The Commissioner of Income-tax, Tamil Nadu–I, Madras v. M/s. Tube Investments of India Ltd
[Citation -2014-LL-1217-11]

Citation 2014-LL-1217-11
Appellant Name The Commissioner of Income-tax, Tamil Nadu–I, Madras
Respondent Name M/s. Tube Investments of India Ltd.
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 17/12/2014
Judgment View Judgment
Keyword Tags management expenses • computing deduction • exempted income • total turnover • interest paid • excise duty • sales tax • scrap sale • admissibility of deduction
Bot Summary: In the course of assessment, the Assessing Officer included the sales tax and excise duty and scrap sales as forming part of the turn over in computing income under Section 80 HHC. Aggrieved against the said order, the assessee preferred an appeal before the CIT and the CIT upheld the order of the Assessing Officer. Aggrieved over the same, the assessee preferred appeal before the Income Tax Appellate Tribunal and the Tribunal, following the decision of the Madras High Court in CIT Vs M/s. Sundaram Fastners Ltd. and CIT Vs Wheels India Ltd., Fenner India Ltd. - Vs CIT, allowed the appeal filed by the assessee. Respectfully following the above decisions of the Hon'ble Madras High Court in the cases cited supra, we decide the issue in favour of the assessee and against the Revenue. As regards the issue of scrap sales, it is covered by the decision of the Hon'ble Madras High Court in the case of Fenner Ltd. - Vs CIT ITR 803) and the Tribunal's order in the case of M/s.Moorco Ltd. Respectfully following the above decision of the Hon'bel Madras High Court and the Tribunal, we decide this issue in favour of the assessee and against the Revenue. Accordingly, the Assessing Officer is directed to disallow proportionate expenditure to the extent of 2 of the exempted income as held by the Hon'ble Tribunal, Chennai Bench 'C' in the case of Southern Petro Chemical Industries Vs DCIT TTJ 161), wherein it was held as under :- Exemption under S. 10 Dividend Expenditure attributable to earning of dividend Investment decisions are very strategic decisions in which top management is involved and proportionate management expenses are required to be deducted while computing the dividend income for the purpose of exemption under S. 10. Commissioner of Income Tax, Chennai No.2511/06 dated 30.10.12). In the said judgment, this Court considered two questions of law as under: Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the estimate of expenses at 2 deemed to have been incurred in respect of dividend income, when no such expenses were incurred Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the addition of the estimate expenses at the rate of 2 on dividend income while computing book profits, when no such expenses were incurred and answered the same as under: 5 2. As far as first and second questions of law are concerned, learned counsel for the assessee fairly submits that the same is covered against the assessee by reason of decision of this Court rendered in assessee's own case in T.C. No.2287 of 2006 dated 8.8.12.


IN HIGH COURT OF JUDICATURE AT MADRAS DATE : 17.12.2014 CORAM HONOURABLE MR. JUSTICE R.SUDHAKAR AND HONOURABLE MR. JUSTICE R.KARUPPIAH T.C. NO. 524 OF 2007 Commissioner of Income Tax Tamil Nadu I, Madras. .. Appellant - Vs - M/s. Tube Investments of India Ltd. Tiam House, 28, Rajaji Salai Chennai 600 001. .. Respondent Appeal filed under Section 260-A of Income Tax Act against order dated 21.07.06, passed by Income Tax Appellate Tribunal, Madras 'B' Bench, made in ITA No.703/Mds/2001. For Appellant : Ms. Vardhini Karthik for Mr. T.Ravikumar For Respondent : Ms. G.Varshitha for Mr. Vaitheeswaran JUDGMENT (DELIVERED BY R.SUDHAKAR, J.) Aggrieved by order of Appellate Tribunal in dismissing appeal filed by it, Revenue is before this Court challenging said order by filing present appeal and this Court, vide order dated 12.6.07, framed for following substantial questions of law for consideration :- 2 1) Whether on facts and in circumstances of case, Appellate Tribunal was right in law in holding that scrap sales is to be excluded from total turn over for purpose of computing income under Section 80 HHC of Income Tax Act, 1961? 2) Whether on facts and in circumstances of case, Appellate Tribunal was right in restricting expenditure on earning exempt income to 2% when assessing officer has proved on scientific basis that interest paid on loans taken for investment in exempt bonds was much larger? 2. appellant/assessee is in manufacture and sale of cycle, cycle accessories, steel tubes, strips, etc. In course of assessment, Assessing Officer included sales tax and excise duty and scrap sales as forming part of turn over in computing income under Section 80 HHC. Aggrieved against said order, assessee preferred appeal before CIT (Appeals) and CIT (Appeals) upheld order of Assessing Officer. 