2015 (6) TMI 103 - HC - Income Tax

Replantation subsidy received from Tea Board - whether is to be taken into consideration for computing the profits of eligible business for the purpose of determining the deduction under Section 32AB ? - Held that - In the present case, the Tribunal had found that the assessee was not entitled to deduction under section 32AB in respect of income from house property, dividend income, bank interest and long-term capital gains as these incomes did not form part and parcel of the business carried on by the assesse. It cannot be disputed that all the heads of income which fell for consideration in that case were chargeable to tax. Whereas we are concerned with the income which is not chargeable to tax, therefore, that judgment of Britannia Industries Ltd. 2004 (9) TMI 90 - CALCUTTA High Court has no manner of application. In any case, the assessee cannot be heard to say that he should be allowed double deduction as held by the Apex Court in the case of Escorts Ltd.(1992 (10) TMI 1 - SUPREME Court). The submission as regards tax effect is also without any substance because the appeal preferred by the Revenue indeed related to other questions as indicated above but the appeal was admitted with regard to this question. Therefore, it cannot be said that even under section 268A and assuming everything in favour of the assessee, the appeal was incompetent going by the circular issued by CBDT, which was in force at the time when the appeal was preferred. - Decided in favour of revenue.

Summary

Issues involved:
Challenge to judgment by Income Tax Appellate Tribunal regarding replantation subsidy for computing profits under Section 32AB of Income Tax Act, 1961.

Analysis:
The appeal challenged a judgment by the Income Tax Appellate Tribunal concerning the treatment of replantation subsidy for computing profits under Section 32AB of the Income Tax Act, 1961 for the assessment year 1990-91. The primary contention was whether the replantation subsidy received by the assessee should be considered for the deduction under Section 32AB despite specific provisions in the Act. The revenue argued that Section 32AB applies only to income chargeable to tax, emphasizing the need for clear statutory indication to allow double deductions. The revenue relied on a Supreme Court decision to support their argument, highlighting the legislative intent against double deductions.

On the other hand, the assessee relied on a previous judgment by the Calcutta High Court to support their position. They argued that the term "eligible business" in Section 32AB(1) should be the determining factor, emphasizing the distinction made by the legislature in defining eligible business. The assessee also pointed out the irrelevance of tax effect under Section 268A, as the appeal was admitted solely on the grounds related to the replantation subsidy issue.

The court considered both arguments and concluded in favor of the revenue. They held that the judgment cited by the assessee was not applicable as it concerned income chargeable to tax, unlike the current case involving income not chargeable to tax. Additionally, the court rejected the argument for double deduction, citing the principle against it established by the Supreme Court. The court also dismissed the relevance of tax effect under Section 268A, as the appeal was specifically admitted for the issue related to the replantation subsidy.

In conclusion, the court allowed the appeal in favor of the revenue, emphasizing the inapplicability of the cited judgment and the lack of merit in the arguments presented by the assessee.