COMMISSIONER OF INCOME TAX vs. NEHA INTERNATIONAL

O/TAXAP/836/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 836 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 ? ================================================================ COMMISSIONER OF INCOME TAX....Appellant(s) Versus NEHA INTERNATIONAL....Opponent(s) ================================================================ Appearance: MR. M.R. BHATT, SENIOR ADVOCATE WITH MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1 RULE SERVED for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and Page 1 of 5

O/TAXAP/836/2006 JUDGMENT HONOURABLE MR.JUSTICE K.J.THAKER Date : 11/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Though served none appears for the respondent. 2. By way of this appeal, the appellant- revenue has challenged the order dated 17.10.2005 passed by the Income Tax Appellate Tribunal, Ahmedabad [for short “the Tribunal”] in ITA No.1322/Ahd/1999, whereby the appeal preferred by the revenue was dismissed by the Tribunal. 3. The facts in brief are that the respondent-assessee is exporter of bed-sheets blended, knitwear etc. The assessee filed its return of income on 29.09.1997 for the Assessment Year 1997-98 and declared total income at Rs.4,06,530/- along with audit report. The return was processed under Section 143(3) of the Income Tax Act. Thereafter, the Assessing Officer passed his order under Section 143(3) of the Income Tax Act and determined the total income of the assessee at Rs.1,78,30,740/- and while finalizing the assessment, the Assessing Officer made disallowance of Rs.1,74,24,214 under Section 80HHC of the Income Tax Act to the return of income. Page 2 of 5

O/TAXAP/836/2006 JUDGMENT 3.1. Against the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax(Appeals). The CIT(A) vide order dated 30.03.1999 allowed the appeal of the assessee and deleted the disallowance made by the Assessing Officer. Being aggrieved and dissatisfied with the order of the CIT(A), the revenue filed an appeal before the Tribunal. The Tribunal vide impugned order dated 17.10.2005 dismissed the appeal of the revenue and upheld the order of the CIT(A). Hence, this appeal is filed at the instance of the revenue. 4. While

admitting

this

appeal

on 29.11.2006, the Court had formulated the following substantial question of law:- “(A) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting the addition made on account of disallowance of excess deduction u/s. 80HHC of the IT Act by Rs.1,74,24,214/-. 5. Mr. Bhatt, learned senior advocate appearing for the appellant-revenue has submitted that both the authorities namely CIT(A) and the Tribunal has committed an error in deciding the matter. He further submitted that both the Page 3 of 5

O/TAXAP/836/2006 JUDGMENT authorities have applied wrong formula as envisaged under Section 80HHC of the Income Tax Act. 5.1. Learned counsel for the appellant- revenue has contended that for the purpose of Section 80HHC 3(a) the explanation below Section 80HHC (a) will apply whereas for the purpose of clause (b) of Section 80HHC (3) the explanation to sub-section 3 will apply. 5.2. By making such submissions, learned senior advocate for the appellant-revenue has contended that both the authorities namely the CIT(A) as well as the Tribunal have committed error in allowing the appeal of the assessee. Therefore, he urged that this Court may allow this appeal and remand the matter to the CIT(A) for deciding the matter afresh. 6. We have heard learned senior advocate appearing for the appellant-revenue. The contention of learned senior advocate for the appellant is required to be accepted inasmuch as Tribunal itself in the order has held that the assessee is a trader. In our view, the CIT(A) as well as Tribunal have wrongly applied the provisions of law. Being a trader company Section 80HHC (3)(b) read with explanation thereunder to the said sub section will apply. Page 4 of 5

O/TAXAP/836/2006 JUDGMENT 7. For the foregoing reasons, the present appeal deserves to be allowed and the same is accordingly allowed. The order of both the authorities namely the CIT(A) and the Tribunal are quashed and set aside. The matter is remanded to the CIT(A) for deciding the matter afresh. (K.S.JHAVERI, J.) (K.J.THAKER, J) PAWAN Page 5 of 5