2016 (8) TMI 770 - HC - Income Tax

Deduction u/s 80HHC - excluding the hiring charges and operating charges from the profits of the business of the Company - Held that - This appeal is already settled by the judgment of this Court in the case of CIT v. Nirma Ltd., 2014 (10) TMI 388 - GUJARAT HIGH COURT . Learned Standing Counsel for the Revenue was not in a position to point out any distiguishing feature, which may warrant a different view. Consequently, Question is answered in favour of the assessee and against the Revenue Interpretation of Section 80HHC - Taxation of interest receipts as income assessable under the Head Income from other sources - Held that - Ninety per cent of not the gross rent or gross interest but only net interest or net rent, which has been included in profits of business of assessee as computed under head Profits and Gains of Business or Professions , is to be deducted under Clause (1) of Explanation (baa) to Section 80HHC for determining profits of business. Learned Standing Counsel for the Revenue was not in a position to point out any distiguishing feature, which may warrant a different view. See M/s ACG Associated Capsules Pvt. Ltd. (Formerly M/s Associated Capsules Pvt. Ltd.) 2012 (2) TMI 101 - SUPREME COURT OF INDIA - Decided in favour of the assessee and against the Revenue. Levy of Section 234A, 234B and 234C - Held that - Apex Court in the case of CIT v. Bhagat Construction Co. P. Ltd. & Anr., 2015 (8) TMI 621 - SUPREME COURT wherein, it has been held that under the provisions of Section 234B, the moment an assessee liable to pay advance tax has failed to pay such tax or where the advance tax paid by such an assessee is less than 90 per cent of the assessed tax, the assessee becomes liable to pay simple interest at the rate of one per cent for every month or part of the month. The levy of such interest is automatic when the conditions of Section 234B are met. Learned counsel for the assessee was not in a position to point out any distiguishing feature, which may warrant a different view. Consequently, Question is answered in favour of the Revenue and against the assessee. Levy of interest under Section 234D - Held that - Addition of explanation (2) to section 234D of the Act by Finance Act, 2012, with retrospective effect from June 01, 2003, is made applicable even to the period under assessment year 2004-2005. In respect of excess refund granted to the assessee under section 143(1) of the Act, the interest was payable by the assessee even if it was received prior to June 01, 2003, so long as the proceedings of the concerned assessment year for which the refund was granted was completed after June 01, 2003. The Bombay High Court held the explanation 2 to section 234D of the Act as declaratory/ clarificatory in nature. The same being declaratory/ clarificatory, the same was held to be applied with retrospective effect. See CITII v. Gujarat State Financial Services Ltd. 2014 (2) TMI 1249 - GUJARAT HIGH COURT - Question is answered in favour of the Revenue and against the assessee.

Summary

Issues:
1. Interpretation of Section 80HHC of the Income Tax Act, 1961 regarding hiring and operating charges exclusion.
2. Taxation of interest receipts under the Head Income from other sources.
3. Computation of deduction under Section 80HHC considering net interest.
4. Interpretation of provisions of Section 234A, 234B, and 234C regarding levy of interest.
5. Application of Section 234D of the Income Tax Act, 1961 with retrospective effect.

Issue 1:
The appellant challenged the interpretation of Section 80HHC of the Income Tax Act, 1961 by excluding hiring and operating charges from the profits of the business. The Court referred to a previous judgment and ruled in favor of the appellant, stating that the issue was settled.

Issue 2 & 3:
Regarding the taxation of interest receipts and computation of deduction under Section 80HHC, the Court relied on a Supreme Court judgment and concluded that only net interest or net rent should be deducted from the profits of the business. The Court ruled in favor of the appellant based on the established legal principles.

Issue 4:
The Court addressed the interpretation of Sections 234A, 234B, and 234C concerning the levy of interest. Citing a Supreme Court judgment, the Court held that the levy of interest is automatic under Section 234B when the conditions are met. Consequently, this issue was decided in favor of the Revenue.

Issue 5:
The Court analyzed the application of Section 234D with retrospective effect based on a previous judgment. It was clarified that the section applies even to refunds granted before June 1, 2003, if the assessment proceedings were completed after that date. The Court ruled in favor of the Revenue on this issue.

In conclusion, the Court disposed of the appeal, with different issues being decided in favor of either the appellant or the Revenue based on established legal principles and previous judgments.