.3.2004, 24.3.2004 and 25.3.2004 were served on the assessee company. In response to these notices, necessary details are furnished by the assessee company. After consider the material on record, the assessment order came to be passed. Against the said order of assessment order, the assessee company has preferred an appeal before the CIT(A), which was partly allowed. Against the order of CIT(A), the Revenue has preferred appeal before the ITAT which was dismissed. Being aggrieved by the said order of ITAT, the Revenue has preferred present Tax Appeal before this Court. Page 3 of 5

O/TAXAP/1223/2014 JUDGMENT 4. We have heard the learned advocates appearing for the parties and considered the submissions. The questions involved in the present appeal are now squarely covered by the two decisions of this Court. The first question no.(A) is governed by the decision of this Court in the case of Commissioner of Income-Tax v. Nirma Ltd., reported in [2014] 367 ITR 12 (Guj.), more particularly, in para6, this Court has held as under: “The sole surviving question No. 13, pertains to disallowance of soda ash project interest expenses of Rs. 3.33 crores (rounded off) and lad project interest of Rs. 12.27 crores (rounded off). The Assessing Officer, questioned the assessee on these expenses and deleted the same on two grounds, firstly, that the interest was paid by way pre-operative expenditure and, secondly, the assessee had capitalized such expenditure.” 5. Therefore, the question no. (A) is answered in favour of the assessee. 6. The second question (B) is also governed by the decision of this Court in the case of Commissioner of Income Tax v. Atul Intermediates, reported in [2014] 45 taxmann.com 275, and therefore, question (B) is decided in favour of the Revenue and against the assessee. The appeal is partly allowed. Page 4 of 5

O/TAXAP/1223/2014 JUDGMENT (K.S.JHAVERI, J.) (K.J.THAKER, J) mandora Page 5 of 5