Commissioner of Income-tax-III, Surat v. Bhojal Gems
[Citation -2014-LL-1113-39]

Citation 2014-LL-1113-39
Appellant Name Commissioner of Income-tax-III, Surat
Respondent Name Bhojal Gems
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 13/11/2014
Assessment Year 2001-02
Judgment View Judgment
Keyword Tags substantial question of law • computation of deduction • income from business • set off of interest • interest received • return of income • total turnover • interest paid • commission • brokerage • rent
Bot Summary: The assessee approached the Tribunal against the order of the CIT(A), wherein, the Tribunal passed the impugned order. At the time of admission, this Court framed the following question for consideration; Whether on the facts and circumstances of the case, and in law the Appellate Tribunal was justified in holding that the interest received on Fixed Deposits should be netted out of the purposes of Page 2 of 5 Downloaded on : Thu Jul 30 08:02:17 IST 2020 O/TAXAP/62/2006 JUDGMENT computation of deduction u/s.80HHC 4. The issue involved in this matter is no more res integra and is covered by a decision of the the Apex Court in the case of COMMISSIONER OF INCOME TAX VS. LAKSHMI MACHINE WORKS , 2007 290 ITR 667(SC), wherein, the Apex Court hold that while interpreting the words total turnover in the formula in Section 80HHC, one has to give a schematic interpretation and the various amendments made therein show that receipts by way of brokerage, commission, interest, rent, etc. As is clear from the material on record, in the instant case, the AO while examining the case of the respondent-assessee for the relevant assessment year, noted that the assessee had paid Rs.1,72,49,210/- to the bank as interest and thereby, the assessee netted out the FD interest to the tune of Rs.5,93,150/-, which was not related to export of the assessee. While doing so the AO overlooked the earlier decision of the Tribunal in LALSONS ENTERPRISE ORS. VS. DCIT , 89 ITD 25(SB), wherein, the Tribunal held that 90 per cent of net interest remaining after a set off of interest paid which has nexus between the interest that can be reduced and 90 per cent of the gross interest. We are therefore of the opinion that the Tribunal, in the case of the assessee, rightly placed reliance on the same and remanded the said issue to AO to enable him to consider 90 per cent of the net interest while allowing assessee s claim under Section 80HHC in respect of the income from interest. In view of the above discussion and in view of the ratio laid down by the apex Court in the case of LAKSHMI MACHINE WORKS, we are of the opinion that the Tribunal committed no error in passing the impugned order.


IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 62 of 2006 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 ? COMMISSIONER OF INCOME TAX-IIISURAT....Appellant(s) Versus BHOJAL GEMS....Opponent(s) Appearance: MR SUDHIR M MEHTA, ADVOCATE for Appellant(s) No. 1 MR MANISH J SHAH, ADVOCATE for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 13/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This is appeal by appellant- Page 1 of 5 Downloaded on : Thu Jul 30 08:02:17 IST 2020 O/TAXAP/62/2006 JUDGMENT revenue, seeking to challenge order of learned ITAT, Ahmedabad Bench (for short, Tribunal ), Dated : 19.05.2005, rendered in ITA No. 2996/Ahd/2004 for A.Y. 2001-02, whereby, Tribunal partly allowed appeal of respondent-assessee. 2. brief facts of case are that respondent-assessee, who is engaged in business of import, export and manufacturing of diamonds, filed its return of income for A.Y. 2001-02 on 30.10.2001, declaring its total income at Rs.52,83,140/-. Pursuant thereto, case of respondent-asessee was examined and AO excluded amount of Rs.5,93,150/- from deduction under Section 80HHC of Act. Being aggrieved thereby, assessee approached learned CIT(A), who dismissed appeal of assessee. assessee, hence, approached Tribunal against order of CIT(A), wherein, Tribunal passed impugned order. Hence, present appeal. 3. At time of admission, this Court framed following question for consideration; Whether on facts and circumstances of case, and in law Appellate Tribunal was justified in holding that interest received on Fixed Deposits should be netted out of purposes of Page 2 of 5 Downloaded on : Thu Jul 30 08:02:17 IST 2020 O/TAXAP/62/2006 JUDGMENT computation of deduction u/s.80HHC? 4. Heard, Mr. Mehta, learned Advocate for appellant-revenue, and Mr. Shah, learned Advocate for Respondent-assessee, and perused material on record as well as orders passed by CIT(A) and Tribunal. issue involved in this matter is no more res integra and is covered by decision of the Apex Court in case of COMMISSIONER OF INCOME TAX VS. LAKSHMI MACHINE WORKS , [2007] 290 ITR 667(SC), wherein, Apex Court hold that while interpreting words total turnover in formula in Section 80HHC, one has to give schematic interpretation and various amendments made therein show that receipts by way of brokerage, commission, interest, rent, etc. do not form part of business profits, as they have no nexus with activity of export. 5. As is clear from material on record, in instant case, AO while examining case of respondent-assessee for relevant assessment year, noted that assessee had paid Rs.1,72,49,210/- to bank as interest and thereby, assessee netted out FD interest to tune of Rs.5,93,150/-, which was not related to export of assessee. AO, therefore, did not treat same as income from business and hold that said amount was not Page 3 of 5 Downloaded on : Thu Jul 30 08:02:17 IST 2020 O/TAXAP/62/2006 JUDGMENT liable to deduction under Section 80HHC of Act. However, while doing so AO overlooked earlier decision of Tribunal in LALSONS ENTERPRISE & ORS. VS. DCIT , 89 ITD 25 (Del)(SB), wherein, Tribunal held that 90 per cent of net interest remaining after set off of interest paid which has nexus between interest that can be reduced and 90 per cent of gross interest. We are therefore of opinion that Tribunal, in case of assessee, rightly placed reliance on same and remanded said issue to AO to enable him to consider 90 per cent of net interest while allowing assessee s claim under Section 80HHC in respect of income from interest. 6. Hence, in view of above discussion and in view of ratio laid down by apex Court in case of LAKSHMI MACHINE WORKS (Supra), we are of opinion that Tribunal committed no error in passing impugned order. Under circumstances, present appeal deserves to be dismissed. 7. In result, appeal fails and stands DISMISSED as being without merit. No order as to costs. (K.S.JHAVERI, J.) Page 4 of 5 Downloaded on : Thu Jul 30 08:02:17 IST 2020 O/TAXAP/62/2006 JUDGMENT (K.J.THAKER, J) Commissioner of Income-tax-III, Surat v. Bhojal Gem
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