Calcutta High Court
Cit vs M/S. Jay Shree Tea & Industries & Ltd on 22 April, 2015
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction (Income Tax)
Original Side
Present :
The Hon'ble Justice Girish Chandra Gupta
And
The Hon'ble Justice Arindam Sinha
22nd April, 2015
ITA 136 of 2009
CIT, Kolkata
Vs.
M/s. Jay Shree Tea & Industries & Ltd.
Mr. M.P. Agarwal, Advocate for the appellant
Mr. Ananda Sen, Advocate with
Mr. Biswajit Mal, Advocate for the redspondent
The Court :- The subject matter of challenge in the appeal is a judgment and order
dated 10th November, 1998 by which the learned Tribunal upheld the order passed by the CIT
(Appeals). The CIT (Appeals) in his turn had held as follows :-
" In this case, while disposing departmental appeal, in ITA No.1500/Kol/2002, the
Hon'ble ITAT, Kolkata remanded the following matter to be decided afresh.
Whether the recomputation of income should be made u/s 80HHC by reducing the
90% of the gross income from interest and rent of 90% of net income from interest and rent :-
Sri B.K. Chaturvedi, A.R. of the appellant appeared and filed written submission
and advanced oral arguments :-
It is stated by him that during the year under review a sum of Rs. 7,60,60,983/- was
paid as interest and the corresponding income from interest was only Rs. 1,10,16,863/-. Hence,
there was no income from interest if both income and expenditure are taken together.
2
The A.R. has placed reliance on the judgements of Hon'ble Supreme Court in case of
Keshavji Rabji Vs. CIT 183 ITR 1, Hon'ble Gujrat High Court in case of CIT Vs. Vitex Mills Ltd.
244 ITR 266 and Hon'ble Delhi High Court in case of CIT vs. Sriram Honda Power Equip 289
ITR 475.
I have considered the facts of the case and case laws cited above and direct A.O. to
take into consideration 90% of the net amount of interest/rent while computing profit of the
business for the purpose of deduction u/s 80HHC and if there is negative amount of receipt,
nothing should be deductible in this regard."
The Revenue is in appeal before us. The following question of law was suggested :-
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate
Tribunal is correct in holding that 90% of the interest income to be excluded from the export profit
in terms of clause (baa) of section 80HHC would be the net income after deducting interest paid
from the interest earned on investment of the surplus funds of 90% of the interest income earned
without netting of the interest paid ?"
Mr. Agarwal, learned Advocate appearing for the revenue/appellant drew our
attention to a judgment of the Madras High Court in the case of CIT vs. V. Chinnapandi reported in
(2006) 282 ITR 389 wherein it was held that 90% was to be deducted from the gross interest
received by the assessee. The same view was reiterated or adopted by the Punjab and Haryana High
Court in the case of CIT Vs. Liberty Footwear Company reported in (2006) 287 ITR 339. Mr. Sen
appearing for the assessee/respondent submitted that the question has now been set at rest by the
Apex Court in the case of ACG Associated Capsules Pvt. Ltd. vs. CIT reported in (2012) 343 ITR
89 (SC) wherein the following view was taken :-
3
"If we now apply Explanation (baa) as interpreted by us in this judgment to the facts of
the case before us, if the rent or interest is a receipt chargeable as profits and gains of business and
chargeable to tax under section 28 of the Act, and if any quantum of the rent or interest of the
assessee is allowable as an expense in accordance with sections 30 to 44D of the Act and is not to
be included in the profits of the business of the assessee as computed under the head "Profits and
gains of business or profession", ninety per cent, of such quantum of the receipt of rent or interest
will not be deducted under clause (1) of Explanation (baa) to section 80HHC. In other words,
ninety per cent, of not the gross rent or gross interest but only the net interest or net rent, which has
been included in the profits of business of the assessee as computed under the head "Profits and
gains of business or profession", is to be deducted under clause (1) of Explanation (baa) to section
80HHC for determining the profits of the business."
The aforesaid judgment was also followed by the Apex Court in the case of Vikas
Kalra vs. CIT reported in (2012) 345 ITR 557 wherein it was held that 90% of the net interest and
not of the gross interest has to be deducted, Therefore, the judgments cited by Mr. Agarwal are no
longer good.
The question proposed by the revenue is answered in the affirmative and against the
revenue.
The appeal is dismissed.
(Girish Chandra Gupta, J.)
. (Arindam Sinha, J.)
ANC.
.
