THE COMMISSIONER OF INCOME TAX, vs. M/S.APPOLLO TYRES LIMITED,

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY, THE 27TH DAY OF NOVEMBER 2018 / 6TH AGRAHAYANA, 1940 I.T.R.No.309 of 1999 ARISING FROM R.A.NO.283(COCH)/95 IN I.T.A.NO.356(COCH)/93 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN [ASSESSMENT YEAR 1989-90] APPLICANT: THE COMMISSIONER OF INCOME TAX, CENTRAL-II, NEW DELHI. BY ADVS. SRI.P.K.R.MENON, SENIOR COUNSEL FOR GOI (TAXES) SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT: M/S.APOLLO TYRES LTD., CHALAKUDI. BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.ABRAHAM JOSEPH MARKOS SRI.HARAN THOMAS GEORGE SRI.ISAAC THOMAS SRI.V.ABRAHAM MARKOS THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD ON 27.11.2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

I.T.R.No.309 of 1999 - 2 - ORDER Vinod Chandran, J: The reference arises from the order of the Tribunal for the assessment year 1989-90. The following are the questions of law raised in the reference: "1. Whether on the facts and in the circumstances of the case and in law the I.T.A.T. was correct in: i) holding that the assessee's business in the purchase and sale of units and its business in the manufacture and sale of tyres constituted one and the same business? ii) holding that the buying and selling of units is not speculation business and that the profit of Rs.12,17,441/- was a business profit and that it cannot be treated as a speculation profit? 2. Holding that the amount of deduction under section 80HHC should be worked out on the basis of book profits even though as per sub-section 3 of section 80 HHC, this has to be allowed on the basis of normal profits? 3. Holding that the amount of Rs.2,72,43,385/-0 withdrawn from the revaluation reserve account for adjusting the depreciation should be allowed as deduction while computing the book profits?

I.T.R.No.309 of 1999 - 3 - 4. Whether on the facts and in the circumstances of the case and in law:- i) should not the dividend income amounting to Rs.1,97,89,440/- be excluded in computing the profits of eligible business under sub-sec.(3) of sec.32AB of the I.T.Act? ii) the entire business of the assessee company including earning dividend income is eligible business or profession within the meaning of sub-section (3) of section 32AB of the Income Tax Act, 1961? 5. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in holding:- i) in computing 20% of the eligible profits, the income from Unit Trust of India (dividends and profits or loss on the sale of units) should also be considered along with other income? ii) two activities of the assessee have to be considered as forming part of the same business? iii)as both the activities constituted the same business, which is an eligible income, provisions of section 32AB(3)(b) is not applicable? 2. Question Nos.1, 4 and 5 are covered by the decision of this Court, in favour of the assessee, in C.I.T. v. Appollo Tyres Ltd. [(1999) 237 ITR 706 (Ker.)], as

I.T.R.No.309 of 1999 - 4 - confirmed by the Hon'ble Supreme Court by the decision reported in Apollo Tyres Ltd. v. C.I.T. [(2002) 255 ITR 273 (SC)]. Question No.2 is covered in favour of the assessee by the decision of the Hon'ble Supreme Court in C.I.T. v. Bhari Information Tech. Sys.P.Ltd. [(2012) 340 ITR 593 (SC)]. What survives is only consideration of question No.3. 3. The assessee in the previous assessment year on a revaluation of its assets, credited an amount to the revaluation reserve account. In the current assessment year, the assessee debited Rs.2,72,43,385/- from the revaluation reserve account and adjusted the depreciation arising in the said year. In fact, this should have been shown in the profit and loss accounts as a profit, which the assessee did not; but, however, adjusted to depreciation, which has the same effect. In fact, if the assessee had added on the said amounts to the profit, then under Section 115J [Minimum Alternate Tax (MAT)] the said amounts would be allowed as deduction under Section 115J. The Assessing Officer, however, found that the profit having not been added on, there could be no deduction claimed. The Assessing Officer, hence, added on the said amounts to the profit for assessment under MAT. The first appellate authority and the Tribunal found that there is no ground to decline such exemption to the assessee, merely for the fact that the same was not shown in the

I.T.R.No.309 of 1999 - 5 - profit. The deduction which is permissible under the Act could not have been disallowed. We affirm the concurrent findings of the first appellate authority and the Tribunal on Question No.3 and it stands answered in favour of the assessee and against the Revenue. The questions of law referred are answered in favour of the assessee. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE Vku/-

I.T.R.No.309 of 1999 - 6 - APPENDIX PETITIONER'S/S EXHIBITS: ANNEXURE A COPY OF ASSESSMENT ORDER DATED 7.2.1992 FOR A.Y. 1989-90 ANNEXURE B COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), COCHIN DATED 12.2.1993 ANNEXURE C COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN DATED 29.5.1995 IN ITA.356(COCH)/93 Vku/- [ true copy ]