The division bench of the Gujarat High Court, recently held that the benefit of deduction under section 80HHC of the Income Tax Act cannot be allowed in case of loss or negative profits.
The Court has relied upon the decision laid by the Apex Court while holding so. The highlights of the judgment are below.
In the instant case, the Revenue raised the following substantial questions before the High Court against the order of the Appellate Tribunal in which it was held that the deduction under section 80HHC of the Income Tax Act is allowable though there was negative profit.
According to the Tribunal, the net interest or gross interest should be considered while computing deduction under Section 80 HHC of the Income Tax Act. The Tribunal, also held that the interest income must be included in the eligible profits for computing the deduction u/S.80HH & 80IA of the Income Tax Act of 1961 is justifiable though there is no immediate and direct nexus with the industrial activities of the assessee.
The bench comprising Justice K S Jhaveri and Justice G R Udhwani, regarding the first question of law held that, the deduction u/S.80HHC of the Income Tax Act, cannot be permitted in case of loss or negative profit. The Court relied upon the decision of the Supreme Court in IPCA Laboratory Ltd. case and decided in favour of the Revenue.
Regarding the second question, i.e., whether the net interest or gross interest should be considered while computing deduction under Section 80 HHC of the Act, the Court opined that, the question is squarely covered by the decision in ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income-Tax,. Following the said decision, the Court confirmed the order of the ITAT by observing that the Tribunal was right in law and on facts in holding that net interest should be considered instead of gross interest while computing the deduction u/s.80HHC of the Act.
The third issue was in connection with the inclusion of the interest income in the eligible profits for computing the deduction u/S.80HH & 80IA of the Act. The Court found that the said issue resolved by the Supreme Court in Pandian Chemicals Ltd. v. Commissioner of Income Tax and the Gujarat High Court inCommissioner of Income Tax v. Gaskets and Radiators Distributors. In view of these decisions, the Court held that the order of ITAT is not justifiable since the same has no immediate and direct nexus with the industrial activities of the assessee.
Read the full text of the Judgment below.
