COMMISSIONER OF INCOME TAX vs. M/S.I.P.PATEL AND CO.

O/TAXAP/888/2005 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 888 of 2005

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 M/S.I.P.PATEL AND CO.....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 RULE SERVED for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Page 1 of 5

O/TAXAP/888/2005 JUDGMENT

Date : 25/11/2014

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By way of this appeal, the appellant has challenged the judgment and order dated 27.10.2004 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘B’, in ITA No. 2450/A/2004 for AY 2001-02. 2. While admitting this appeal, this Court has framed the following substantial questions of law: (1) Whether

the

facts

and circumstances of the case and in law the Hon’ble Tribunal was justified in holding

that

the

exchange

rate difference pertaining to exports made in earlier years was ‘profits of business’ within the meaning of Section 80HHC of the Act ? (2) Whether

the

facts

and circumstances of the case, and in law the Hon’ble Tribunal was justified in holding that the interest received on fixed deposits should be netted out for the purposes of computation of deduction under section 80HHC ? 3. The facts of the present case are that the Page 2 of 5

O/TAXAP/888/2005 JUDGMENT return of income for the year under consideration was filed by the assessee on 29.10.2001 declaring total income of Rs. 1,69,53,880/-. The return of income so filed was processed u/s. 1453(1) of the Act. The return of income is supported by Audit report in the prescribed form No. 3CB and form No. 3CD of the Act. It is also accompanied by Form No. 10CCAC i.e. the claim by the exporter for the deduction u/s. 80HHC of the Act. The case was selected under scrutiny and notice under sec. 143(2) of the IT Act was issued on31.1.2002 and the same was served upon the assessee on 1.2.02. In response to the notice, the assessee has filed all the details called for from time to time. After considering the material on record, the assessment order came to be passed. Against the said assessment order, the assessee has preferred an appeal before the CIT(A) which came to be dismissed. Against the said order of CIT(A), the assessee has preferred an appeal before the ITAT Ahmedabad, which was partly allowed. Being aggrieved and dissatisfied with the said order of ITAT, the Revenue has preferred the present Tax Appeal before this Court. 4. Heard the learned advocate appearing for the appellant and considered the submissions. Learned advocate appearing for the appellant has submitted that the question no. 1 is governed by the decision of this Court in the case of Commissioner of Income-tax v. Priyanka Gems, Page 3 of 5

O/TAXAP/888/2005 JUDGMENT reported in[2014] 367 ITR 575 (Guj), wherein, this Court has held as under: “that the source of the income of the assessee was the export. On the basis of accrual, income was already reflected in the assessee’s account on the date of the export at the prevailing rate of exchange. Further, the income was earned merely on account of foreign exchange fluctuation. Such income, therefore, was directly related to the assessee’s export business and could not be said to have been removed beyond the first degree. The assessee was entitled to deduction under section 80HHC.” 5. Similarly, the question no. 2 is also answered by the Apex Court in the case of ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income-tax, reported in [2012] 343 ITR 89 (SC), wherein, the Apex Court has held as under: “that ninety per cent 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 Page 4 of 5

O/TAXAP/888/2005 JUDGMENT section 80HHC for determining the profits of the business.” 6. In that view of the matter, we are in complete agreement with the view taken by the Tribunal as facts and law are similar, no elaborate reasons are given by us. The appeal deserves to be dismissed. The questions are answered in favour of the assessee and against the Revenue. The present Tax Appeal is dismissed. (K.S.JHAVERI, J.) (K.J.THAKER, J) mandora Page 5 of 5