M/S DHADDHA EXPORTS vs. THE ASSISTANT COMMISSIONER OF

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 10 / 2008 M/S Dhaddha Exports, 1387, Ganesh Bhawan, Partaniyon Ka Rasta, Johari Bazar, Jaipur, in the state of Rajasthan, through Shri Vimal Chand Dhadda, Partner. ----Appellant Versus The Assistant Commissioner Of Income Tax, Circle-I, Jaipur, Earlier Known as Joint Commissioner of Income, Special Range-1, Jaipur Having its Office at New Central Revenue Building, Statue Circle, Bhagwandass Road, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Siddarth Ranka For Respondent(s) : Mr. Anuroop Singhi _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 05/07/2017

(2 of 8) [ITA-10/2008] 2. Whether on the facts and in the circumstances of the case, the learned Tribunal was justified in not deleting the interest u/s 234-B and interest u/s 234-C of the Income Tax Act when there was no specific directions to charge interest in the assessment order dated 31/12/1999? 3. Again further question was framed on 1st June, 2017. “Whether on the facts and in the circumstances of the case and in law, the ld. Tribunal was justified in not allowing/netting of interest paid at Rs. 1,34,850/- against interest earned and in taxing entire interest earned of Rs. 13,20,900/- as Income from Other Sources?” 4. The brief facts of the case are that the appellant-assessee is a partnership firm and derives income by way of export of “precious and semi-precious stones. The assessee is 100% exporter. During the previous year relevant to the year under appeal, the total turnover of the appellant was Rs. 82,25,583/- and the entire turnover was by way of exports. The appellant- assessee maintains one set of books of account and has common Bank account. The said books of account are supported by supporting record and even audited by a Chartered Accountant. The audit report u/s 44 AB and u/s 80 HHC of the I.T. Act was also obtained and such reports were furnished on the assessment record, as in the past years. The appellant- assessee is being assessed to income tax for the last several years. The appellant-assessee furnished return of income declaring an income of Rs. 10,67,450/- on 27.10.1997. the profit as per Profit and Loss Account was shown at Rs. 40,75,275/-. The Chartered Accountant computed deduction

(3 of 8) [ITA-10/2008] under Section 80 HHC of the I.T. Act at Rs. 33,78,871/- vide report of 4.10.1997. 5. Counsel for the respondent has relied upon the decision of this Court in Tax Appeal No. 329/2005 in case of M/s Chordia Trading Corporation vs. Income Tax Officer decided on 23rd November, 2016, wherein speaking for the bench, this court observed as under:- “5. Counsel for the appellant contended that in view of the decision of Supreme Court in case of ACG Associated Capsules (P) Ltd. vs. Commissioner of Income Tax, Central-IV, Mumbai reported in (2012) 343 ITR 89 where in respect of quantum, the Supreme Court held as under: “1. Section 80HHC of the Income Tax Act, 1961- Deduction-Exporters-Assessment year 2003-04- Whether expression “included any such profit” in clause (baa) to section 80HHC would mean only such receipts by way of brokerage, commission, interest, rent, charges or any other receipt which are included in profits of business as computed under head 'profit and gains of business or profession'- Held, yes- Whether therefore, if any quantum of receipt of nature mentioned in clause (1) of Explanation (baa) is allowed as expenses under sections 30 to 44D and is not included in profits of business as computed under head 'Profits and Gains of Business or Profession”, ninety per cent of such quantum of receipts cannot be reduced under clause (1) Explanation (baa) from profits of business -Held, yes- Whether therefore, ninety per cent of net gross rent of gross interest but only net interest or net rent, which has been included in profits of business of assessee as computed under head 'Profit and Gains of Business of Profession', is to be deducted under clause (1) of Explanation (baa) to section 80HHC for determining profits of business- Held, yes [In favour of assessee] 2. Section 80HHC, read with sections 28(iiid), of the Income Tax Act,1961- Deductions -Exporters- Assessment year 2003-04- Whether not entire amount received by assessee on sale of DEPB by assessee under

