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2012 (8) TMI 774 - HC - Income TaxDisallowance of Guest House expenditure u/s 32 - Held that - As decided in Britannia Industries Limited Versus CIT And Another 2005 (10) TMI 30 - SUPREME COURT disallowance of a sum, which was claimed by the assessee as expenses towards rent, repairs, depreciation and maintenance of a guest house which was purportedly used in connection with the business of the company - against assessee. Deduction u/s 80HH, 80I and 80IA are not allowable in view of Section 80AB - Held that -when separate books of accounts are maintained by these Units and there was no mixing up of accounts of one unit with the other and there was no inter-dependency, the income earned from export goods from the Bangalore Unit merited to be considered independently for 100% relief as one falling under Section 80HHC(3)(a) of the Income Tax Act, the question of applying the formula did not arise - the assessment on the relief under Chapter VIA be set aside and the matter be remanded back for working out the relief, keeping however in the background that the relief under Chapter VIA cannot exceed the business income arrived at by the Officer.
Issues:
1. Levy of interest under Section 234B and C of the Income Tax Act while computing total income under Section 115 JA. 2. Disallowance of Guest House expenditure under Sections 32, 37, and other provisions. 3. Deduction under Sections 80HH, 80I, and 80IA in view of Section 80AB. 4. Nature of amount received from Timex Watches Limited and its impact on deduction under Section 80HHC. Issue 1: Levy of Interest under Section 234B and C: The appellant, a public limited company, challenged the levy of interest under Sections 234B and 234C of the Income Tax Act while computing total income under Section 115JA for the assessment year 1997-98. The Assessing Officer determined taxable income under Section 115JA and charged interest, leading to appeals. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal upheld the charging of interest. The appellant cited decisions in its favor, but the Tribunal relied on other precedents. The appellant conceded that the issue was covered by a Supreme Court decision, resulting in the dismissal of the appeal. Issue 2: Disallowance of Guest House Expenditure: In Tax Case (Appeal) No.2201 of 2006, the appellant raised questions regarding the disallowance of Guest House expenditure under various sections of the Income Tax Act. The counsel for the appellant acknowledged adverse precedents, leading to the decision against the appellant. Another question regarding the nature of the amount received from Timex Watches Limited and its impact on the deduction under Section 80HHC was not pressed and hence dismissed. The only surviving question was related to the deduction under Sections 80HH, 80I, and 80IA. Issue 3: Deduction under Sections 80HH, 80I, and 80IA: The appellant contested the restriction of deduction under Chapter VIA to the business income as per Section 80AB. Despite unsuccessful appeals before the Commissioner of Income Tax (Appeals) and the Tribunal, the appellant argued for a remand based on the independent consideration of relief under the provisions. Citing a relevant decision, the counsel highlighted the importance of separate maintenance of accounts for units engaged in export activities. The Court acknowledged the need for a remand to the Assessing Officer for proper assessment of relief under Chapter VIA within the limits of Section 80AB. In conclusion, the High Court of Madras addressed various issues related to income tax assessments and deductions, emphasizing the importance of legal precedents and proper application of tax laws. The judgment provided clarity on the levy of interest, disallowance of expenditures, and the calculation of deductions under specific sections of the Income Tax Act, ensuring a fair and just resolution based on established legal principles.
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