PARLE PRODUCTS LTD. vs. THE DEPUTY COMMISSIONER OF INCOME-TAX SPL. RANGE, 5

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ITXA/1107/2004HC Bombay31 July 2008Author: HON'BLE THE CHIEF JUSTICE, HON'BLE SHRI JUSTICE A.P. DESHPANDE7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises for consideration. The Court noted that the assessee had claimed deductions under Section 32-AB for interest on corporate deposits, other deposits, and dividend income, totaling Rs. 2,07,68,631. The assessee's computation included all income items without considering whether they were from business. The onus was on the assessee to prove that the profits were from eligible business. The Profit and Loss Account showed these items as 'other income' from non-trading investments, bank deposits, and other deposits, indicating they were not profits from eligible business. The Tribunal's reliance on the Supreme Court judgment in Apollo Tyres Ltd. was found appropriate, as in the present case, the assessee failed to discharge the onus to substantiate that the income arose from its eligible business. The Court distinguished the case of M/s. Parle Biscuits Limited, stating it was not applicable. Consequently, the appeal was dismissed.

What were the facts?

M/s. Parle Products Limited (the assessee) filed its return for assessment year 1990-91, declaring a total income of Rs. 11,28,05,040. The Assessing Officer (AO), vide order dated March 19, 1993, recomputed deductions under Section 32-AB of the Income Tax Act, 1961, reducing the claim and assessing total income at Rs. 12,46,75,532. The assessee appealed to the Commissioner of Income Tax (Appeals) (CIT(A)), challenging the computation of deduction under Section 32-AB. The CIT(A), by order dated May 18, 1994, affirmed the AO's findings, holding that interest and dividend income were income from other sources, not eligible for deduction under Section 32-AB. The assessee further appealed to the Income Tax Appellate Tribunal (ITAT), which upheld the lower authorities' decision. The assessee then filed an appeal before the High Court.

What were the issues?

1. Whether, on the facts and in law, the Hon'ble Tribunal erred in not considering interest on inter-corporate deposits, interest on other deposits, dividend income, and diminution in the value of investment as profits of business on which deduction under Section 32-AB was allowable? Assessee's Contention: The assessee contended that the aforementioned income items were eligible for deductions under Section 32-AB(1)(ii) and Part (ii) and (iii) of Schedule VI of the Companies Act. They argued that the eligible products were correctly calculated after making necessary adjustments, and the entire amount was entitled to deduction under Section 32-AB. The assessee also relied on the case of Commissioner of Income-tax Central-I/II, Mumbai vs. M/s. Parle Biscuits Limited. Revenue's Contention: The revenue contended that the law requires the assessee to avail deduction under Section 32-AB(1)(i)(ii) with reference to profits from eligible business only, which must be computed in accordance with the Companies Act. The Tribunal accepted this contention. The revenue also relied on the Supreme Court judgment in Apollo Tyres Ltd. vs. Commissioner of Income-tax, Kochi.

Which sections of the Income-tax Act were involved?

Section 32-AB,Section 80-HHC,Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
-1- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1107 OF 2004 Parle Products Limited ) Nirlon House, 254­B ) Dr. A.B. Road, Worli, Mumbai 400 025 ).. APPELLANT Versus 1) The Deputy Commissioner of Income­Tax )      Special Range 5, Mumbai )      having his office at Aayakar Bhavan )      M.K. Road, Mumbai 400 020. ) 2) The Commissioner of Income­Tax, City )      having his office at Aayakar Bhavan )      M.K. Road, Mumbai 400 020. ).. RESPONDENTS Ms. R.M. Sidhwa for the Appellant.                              CORAM:  SWATANTER KUMAR, C.J. AND                                              A.P. DESHPANDE    , J.                  JUDGMENT   RESERVED    ON  :     9TH JULY 2008             JUDGMENT PRONOUNCED ON :    31ST JULY 2008

JUDGMENT : (PER SWATANTER KUMAR, C.J.) Assessee  M/s   Parle   Products   Ltd.   filed   return   for   the CNR No : HCBM020220912004 Uploaded on - 21/08/2020 -2- assessment year 1990­91 declaring a total income of Rs.11,28,05,040/­ after claiming various deductions.   Assessing  Officer  vide his order dated   19th  March   1993   amongst   others   recomputed   the   deductions under Section 32­AB of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and reduced the excess claim and granted reduction under the said provisions of Rs.1,66,86,614/­ and assessed total income on Rs.12,46,75,532/­.  The Assessee challenged this order before the Commissioner of Income Tax (Appeals), Bombay, and questioned the correctness and legality of the said order with particular emphasis on incorrect computation of deduction under Section 32­AB of the Act.  The Commissioner of Income Tax (Appeals) affirmed the findings recorded by the Assessing Officer and held as follows :­ “2. I   have   considered   the   arguments   of   the learned counsel but found no force in it.  As regards the income by way of interest, dividend treated by the Appellant as  business  income while adjudicating the issue of education u/s. 32­AB of the Act I have held it to be income from other sources on which deduction u/s 32­AB was not allowable. The same finding will hold good here also.   My findings in respect of the portion of interest on IDBI deposit, if any will also hold good here.  The assessing Officer is therefore justified in   not   allowing   deduction   u/s   80­HHC   on   this amount. .... “ Uploaded on - 21/08/2020 -3-

2.

