Punjab-Haryana High Court
M/S Vardhman Spinning And General Mills ... vs M/S Malwa Cotton Spinning Mills Ltd ... on 5 September, 2008
Author: Ajay Tewari
Bench: Adarsh Kumar Goel, Ajay Tewari
I.T.A No. 340 of 2007 ::1::
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
I.T.A No. 340 of 2007
Date of decision : September 05, 2008
M/S Vardhman Spinning and General Mills Ltd.
...... Appellant
through Mr.Akshay Bhan, Advocate
v.
Commissioner of Income Tax, Range-I, Ludhiana & another,
...... Respondents
CORAM : HON'BLE MR.JUSTICE ADARSH KUMAR GOEL
HON'BLE MR.JUSTICE AJAY TEWARI
***
1. Whether Reporters of Local Newspapers may be allowed to see the judgment ?
2. To be referred to the Reporters or not ?
3. Whether the judgment should be reported in the Digest ?
*** AJAY TEWARI, J The present appeal proposes the following questions of law:-
" i) Whether the ITAT was justified in excluding the interest income accrued from the loan given to the staff and workers and also FDR's from banks from the eligible profits for deduction under section 80 HHC of Income Tax Act, when these two items form part of appellant's business income as they have been earned during the normal business activity ?
ii) Whether the ITAT was justified in excluding "Gross" interest income instead of "net" interest income i.e the gross interest income less. The expenditure I.T.A No. 340 of 2007 ::2::
incurred by the assessee for earning such income, from the "eligible profits of business" for deduction under section 80 HHC of Income Tax Act ?
iii) Whether in the facts and circumstances of the present case the impugned orders A-1 and A-3 are legally sustainable in the eyes of law ?
The essential factual matrix giving rise to this appeal is that the appellant, a manufacturer of cotton and acrylic yarn, originally filed its return declaring income of Rs.13,45,07,470/- for the assessment year 1994- 95, which was subsequently revised on 9.5.1995 claiming an additional amount of Rs.7,64,649/- as a capital loss. The said return was processed under Section 143(1)(a) of the Income Tax Act, 1961 (for short "the Act") on 28.8.1995 at the total income of Rs.13,45,07,470/- and out of the resultant refund of Rs.1,34,670/- outstanding demand of Rs.1,12,064/- for the assessment years 1987-88 and 1991-92 was adjusted and balance refund of Rs.22,606/- was issued to the appellant.
The case was taken up for scrutiny assessment by issuing a notice under Section 143(2) of the Act dated 15.6.1995 and thereafter a notice under Section 142(1) of the Act along with questionnaire dated 23.7.1996 calling for various details was also issued to the assessee. By order dated 29.11.1996, the total taxable income of the appellant was computed at Rs.13,69,74,107/-. Penalty proceedings under Section 271(1)
(c) of the Act were also initiated. In Appeal, disallowance of Rs.55,709/- out of entertainment expenses and another disallowance of Rs.16,406/- which represented the amount of expenditure tax were reversed. Further the deduction was reduced by Rs.5,49,000/-. Apart from this, the appellant I.T.A No. 340 of 2007 ::3::
was also held entitled to exclude excise duty amounting to Rs.6,16,54,000/- and sales tax amounting to Rs.285 lacs from total turnover while working out deduction under Section 80 HHC of the Act. The assessee was also permitted to exclude interest income earned by it from loans given to staff and workers and also from FDRs with banks from the business income. Another relief of Rs.13,46,687/- was allowed to the appellant under the head of `interest income' for computation under Section 80 HHC of the Act. The appellant was also permitted an amount of Rs.10,91,129/- to be counted as deduction under Section 35AB of the Act. The appellate Authority also allowed the appellant to carry forward capital loss to the extent of Rs.9205769/- in place of originally claimed Rs.6101120/-.
The revenue filed an appeal against the aforesaid order. The Tribunal by the impugned order reversed the finding of the first appellate authority regarding the expenditure of Rs.16406/- as well as the decision to permit the appellant to treat the entire interest income as a part of the business income, in view of the decision of this Court in CIT-III, Ludhiana vs M/S Malwa Cotton Spinning Mills Ltd Ludhiana ( ITA No.94 of 2006 decided on 22.12.2006). As regards the finding that the appellant would be allowed to claim Rs.9205769/- as carried forward capital loss, the same was set aside even while holding that the Assessing Officer had wrongly refused to consider the claim for higher amount and consequently the matter was remanded back to the Assessing Officer for consideration of the claim of the appellant on merit.
In view of the decisions of this Court in CIT-III, Ludhiana vs M/S Malwa Cotton Spinning Mills Ltd Ludhiana (supra), as well as in the case of M/S Vardhman Textiles Ltd vs Commissioner of Income Tax, I.T.A No. 340 of 2007 ::4::
Ludhiana and another (ITA No.422 of 2008, decided on 11.8.2008), the questions of law proposed herein do not arise. Consequently, the present appeal is dismissed with no order as to costs.
( AJAY TEWARI )
JUDGE
( ADARSH KUMAR GOEL )
JUDGE
September 05, 2008
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