COMMISSIONER OF INCOME TAX-II vs MADHUSUDAN INDUSTRIES

Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Income Tax Appellate Tribunal "B" Bench, Ahmedabad (hereinafter referred to as "the learned tribunal") in ITA No.2076/Ahd/2004 for the Assessment Year 1999-2000, revenue has preferred the present Tax Appeal to consider the following questions of law;

(A) Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT(A) and thereby deleting the disallowance of deduction under Section 80HHC to exclude the interest amounting to Rs.10,79,681/-?

(B) Whether the Appellate Tribunal is right in law and on facts in directing to compute the deduction under Section 80HHC after reducing the deduction under Section 80IA of the Act?

We have heard Ms. Mauna Bhatt, learned advocate appearing on behalf of the revenue and Shri Monaal Davawala, learned advocate appearing for Mrs. Swati Soparkar, learned advocate appearing on behalf of the assessee.

Now so far as question no.(A) i.e. whether the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT(A) and thereby deleting the disallowance of deduction under Section 80HHC to exclude the interest amount to Rs.10,79,681/- is concerned, the said issue is now not res integra in view of the decision of the Hon''ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. Vs.

Commissioner of Income Tax reported in (2012) 343 ITR 89 (SC). In the case of ACG Associated Capsules Pvt. Ltd. (Supra) it is held by the Hon''ble Supreme Court that 90% of not the gross interest but only the net interest, which has been included in the profits of the business of the assessee as computed under the heads "profits and gains of business or profession" is to be deducted under Clause (1) of Explanation (baa) to Section 80HHC of the Income Tax Act for determining the profits of business.

3.1 Applying the law laid down by the Hon''ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. (Supra) the aforesaid question of law raised in the present Tax Appeal is held against the revenue and in favour of the assessee.

Now so far as question no.(B) i.e. whether the Appellate Tribunal is right in law and on facts in directing to compute the deduction under Section 80HHC after reducing the deduction under Section 80IA of the Act is concerned, the same is held against the assessee and in favour of the revenue in view of the decision of the Division Bench of this Court in the case of Commissioner of Income-Tax Vs. Atul Intermediates reported in [2015] 373 ITR 638 (Gujarat). In the said decision, it is held by the Division Bench that special deduction under Section 80IA of the Income Tax Act must be taken into account in computing special deduction under Section 80HHC of the Income Tax Act.

4.1 Shri Monaal Davawala, learned advocate appearing on behalf of the assessee has submitted that against the

decision of the Division Bench of this Court in the case of Atul Intermediates (Supra) SLP Is pending before Hon''ble the Supreme Court and the matter is referred to the Larger Bench. However, it is required to be noted that so far as this Court is concerned, as on today the issue is squarely covered against the assessee in view of the decision of the Division Bench of this Court in the case of Atul Intermediates (Supra). Hence, the aforesaid question no.(B) is held against the assessee and in favour of the revenue.

With this, the present Tax Appeal stands disposed of to the aforesaid extent. No order as to costs.