3. Aggrieved over same, assessee preferred appeal before Income Tax Appellate Tribunal and Tribunal, following decision of Madras High Court in CIT Vs M/s. Sundaram Fastners Ltd. (272 ITR 652) and CIT Vs Wheels India Ltd. (275 ITR 319), Fenner India Ltd. - Vs CIT (241 ITR 803), allowed appeal filed by assessee. Aggrieved by said order, Revenue is before this Court by filing above appeal. 4. Heard learned standing counsel appearing for appellant and learned counsel appearing for respondent. 3 5. On first question of law, Tribunal, considering computation of deduction under Section 80 HHC, has held as under :- 9. next issue in this appeal is regarding computation of deduction under Sec. 80 HHC of Act on account of inclusion of excise duty, sales tax recoveries and scrap sales in total turnover. We find that issue of excise duty and sales tax are covered by decisions of Hon'ble Jurisdictional High Court in cases of CIT Vs Sundaram Fasteners Ltd. (272 ITR 652) and CIT Vs Wheels India Ltd. (2005 (275) ITR 319), wherein it was held that excise duty and sales tax would not form part of total turnover for purpose of computing deduction under Sec. 80 HHC of Act. Respectfully following above decisions of Hon'ble Madras High Court in cases cited supra, we decide issue in favour of assessee and against Revenue. As regards issue of scrap sales, it is covered by decision of Hon'ble Madras High Court in case of Fenner (India) Ltd. - Vs CIT (2000 (241) ITR 803) and Tribunal's order in case of M/s.Moorco (India) Ltd. Respectfully following above decision of Hon'bel Madras High Court and Tribunal, we decide this issue in favour of assessee and against Revenue. 6. From above, it is clear that abovesaid issue stands resolved by decision of this Court in Fenner India's case (supra) and, therefore, first question of law is answered against Revenue and in favour of assessee. 7. Insofar as 2nd question of law is concerned, Tribunal has considered same, relevant portion of which is extracted hereinbelow :- 8. next issue in this appeal is against disallowance of proportionate expenses on exempted income. After considering rival submissions and going through case records, it is observed that assessee has claimed exemption from interest on tax free bonds. It is fact that assessee has made systematic huge investments resulting in income and 4 no expenditure in form of expenditure and management have been made by assessee. As income is exempted, proportionate expenditure in this regard to be disallowed but as to how much. This issue has to be considered. It is to be noted that reasonable disallowance can be made i.e., to extent of 2% of exempted income. Accordingly, Assessing Officer is directed to disallow proportionate expenditure to extent of 2% of exempted income as held by Hon'ble Tribunal, Chennai Bench 'C' in case of Southern Petro Chemical Industries Vs DCIT (2005 (93) TTJ 161), wherein it was held as under :- Exemption under S. 10 (33) Dividend Expenditure attributable to earning of dividend Investment decisions are very strategic decisions in which top management is involved and, therefore, proportionate management expenses are required to be deducted while computing dividend income for purpose of exemption under S. 10 (33). Respectfully following decision of Tribunal, this issue is allowed partly. 8. It is brought to notice of this Court that 2nd question of law has also been decided against Revenue by this Court in decision reported in EID Parry Vs Asst. Commissioner of Income Tax, Chennai (T.C. (A) No.2511/06 dated 30.10.12). In said judgment, this Court considered two questions of law as under: (i) Whether on facts and in circumstances of case, Appellate Tribunal was right in law in upholding estimate of expenses at 2% deemed to have been incurred in respect of dividend income, when no such expenses were incurred? (ii) Whether on facts and in circumstances of case, Appellate Tribunal was right in law in upholding addition of estimate expenses at rate of 2% on dividend income while computing book profits, when no such expenses were incurred? and answered same as under: 5 2. As far as first and second questions of law are concerned, learned counsel for assessee fairly submits that same is covered against assessee by reason of decision of this Court rendered in assessee's own case in T.C. No.2287 of 2006 dated 8.8.12. Accordingly, above two questions of law are answered against assessee. said judgment squarely applies to facts of present case and, 2nd question of law is answered accordingly. 10. Finding no merit warranting interference with order passed by Tribunal, this appeal fails and same is dismissed. (R.S.J.) (R.K.J.) 17.12.2014 Index : No Internet : Yes GLN/sasi To 1. Income Tax Appellate Tribunal Madras 'C' Bench Chennai. 2. Asst. Commissioner of Income Tax Circle (I), Tuticorin. 6 R.SUDHAKAR, J. AND R.KARUPPIAH, J. GLN T.C. NO. 524 OF 2007 17.12.2014 Commissioner of Income-tax, Tamil NaduI, Madras v. M/s. Tube Investments of India Ltd
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