(4 of 8) [ITA-10/2008] section 28(iiid) for purpose of Explanation (baa) to section 80HHC- held, yes [In favour of assessee].” 6. Counsel for the department has relied on decision of this Court in case of Kushal Kishore Agarwal vs. The Income Tax Officer & Ors. in DB Income Tax Appeal No.124/20026, decided on 09.11.2016 and in case of Dhadda Exports vs. I.T.O. Jaipur in DB Income Tax Appeal No.62/2003, decided on 08.09.2016. 9. Taking into consideration the contention which has been raised and the finding of the AO, we are of the opinion that in view of clause (baa) of Section 80 HHC, the assessee is entitled to get net income under Section 80 HHC. In that view of the matter, the issues No.1 to 3 all are answered in favour of the assessee and against the department. Since issues are No.1 to 3 are decided in favour of assessee, issues No. 4 and 5 being consequential, the counsel for the parties do not press these issues and issues No.4 & 5 are not pressed. 6. He has also relied upon three decisions of the Allahabad High Court in the case of Commissioner of Income Tax vs. Oswal Exports [2014] 369 ITR 630, Commissioner of Income Tax-UU, Kanpur vs. Deep Awadh Hotels (P) Ltd. [2013] 350 ITR 185 and one from Himachal Pradesh in the case of Commissioner of Income Tax, Shimla v. Ruchira Papers Ltd. [2013] 259 CTR 153. 7. Taking into consideration the issue No. 2 regarding interest Mr. Singhi has relied upon the decision of this Court in case of Dhadda Exports vs. ITO (DBITA No.62/2003), Jaipur passed on 8th September, 2016 wherein in para 8, 9 & 10 it has been observed as under:- “8. From the record, as interest is not the business income, in that view of the matter, the discretion of the Division Bench which was

(5 of 8) [ITA-10/2008] sought by counsel for the appellant is not applicable to the facts of the present case. 9. The appellant was not in position to establish that before AO or CIT (Appeals) or Tribunal he has attempted to show this as business income. 10. Counsel for the appellant has taken us through the finding recorded by AO and CIT (A) as well as oral and documentary evidence on record on the point of interest and business income. The income involved is not a business income, therefore, naturally they will not be entitled to benefit under Section 80HHC and view taken by the Tribunal is required to be upheld and for the same, the issue is answered in favour of Department and against the assessee.

(2015) 60 taxmann. Com 334 (SC), while considering the earlier decision of the Supreme Court in para 8 & 9 observed as under:- “8. It will be seen that under the provisions of Section 234B, the moment an assessee who is liable to pay advance tax has failed to pay such tax or where the advance tax paid by such an assessee is less than 90 percent of the assessed tax, the assessee becomes liable to pay simple interest at the rate of one per cent for every month or part of the month. Shri Guru Krishna is right in stating that levy of such interest is automatic when the conditions of Section 234B are met. 9. We are of the view that the facts of the present case are squarely covered by the decision contained in Kalyankumar Ray’s case (supra) inasmuch as it is undisputed that Form I.T.N.S.150 contained a calculation of interest payable on the tax assessed. This being the

