INCOME TAX OFFICER vs. VENKATESHWAR FILAMENTS PVT. LTD.

O/TAXAP/588/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 588 of 2006 WITH TAX APPEAL NO. 589 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 ? ================================================================ INCOME TAX OFFICER....Appellant(s) Versus VENKATESHWAR FILAMENTS PVT. LTD.....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 MR. HARMISH K SHAH, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI Page 1 of 4

O/TAXAP/588/2006 JUDGMENT and HONOURABLE MR.JUSTICE K.J.THAKER

Date : 18/11/2014

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘B’ (hereinafter referred to as ‘the Tribunal’) dated 08.09.2005 in ITA Nos. 1616 & 1617/Ahd/2005, the revenue has preferred the present Tax Appeals for consideration of the following substantial question of law: “Whether on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right in directing the Assessing Officer to compute deduction under Section 80IB of the Income Tax Act by excluding net interest income in respect of gross interest receipts from the turn over?” 2. The assessee filed its return of income declaring total income. During the course of assessment proceedings, the assessing officer noticed that the assessee had claimed deduction u/s 80IB of I.T Act. The Assessing Officer rejected the claim of the assessee for deduction u/s 80IB treating it as ‘other income’. On appeal the CIT (Appeals) dismissed the same. 3. On appeal before the Tribunal by the assessee, by Page 2 of 4

O/TAXAP/588/2006 JUDGMENT impugned judgment and orders, Tribunal while partly allowing the appeals, directed the Assessing Officer to disallow inclusion of net interest income from the total turn over for the purpose of computing deduction under Section 80IB of the Act. 4. Being aggrieved and dissatisfied with the impugned orders passed by the Tribunal, the revenue has preferred the present Tax Appeals for consideration of the aforesaid substantial question of law. 5. The issue involved in the present Tax Appeal is now not res integra in view of the decision of the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. vs. CIT reported in [2012] 343 ITR 89 (SC) wherein the Hon’ble Supreme Court has held that for the purpose of Section 80HHC of the Income Tax Act, 1961 it is not the entire amount received by the assessee on sale of DEPB credit but the sale value less the face value of the DEPB that will represent profit on transfer of DEPB credit by the assessee. It is also held that if any quantum of any receipt of the nature mentioned in clause (1) of Explanation (baa) has not been included in the profits of business of an assessee as computed under the head ‘Profits and gains of business or profession’, ninety per cent of such quantum of the receipt cannot be deducted under Explanation (baa) to section 80HHC. 6. Mr. Mehta, learned advocate on behalf of the revenue is not in a position to dispute the above and is not in a position to show and/or point out any contrary decision. Page 3 of 4

O/TAXAP/588/2006 JUDGMENT 7. Having heard learned advocates appearing on behalf of the assessee and the revenue and the question posed for consideration before us reproduced hereinabove and considering the decision of the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd (Supra), the question, which is raised in the present appeals are required to be answered in favour of the assessee. We are not giving any elaborate reasons for the same as in the case of ACG Associated Capsules Pvt. Ltd (Supra) it is held by the Hon’ble Supreme Court that ninety percent of not the gross rent or gross interest but only the net interest or net rent which had been included in the profits of business of the assessee as computed under the head “Profits and gains of business or profession” was to be deducted under clause (1) of Explanation (baa) to section 80HHC for determining the profits of the business. Accordingly, the question is answered in the affirmative i.e. against the appellant – revenue and in favour of the assessee. 8. In view of the above, the impugned judgment and order passed by the Tribunal is confirmed. Hence, the present Tax Appeals are dismissed. (K.S.JHAVERI, J.) (K.J.THAKER, J) divya Page 4 of 4