COMMR. OF INCOME TAX LDH. vs. M/S AVERY CYCLE INDUSTRIES LTD. LDH.

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ITA/460/2006HC Punjab & HaryanaPHHC01075185200607 August 2018Bench: MR. JUSTICE RAMENDRA JAIN,MR. JUSTICE ARUN MONGA2 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court did not decide the substantial questions of law on merits. The counsel for the Revenue conceded that the tax amount involved in the appeal was below the threshold limit prescribed by a circular dated 11.07.2018 issued by the Central Board of Direct Taxes. Consequently, the Revenue requested that the appeal be dismissed as not pressed. The High Court accepted this request and ordered accordingly. Therefore, no findings were made on the correctness of the ITAT's order regarding the inclusion of interest income in business income for Section 80HHC deductions, the treatment of exchange rate fluctuations and insurance claims in total turnover for Section 80HHC, or the deletion of disallowance for interest-free advances.

What were the facts?

The Revenue, Commissioner of Income Tax, Ludhiana-II, filed an appeal against an order dated 30.05.2005 passed by the Income Tax Appellate Tribunal (ITAT), 'B' Bench, Chandigarh. The appeal pertains to assessment year 1997-98 and concerns the respondent, M/s Avery Cycles Limited. The High Court admitted the appeal for determination of substantial questions of law. However, during the proceedings, the counsel for the Revenue acknowledged that the tax involved in the appeal was less than ₹50,00,000/-. Citing a circular issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board Direct Taxes on 11.07.2018, the Revenue requested that the appeal be dismissed as not pressed.

What were the issues?

The High Court was to decide three substantial questions of law: 1. Whether the ITAT was legally correct in holding that interest income of ₹19,53,855/- should be included in the business income of the respondent for the purpose of computing deductions under Section 80HHC of the Income Tax Act? 2. Whether the ITAT was legally correct in holding that exchange rate fluctuations and insurance claims would not form part of the total turnover when computing deductions under Section 80HHC? 3. Whether the Tribunal was right in deleting the disallowance of ₹75,600/- relating to an interest-free advance, considering the nexus between borrowing and funds advanced by the assessee from an interest-bearing CC Account without charging interest to a sister concern/Directors? The Revenue argued that the ITAT's findings on these issues were incorrect. The judgment does not record specific arguments from the respondent (assessee) on these points.

Which sections of the Income-tax Act were involved?

Section 80HHC

AI-generated summary — verify with the full judgment below

213

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.460 of 2006 (O&M)

Date of Decision: 07.08.2018 Commissioner of Income Tax, Ludhiana-II

...... Appellant Versus M/s Avery Cycles Limited

....... Respondent CORAM: HON'BLE MR. JUSTICE RAJESH BINDAL HON'BLE MR. JUSTICE AMIT RAWAL Present: Mr. Zora Singh Klar, Advocate for the appellant. RAJESH BINDAL J. The revenue is in appeal against the order dated 30.05.2005 passed by the Income Tax Appellate Tribunal 'B', Bench Chandigarh in ITA No.556/Chandi/2000 for the assessment year 1997-98. The same was admitted on 24.03.2017 for determination of following substantial questions of law:- i) Whether on the facts and in law, the ITAT was legally correct in holding that the interest income of `19,53,855/- was to be included in business income of the respondent for the purpose of computation of deductions u/s 80HHC of the I.T. Act? ii) Whether on the facts and in law, the ITAT was legally correct in holding that the Exchange rate fluctuations and insurance claim will not form part of total turnover while computing deductions u/s 80 HHC? Rittu 2018.08.10 15:13 I attest to the accuracy and integrity of this document

ITA No.460 of 2006 (O&M) -2- iii) Whether on the facts and in law, the Tribunal was right in deleting the disallowance of ` 75,600/- relating to interest-free advance when there was nexus between the borrowing and funds advanced by the assessee due to payments to sister concern/Directors from the interest bearing CC Account without charge of any interest? Learned counsel for the revenue did not dispute the fact that the amount of tax involved in the present appeal on the issues for consideration for which the appeal was admitted is less than ` 50,00,000/- and in view of the circular issued on 11.07.2018 by the Government of India, Ministry of Finance, Department of Revenue, Central Board Direct Taxes, the present appeal may be dismissed as not pressed. Ordered accordingly.

(RAJESH BINDAL) JUDGE (AMIT RAWAL) JUDGE 07.08.2018

rittu Whether speaking/reasoned: Yes/No Whether reportable: Yes/No Rittu 2018.08.10 15:13 I attest to the accuracy and integrity of this document

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