This order of the Commissioner of Income Tax Appeals dated 18th  May 1994 was challenged by the Assessee before the Tribunal. Before the Tribunal it was contended by the Assessee that items of income were eligible for deductions under Section 32­AB(1)(ii) and Part (ii) and (iii) of Schedule VI of the Companies Act.   Eligible products worked out by the Assessee were arrived at after making the requisite adjustments and the whole amount calculated was entitled for deduction under Section 32­AB of the Act.  The Tribunal accepted the contention raised on behalf of the Department that the law requires the Assessee to avail deduction under Section 32­AB(1)(i)(ii) with reference to the profits from eligible business only which also has to be computed in accordance with the provisions of the Companies Act,  in preference to the contention of the Assessee.  It will be useful to refer to the findings recorded by the Tribunal on this issue. “10. Coming to the matter under consideration, we find that the burden was on the assessee to show that   the   amounts   in   question   were   its   profits   from eligible   business.     However,   the   assessee   did   not discharge   the   requisite   burden   that   lay   upon   it   by Uploaded on - 21/08/2020 -4- establishing that the income in question was its profit from eligible business.  The assessee persisted before the   authorities   below   that   the   heads   of   income   as prescribed under the Income­tax Act, 1961 were not relevant for allowing deduction u/s 32AB and that the profit computed in accordance with the Companies Act alone   would   form   the   basis   for   working   out   the deduction.   Since both the authorities have already recorded a finding that the impugned amounts were not   the   profits   of   the   assessee   from   its   eligible business,   we   are   left   with   no   alternative   but   to respectfully   follow   the   aforesaid   two   orders   of   the Tribunal cited above.”

3.

Aggrieved from the order dated 25th June 2004 passed by the Income Tax Appellate Tribunal, the Assessee has preferred the present Appeal  under Section 260A(1) of the Act before this Court.   While raising the challenge to the concurrent findings afore­noticed, according to the Assessee, the following question of law falls for consideration of the Court :­ “ Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal erred in not considering the following income viz. Interest on inter corporate   deposits,   interest   on   other   deposits, Dividend   income   and   dimunition   in   the   value   of investment as profit of business on which deduction u/s. 32AB was allowable ?” Uploaded on - 21/08/2020 -5-

4.

It is not necessary for us to notice the facts in a greater detail except to the extent that the Assessee had claimed exemption under Section 32­AB of the Act to the extent of Rs.2,07,68,631/­.  These were claimed in respect of interest on corporate deposits, other deposits, dividend income, etc.  The computation by the Assessee had included all items of income without considering whether the same are in respect of business or not.  The assessee is required to maintain one Profit and Loss Account and the onus to show the entries under the head “other income” and to prove that the assessee is entitled to the benefit of the provisions of Section 32AB of the Act to show that the profits are from eligible business of the assessee, is upon the assessee.

5.

It   is   noticed   from   the   impugned   order   that   Schedule   13 forming part of the Profit and Loss Account, shows other income from non­trading investment, interest on bank deposit and an interest on other deposits. Thus, it was concluded that the assessee itself has treated the aforesaid items of income as other income in its accounts and the finding of the lower authorities that amounts did not represent the profit of the assessee from its eligible business was correct.  The Tribunal relied upon the judgment of the Supreme Court in the case of Uploaded on - 21/08/2020 -6-

1.

We may also notice that the word “eligible” from the expression “eligible business” stood deleted in the Statute by the Finance Act, 1989 with effect from 1st  April 1991. However, the present case before us would   be   covered   by   the   unaltered   law   and   as   such   the   principle enunciated by the Supreme Court in Apollo Tyres (supra) would squarely be   applicable   and   answer   the   question   sought   to   be   raised   in   the present Appeal. In  Apollo Tyres,  the Tribunal had in fact recorded a finding of fact that the sale and purchase of units of UTI in the course of Assessee's business was an “eligible business” and, therefore, was granted requisite benefit.  But, in the present case, the Assessee failed to discharge the onus to substantiate that it was profit arising from its eligible business.   The learned Counsel appearing for the Appellant relied upon the judgment in The Commissioner of Income­tax Central­I/II, Mumbai vs. M/s. Parle Biscuits Limited, (Income Tax Appeal No.215 of 2002),  where again the Division Bench of this Court had noticed that the Tribunal had recorded a finding that income from interest, rent, divided and profit on sale of tooth paste was from “eligible business” and as such permitted the deduction.  That case is not applicable to the facts of the present case.  The question of law has already been answered in Uploaded on - 21/08/2020 -7- different judgments and the Tribunal has arrived at the conclusion on the basis of a finding of fact which calls for no interference by this Court.

6.

Thus, in our view, no question of law, much less a substantial question  of  law,  arises for consideration  in the present  case.    The Appeal is accordingly dismissed.  No order as to costs. CHIEF  JUSTICE

A. P. DESHPANDE, J. Uploaded on - 21/08/2020 Powered by TCPDF (www.tcpdf.org)

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