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TMI Blog2024 (9) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... estion is, therefore, answered in the negative against the Revenue. Exclude only the net income from FDR interest while computing deduction u/s 80HH and section 80I - HELD THAT:- Issue squarely covered by the decision [ 2016 (6) TMI 1485 - GUJARAT HIGH COURT] in the case of the assessee held that in computing the special deductions under sections 80-I, 80-IA and 80HH net incomes not derived from industrial undertaking should be excluded and that the Tribunal was right in granting benefit of deduction under section 80-I of the Act on various incomes such as job work receipt, sale of empty soda ash bardan, sale of empty barrels and plastic waste. Therefore we are of the opinion that the Tribunal is justified in directing to exclude the net income from FDR interest, interest on loans, discounting income and transport income. we answer the question No. (b) in affirmative in favour of the assessee and against the Revenue adopting the same reasoning given by this Court in the case of the assessee for the Assessment Year 1996-97 to the effect that in computing the special deductions under Sections 80-I, 80-IA and 80HH, net incomes not derived from industrial undertaking should be excluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals, prayers made in the writ petitions shall be considered. TAX APPEAL NO.781 OF 2009 WITH R/SPECIAL CIVIL APPLICATION NO.19378 OF 2021: [3] Tax Appeal No.781 of 2009 is admitted by order dated 30th August 2010 on the following proposed substantial questions of law for the Assessment Year 1996-97: (a) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in directing to allow deduction under Section 35AB of the Income Tax Act, 1961 though the business of the concerned unit had not commenced during the year under consideration? (b) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in directing to exclude only the net income from FDR interest while computing deduction under section 80HH and section 80I of the Income Tax Act, 1961? (c) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that interest on income from insurance claim, truck hiring charges and truck rent is derived from industrial undertaking? (d) Whether on the facts and in the circumstances of the case, the Income Tax Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business income only and not for earning income liable to be excluded? 7. Whether the Appellate Tribunal is right in law and on facts restoring the issue back to AO to decide for granting benefits of netting to the Assessee and further directing the AO to allow expenses after verifying nexus with income of Rs. 57,40,830/- out of sale gunny bags, bardans for the purpose of deduction under Section 80I, 80IA 80HH of the Act for Kanpur Division of the assessee as not derived from and industrial undertaking and further directing that net income should be excluded from the business profit for the purpose of allowing deductions under section 80I, 80IA 80HH of the Act for netting purpose without considering the facts that such expenses were incurred from the business income only and not for earning incomes and hence liable to be excluded? 8. Whether the Appellate Tribunal is right in law and on facts restoring the issue back to AO to decide for granting benefits of netting to the Assessee and further directing the AO to allow expenses after verifying nexus with various income such as Interest on Loan given to staff of Rs. 583/- and Truck hire charges of Rs. 90,950/- for the purpose of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the above, we answer the question No.(a) in affirmative in favour of the assessee and against the Revenue. [8] So far as question No. (b) is concerned, the same is also squarely covered by the decision rendered on 24th June 2016 by this Court in Tax Appeal No.780 of 2009 in the case of the assesse, wherein, on similar issue, it was held as under: 5. Mr. Soparkar, learned Counsel appearing on behalf of the respondent assessee has submitted that the questions raised in the present appeal are covered by the decision of this Court rendered in the case of Commissioner of Income Tax vs. Nirma Ltd. reported in (2014) 367 ITR 12 (Guj). He submitted that the Tribunal has rightly answered the issue in favour of the assessee by directing to exclude only the net income from FDR interest, interest on loans, discounting income and transport income. 6. We have adverted to the merits of the rival submissions. This Court in the case of Nirma Ltd. (Supra) has held that in computing the special deductions under sections 80-I, 80-IA and 80HH net incomes not derived from industrial undertaking should be excluded and that the Tribunal was right in granting benefit of deduction under section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, it is not the entire amount received by the assessee on sale of DEPB credit, but the sale value of less the face value of the DEPB that will represent profit on transfer of DEPB credit by the assessee. Heavy reliance was placed in the case of Topman Exports v. CIT, 342 ITR 49 (SC). Extending such logic, it was further held that even other amounts, such as, interest or rent when are to be excluded for the purpose of explanation (baa) to section 80HHC of the Act. Ninety per cent of not the gross rent or gross interest, but the net thereof shall have be excluded. It was observed as under: If we now apply Explanation (baa) as interpreted by us in this judgment to the facts of the case before us, if the rent or interest is a receipt chargeable as profits and gains of business and chargeable to tax under section 28 of the Act, and if any quantum of the rent or interest of the assessee is allowable as as expense in accordance with sections 30 to 44D of the Act and is not to be included in the profits of the business of the assessee as computed under the head Profits and gains of business or profession , ninety per cent of such quantum of the receipt of rent or interest will not be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we see no reason to entertain this tax appeal. The Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. (supra) has already laid down the foundation for the logic for excluding the net profit and not the gross profit from the claim of deduction when it is found that the source of income does not quality for such deduction under section 80HHC of the Act. It is true that section 80HHC represents vastly different scheme of deduction and also provides for complex formula for deriving for the eligible profit for deduction under different situations depending on whether the exporter is also engaged in the local business or not. However, this distinction would not be material insofar as central question of exclusion of certain profit from the activity which is not eligible for deduction under section 80HH and 80-I are concerned. The logic being when the profit is being excluded form the claim of deduction, not the gross profit but the net thereof, that is the gross profit minus the expenditure incurred for earning such profit should be excluded. That is precisely how this Court in the case of Rajoo Engineers (supra) viewed the situation. That is how the Delhi High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Application No. 19378 of 2021 would not survive and the petitioner assessee would not be required to apply for settlement of dispute for questions raised in Tax Appeal No.781 of 2009. As the Tax Appeal is already dismissed , R/Special Civil Application No. 19378 of 2021 has become infructuous and is accordingly disposed of. TAX APPEAL NO.610 OF 2010 WITH R/SPECIAL CIVIL APPLICATION NO. 19368 OF 2021: [16] Tax Appeal No. 610 of 2010 is admitted vide order dated 27th March 2012 on the following substantial questions of law: [1] Whether the Tribunal below committed substantial error of law in reversing the order of the Commissioner of Income Tax [Appeals] [ CIT [Appeals] ] passed under Section 154 of the Income Tax Act, 1961 [ the Act ] and thereby allowing the assessee's claim of deduction of other expenses with respect to Soda Ash Project and LAB Project when the said expenditure was capitalized in the books of account and the said issue was debatable one. [2] Whether the Tribunal below committed substantial error of law in entertaining the assessee's additional ground relating to the claim on account of interdivision transfer of Rs. 2070.55 Lac, when the said issue was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business it was further held that the expenditure was in connection with the expansion of the existing business. On such ground, the expenditure was held allowable. It is this order of the CIT (Appeal) which the Tribunal upheld in the impugned judgment. Having heard the learned counsel for the parties and having perused the documents on record, we notice that CIT (Appeals) and the Tribunal concurrently came to the conclusion that there was interconnection, interlacing and inter-dependence of the management, financial and administrative control of various units of Nirma Limited. It was on this ground, the Tribunal held that the business in question is continuation of the existing business and not a new business. In this context, the decision relied on by the authorities below of this Court in the case of Alembic Glass Industries Ltd. (supra) laid down tests for ascertaining whether a business was part of existing business or the assessee was starting a new unit. It was held that merely because the unit was coming to a distant point by itself would not mean that it was a new business. If the facts as recorded by the CIT (Appeals) and the Tribunal can be said to have achieved finalit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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