2006 (2) TMI 150 - HC - Income Tax

Summary

Issues:
1. Excise duty inclusion in closing stock value
2. Treatment of loss on sale of units as speculative loss
3. Deduction under section 80M for dividend received from units

Excise Duty Inclusion in Closing Stock Value:
The case involved a dispute regarding whether excise duty on raw materials and finished goods should be included in the value of closing stock. The court referred to previous decisions and held that excise duty should not form part of the closing stock value for the purpose of computing deductions under section 80HHC. Citing relevant case law, the court ruled in favor of the assessee, stating that excise duty and sales tax should not be included in the total turnover while calculating deductions. Consequently, the court answered the first question of law against the Revenue and in favor of the assessee.

Treatment of Loss on Sale of Units as Speculative Loss:
The second issue revolved around whether the loss on the sale of units within one month of purchase should be considered a speculative loss. The court referred to a Supreme Court decision in Apollo Tyres Ltd. v. CIT, which determined that buying and selling units of Unit Trust of India did not constitute speculative business. The court upheld the Tribunal's decision based on the Supreme Court ruling, concluding that the loss from buying and selling units was a business loss, not a speculative loss. Therefore, the court found no fault in the Tribunal's order and upheld the decision.

Deduction under Section 80M for Dividend Received from Units:
The final issue concerned the deduction under section 80M for the dividend received from units until the date of sale. The court noted that since the income from units was not speculative, it should be treated as inter-corporate dividend for the purpose of section 80M. The court agreed with the Tribunal's decision in this regard, stating that no interference was necessary. Consequently, the court dismissed the tax case, finding no flaws in the Tribunal's order and ruling in favor of the assessee.