2016 (7) TMI 1216 - HC - Income Tax

Computation of deduction u/s 80HHC - whether the tribunal was right in law in directing to reduce only net amount of the receipts under clause (baa) of section 80HHC? Held that - As decided in the case of Milton Laminates Ltd. v. Assistant Commissioner of Income-tax, Circle-4 2015 (4) TMI 804 - GUJARAT HIGH COURT held that 90% of not the gross interest but only the net interest, which has been included in the profits of the business of the assessee as computed under the heads Profits and gain of business or profession is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of business - Decided in favour of the Assessee

Summary

Issues:
Challenge to judgment of Income Tax Appellate Tribunal, Assessment Year 2002-2003, interpretation of section 80HHC, determination of profits for business.

Analysis:
The High Court of Gujarat heard an appeal challenging the decision of the Income Tax Appellate Tribunal related to the Assessment Year 2002-2003. The Tribunal had ruled in favor of the assessee, partially reversing the order of the CIT (Appeals). The substantial question of law framed for consideration was whether the Tribunal was correct in directing to reduce only the net amount of receipts under clause (baa) of section 80HHC, despite the income not having a nexus with exports. The appellant's counsel referred to a previous decision by the Hon'ble Supreme Court in the case of ACG Associated Capsules (P) Ltd., emphasizing the deduction of only the net interest for determining business profits under clause (1) of Explanation (baa) to Section 80HHC.

In light of the precedent set by the Supreme Court, the High Court concluded that the issue raised in the Tax Appeal should be resolved in favor of the assessee and against the Department. The Court's decision was based on the interpretation of the law and the specific circumstances of the case. The judgment highlighted the importance of considering the net interest for calculating business profits under section 80HHC, aligning with the legal principles established in previous cases. This ruling serves as a significant legal interpretation affecting the computation of profits for businesses under the relevant tax provisions. The judgment provides clarity on the application of the law in similar cases involving the deduction of specific income components to determine taxable profits accurately.