2022 (1) TMI 792 - HC - Income Tax

Computation of deduction u/s 80HHC - HELD THAT - The first question of law raised in this appeal has already been considered and decided by the Supreme Court in favour of the Assessee in the case of ACG Associated Capsules (P) Ltd. 2012 (2) TMI 101 - SUPREME COURT wherein Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads PGBP is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business Decided in favour of assessee

Summary

Issues:
Challenge to order by Income Tax Appellate Tribunal regarding assessment year 2002-03.

Analysis:
The appellant filed a tax case appeal against the order passed by the Income Tax Appellate Tribunal related to the assessment year 2002-03. The High Court admitted the appeal based on substantial questions of law. The first question raised was regarding the correctness of the re-assessment framed by the Appellate Tribunal and the computation of deduction u/s 80HHC of the Act. The Court referred to a Supreme Court judgment in a similar case favoring the Assessee. The Supreme Court held that certain items like interest and rent should be excluded from the profits of the business while computing the deduction under Section 80HHC. The High Court, following the Supreme Court judgment, set aside the order of the Tribunal in favor of the Assessee.

Regarding the second substantial question of law, the High Court left it open for consideration in an appropriate case. The judgment was delivered by Justice R. Mahadevan. The Tax Case Appeal was allowed, and no costs were imposed. The Court's decision was based on the interpretation of the provisions of Section 80HHC of the Income Tax Act and the exclusion of certain items from the profits of the business for computing deductions. The judgment provided clarity on the treatment of specific receipts like interest, rent, commission, etc., in the computation of deductions under Section 80HHC. The Court's decision was in line with the principles established by the Supreme Court in similar cases, ensuring consistency and adherence to legal provisions in tax assessments.