JUDGMENTIN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 344 of 2002 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 judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to civil judge ? ================================================================ UNITED PHOSPHOROUS LIMITED....Appellant(s) Versus JT.COMMISSIONER OF INCOME TAX....Opponent(s) ================================================================ Appearance: MRS SWATI SOPARKAR, ADVOCATE for Appellant(s) No. 1 MR SUDHIR M MEHTA, ADVOCATE for Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Page 1 of 6 HC-NIC Page 1 of 6 Created On Fri May 06 13:03:20 IST 2016 O/TAXAP/344/2002 JUDGMENT Date : 11/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. While admitting appeal on 24.12.2001, following questions of law were formulated for our determination; (i) Whether, in facts and circumstances of case ITAT was right in law in holding that alleged income from Advance License Benefit Receivable ("ALBR" for short) is taxable in year under consideration even though said income has accrued to appellant in subsequent years? (ii) Whether in facts and circumstances of case ITAT was right in law in holding that alleged income from Pass Book Scheme is taxable in year under consideration? (iii) Whether in facts and circumstances of case ITAT was right in law in holding that premium of leasehold land cannot be allowed on proportionate basis spread over period of lease, which is totally contrary to decision of Hon ble Supreme Court in case of Madras Industrial Investment Corporation Limited v. CIT (225 ITR 802)? (iv) Whether, in facts and circumstances of case, ITAT was right in law in allowing deduction u/s.80M after deducting management expenses from gross dividend Page 2 of 6 HC-NIC Page 2 of 6 Created On Fri May 06 13:03:20 IST 2016 O/TAXAP/344/2002 JUDGMENT received when no such expenses have been incurred by appellant? (v) Whether, in facts and circumstances of case, ITAT was right in law in not granting set off of interest expenditure against interest income for purpose of calculating deduction u/s.80HHC of Act? (vi) Whether, in facts and circumstances of case, ITAT was right in law in setting aside for fresh adjudication issue of levy of interest u/s 234B of Act though it was not specifically levied in body of assessment order and therefore same could not be levied?" 2. Briefly stated, facts are that assessee had filed its return of income for A.Y. 1996 97 declaring total income at Rs.Nil on 28.11.1996. Vide order dated 24.03.1999, A.O assessed income of assessee at Rs.19,84,30,202/ . assessee challenged said order by filing appeal before CIT(A). CIT(A) partly allowed appeal vide order dated 15.03.2000. Against said order, assessee filed appeal before Appellate Tribunal. Appellate Tribunal, vide order dated 13.03.2002, partly allowed appeal. Being aggrieved by order passed by Appellate Tribunal, present appeal has been preferred. 3. We have heard learned counsel for both sides. Insofar as Page 3 of 6 HC-NIC Page 3 of 6 Created On Fri May 06 13:03:20 IST 2016 O/TAXAP/344/2002 JUDGMENT questions no.(i) & (ii) are concerned, issues are already concluded by decision of Apex Court in case of Commissioner of Income tax v. Excel Industries Ltd., [2013] 358 ITR 295 wherein, it has been held that where any real business income has not accrued but only hypothetical income has accrued to assessee, then Section 28(iv) of Act would not be applicable. In view of principle propagated by Apex Court, questions no.(i) & (ii) are answered in favour of assessee and against Revenue. 4. Insofar as question no.(iii) is concerned, issue is already concluded by decision of Apex Court in case of Deputy Commissioner of Income tax v. Sun Pharmaceuticals Ind. Ltd., [2010] 329 ITR 479 (Guj). In that case, Appellate Tribunal found that land in question was not acquired by assessee. It was held that merely because deed was registered, transaction in question would not assume different character. lease rent was very nominal and by obtaining land on lease, capital structure of assessee did not undergo any change. It was further held that assessee only acquired facility to carry on business profitably by paying nominal lease rent and that lease rent paid by assessee to GIDC was allowable as revenue expenditure. In view of above principle, question no.(iii) is answered in favour of assessee and against Revenue. 5. Insofar as question no.(iv) is concerned, assessee has claimed deduction u/s.80M. However, assessee has not shown any management expenditure or office expenditure, which was Page 4 of 6 HC-NIC Page 4 of 6 Created On Fri May 06 13:03:20 IST 2016 O/TAXAP/344/2002 JUDGMENT necessary for earning dividend. Apex Court in case of CIT v. United General Trust Ltd., 200 ITR 488, has held that relief u/s.80M must be allowed on net dividend after deducting proportionate management expenditure. Similarly, in case of Distributor, Vadodara Pvt. Ltd. v. Union of India, 156 ITR 120, Apex Court held that relief u/s.80M was not available on gross amount of dividend without deduction of proportionate management expenditure. Accordingly, question no.(iv) is answered in favour of assessee and against Revenue. 6. Insofar as question no.(v) is concerned, issue is already concluded by decision of Apex Court in case of ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income tax, [2012] 343 ITR 89 (SC) wherein, it has been held that for purpose of Section 80HHC of Act, it is not entire amount received by assessee on sale of DEPB credit but, sale value less face value of DEPB that will represent profit on transfer of DEPB credit by assessee. Accordingly, question no.(v) is answered in favour of assessee and against Revenue. 7. Insofar as question no.(vi) is concerned, Appellate Tribunal has placed reliance upon decision of Apex Court in case of CIT v. Ranchi Club Ltd., 164 CTR 200 wherein, it was held that in absence of any specific mention by assessing authority in assessment order in respect of charging interest u/s.234A and 234B, no interest could be recovered merely by way of demand notice. However, subsequently, by Finance Act, 2001, Sections 140A and 234A/B were amended retrospectively with Page 5 of 6 HC-NIC Page 5 of 6 Created On Fri May 06 13:03:20 IST 2016 O/TAXAP/344/2002 JUDGMENT effect from 01.04.1989. In light of above scenario, Appellate Tribunal remitted matter to A.O for deciding same afresh. In our opinion, view taken by Appellate Tribunal is just and appropriate considering amendment of Section 234A/B of Act. Accordingly, question no.(vi) is answered in favour of assessee and against Revenue. 8. In view of aforesaid, appeal stands disposed of. (K.S.JHAVERI, J.) (K.J.THAKER, J) Pravin/* Page 6 of 6 HC-NIC Page 6 of 6 Created On Fri May 06 13:03:20 IST 2016 United Phosphorous Limited v. Jt. Commissioner of Income-tax