(6 of 8) [ITA-10/2008] case, it is clear that as per the said judgment, this Form must be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of Section 143, which is referred to in Explanation 1 to Section 234B.” 10. In that view of the matter, in view of the decision of the Supreme Court and Gujarat High Court, the issue is required to be answered in favour of the department against the assessee.” 9. He has also relied upon the decision of Gujarat High Court in case of Asstt. CIT vs. Norma Detergent Pvt. Ltd. decided on 16th February, 2016 wherein it has been held as under:- “Considering the totality of the facts and on conjoint reading of the aforesaid provisions of sections 143, 234B and 156 of the Income Tax Act and when levy of interest under section 234B of the Act is held to be mandatory and automatic, and the same is on the difference between the advance tax paid and assessed tax and as observed hereinabove, A.O. has no discretion to levy any other interest other than provided under section 234B of the Act. Thereafter, levy of interest under section 234 of the Act would be consequential only and only arithmetically amount of interest is required to be calculated, we are of the opinion that even in absence of any direction by the A.O. while passing assessment order under section 143(3) of the Income Tax Act, which according to under section only for determining assessed tax, there can be demand of levy and demand of interest under section 156 of the Income Tax Act. It would have been a different fact if the A.O. had any discretion with respect to rate of interest and/or to levy any interest considering the facts and circumstances of the case. As observed hereinabove, as such, A.O. had no such discretion and moment he determines the “assessed tax” and on the eventuality as mentioned in section 234B, i.e. (I) an assessee who is liable to pay advance tax under section 208 has failed to pay lsuch tax, or, where advance tax paid by such assessee under the provisions of section 210 is less than 90% of the “assessed tax”, assessee shall, be liable to pay

(7 of 8) [ITA-10/2008] simple interest at the rate of 1% for every month or part of a month comprised in the period from the first day of April next following such financial year to the date of determination of total income under sub-section (1) of section 143 and (ii) where regular assessment is made to the date of such regular assessment, on the amount equal to assessed tax, or, as the case may be, on the amount by which advance tax paid, as aforesaid, falls short of assessed tax. Under the circumstances and considering the sebsequent decisions of the Hon’ble Supreme Court in the case of Anjum M.H. Ghaswala (supra) and in the case of Karanvir Singh Gossal (supra), question of law posed for consideration of this Court is to be answered in favour of the revenue and against the

assessee. 7.15. Now, so far as the decisions of the other High Courts, relied upon the learned counsel appearing on behalf of the assessee, which are referred to hereinabove, are concerned, it is required to be noted that in all such cases, concerned High Courts have relied upon the decision in the case of Rachi Club Ltd. (supra). However, in view of the aforesaid two subsequent decisions of the Hon’ble Supreme Court and for the reasons stated hereinabove, in respectful submission we are not in agreement with the contrary view taken than what we are taking in the present case. 7.16. Similarly, the submissions on behalf of the assessee that the decision of the Patna High Court in the case of Rachi Club Ltd. (supra) came to be merged in the decision of the Hon’ble Supreme Court in view of the dismissal of the SLP against the said decision of Patna High Court in the case of Rachi Club Ltd. (supra) and therefore, the said decision is binding to this court is concerned, it is required to be noted that subsequent decision of the Hon’ble Supreme Court in the case of Anjum M.H. Ghaswala (supra) is a decision of a bench consisting of Five Hon’ble Judges and in the sebsequent decision of the Hon’ble Supreme Court in the case of Karanvir Singh Gossal (supra) had taken note of the earlier decision in the case of Anjum M.H. Ghaswala (supra), in which the Hon’ble Supreme Court has categorically laid down the law that levy of interest under section 234B is mandatory and automatic and that it cannot be reduced [in case before the Hon’ble Supreme Court in the case of Anjum M.H. Ghaswala (supra), which was with respect to power of Settlement Commission to reduce the interest leviable under section

(8 of 8) [ITA-10/2008] 234B of the Act] and therefore, subsequent decision laying down the aforesaid law is binding to this Court. 10. We have heard counsel for both the sides. 11. Taking into consideration, we are of the opinion that issue No. 1 & 3 will be decided together. The interest income earned will be treated as income from other sources but the expenses will be exempted after netting off in view of the our decision as referred by Mr. Ranka Senior Counsel. Therefore, issue No.1 & 3 are partially answered in favour of assessee. 12. In our considered opinion, if there is assessment of tax liability, the interest is not statutory liability. In that view of the matter, the contention of Mr. Ranka is required to be rejected. 13. In view of the above, issue No. 2 is decided in favour of the department and issue No. 1 & 3 as referred hereinabove are partially decided in favour of the assessee. 14. The appeal stands disposed of. (INDERJEET SINGH),J. (K.S. JHAVERI),J. A.Sharma/71