Gujarat High Court
Ellora Time Pvt. Ltd vs Deputy Commissioner Of Income Tax - ... on 3 July, 2006
TAXAP/1265/2005 1/6 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL No.1265 of 2005
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ELLORA TIME PVT. LTD. - Appellant(s)
Versus
DEPUTY COMMISSIONER OF INCOME TAX - Opponent(s)
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Appearance :
MR RK PATEL for Appellant(s) : 1,
None for Opponent(s) : 1,
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CORAM : HONOURABLE THE ACTING CHIEF JUSTICE
Y.R.MEENA
and
HONOURABLE MR.JUSTICE D.A.MEHTA
Date : 03/07/2006
ORAL ORDER
1. Today, after hearing the learned advocate for the appellant, the Court ordered "No substantial question of law does arise. Appeal dismissed. Reasons follow." Accordingly, the reasons are as under.
2. The assessee-appellant has proposed the following four questions:
(1) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in restoring the issue of deduction under section 80IA in respect of export incentive to the file of the Assessing Officer contrary to the ratio laid down by this Hon'ble Court in the case of HARKISHAN J. PATEL at 168 ITR 472?
TAXAP/1265/2005 2/6 ORDER (2) Whether on the facts and in the circumstances of the case the Tribunal has substantially erred in denying deduction under section 80IA of the Act in respect of rent income, profit on trading activities and profit on sale of calculators without assigning any reasons and disregarding the solitary decision of coordinate Bench?
(3) Whether on the facts and in the circumstances of the case, the Tribunal is rights in law in interpreting Entry No.22 to Schedule 11 of the Income-tax Act, 1961 for the purpose of denial of deduction under section 80IA(2) (iii) of the Income-
tax Act, 1961 in respect of electronic devices with multiple memory and scientific functions ?
(4) Whether on the facts and in the circumstances of the case, the Tribunal has substantially erred in law in confirming the action of the Assessing Officer for deemed dividend under Section 2(22)(e) at Rs.5,11,961/- by holding that the accumulated depreciation as per the Income-tax Act is not to be given effect for determining accumulated profits and the same is to be computed as per Companies Act ?
3. In so far as question Nos.1 and 2 are concerned, the Tribunal has found as under:
"9. We have considered the rival contentions and find some force in the arguments of the Ld. A.R. for the assessee with reference to the income arose on export incentives. As the Assessing Officer has not deliberated upon the extended benefit given TAXAP/1265/2005 3/6 ORDER under section 80IA as relied upon by the LR. A.R. for the assessee, we restore this ground with respect to treatment of export incentive to the file of the Assessing Officer for deciding afresh in view of the judgment of the co-ordinate Bench cited by the LD.A.R. for the assessee in the case of ACIT Vs. Maxcare Laboratories Ltd. 273 ITR 1 (ITAT). In respect of other income we are inclined to agree with the loser authorities that they are not eligible for deduction under section 80IA."
4. The contention of the learned advocate, that there is a distinction between phrase "derived from an industrial undertaking" and "derived from the business of an industrial undertaking" and hence, the relief claimed by the assessee should be granted, does not merit acceptance. The provision requires that the gross total income of an assessee should include profits and gains derived from any business of an industrial undertaking and such industrial undertaking must fulfill the conditions specified in sub-section (2) of Section 80IA of the Income Tax Act, 1961 (the Act). Under clause (iii) of sub-section (2) of Section 80IA of the Act the industrial undertaking must be one which manufactures or produces any article or thing, not being any article or TAXAP/1265/2005 4/6 ORDER thing specified in the list in the Eleventh Schedule. Thus the business of industrial undertaking has to be the business of manufacturing or producing of any article or thing which do not form part of the list in the Eleventh Schedule. It is not even contended that rent income, profit from trading activity and profit on sale of calculator parts can be said to be income from manufacture or production and sale of any article or thing which is not prohibited. Therefore, the contention that the ratio of the Apex Court decision in case of Sterling Foods Limited, 237 ITR 579 would not apply does not merit acceptance and there is no infirmity in the impugned order of Tribunal.
5. In relation to export incentives, the Tribunal has restored the matter to the file of the assessing authority to decide the issue afresh in view of the judgment of a Co-ordinate bench of the Tribunal. It cannot be stated that this has resulted in any prejudice to the appellant so as to give rise to a substantial question of law.
6. In so far as the proposed question No.3 is concerned, it is the say of the appellant that the appellant manufacturers electronic devices in form of calculators TAXAP/1265/2005 5/6 ORDER with multiple memories and scientific functions making ultimate products more akin to computers. The Tribunal has upheld the orders of the lower authorities holding that the products manufactured by the appellant fall within Entry 22 of the Eleventh Schedule. On plain reading of the said Entry No.22 of the Eleventh Schedule, it is apparent that all machines and apparatus used in offices, shops, factories, workshops, educational institutions, railway stations, hotels and restaurants for doing office work (except computers within the meaning of Section 32AB) fall within Entry No.22 of the Eleventh Schedule. The appellant has not been able to show that the product manufactured by it is not used for any of the purposes stated in the entry. To the contrary it is stated that the appellant manufactures electronic devices in the form of calculators with multiple memories and scientific functions. In these circumstances, there is no infirmity in the impugned order made by the Tribunal.
7. In relation to proposed question No.4, it is the contention of the appellant-assessee that the amount of deemed dividend under Section 2(22)(e) is wrongly worked out by holding that the "accumulated profits"
TAXAP/1265/2005 6/6 ORDER are to be worked out after giving effect to the profits worked out under the Companies Act by deducting therefrom accumulated depreciation as per Income-tax Act. All the authorities, including the Tribunal, have negatived this contention. The expression "accumulated profits" has been defined by Explanation 2 and is an inclusive definition. When one reads the same it becomes apparent that the accumulated profits in question of the company referred to are the profits worked out under the Companies Act and not under the Income-tax Act. Therefore, on this count also, there is no infirmity in the impugned order of the Tribunal.
8. In the result, in absence of any substantial question of law, as proposed or otherwise, the appeal is dismissed.
Sd/-
[ Y.R. MEENA, Actg. C.J. ] Sd/-
[ D.A. MEHTA, J ] *** Bhavesh*