Gujarat H.C : Whether, the Tribunal is right in law and on facts in allowing the deduction under s. 80L to the assessee-trust treating the status as individual?

High Court Of Gujarat

DCIT vs. Harjivandas Juthabhai Zaveri & Anr.

Sections 80L, 80-I

Asst. Year 1988-89

B.C. Patel & K.M. Mehta, JJ.

Tax Appeal No. 189 of 1999

6th December 1999

Counsel Appeared

Manish R. Bhatt, for the Appellant : S.N. Soparkar, for Respondent No. 2

JUDGMENT

BY THE COURT :

The present appeal is preferred by the Asstt. CIT, Central Circle 2(1), Ahmedabad, under s. 260A of the IT Act, 1961 (hereinafter referred to as “the Act”), against the decision rendered by the Tribunal, Ahmedabad Bench (hereinafter referred to as “the Tribunal”). For the asst. yr. 1988-89, Harsidh Specific Family Trust was assessed by the AO and the said assessment was challenged before the CIT(A), who, after hearing the parties, allowed the appeal partly. The matter was thereafter carried in appeal by the Revenue. However, on hearing the parties, the Tribunal dismissed the appeal preferred by the Revenue. Hence, the Revenue has preferred this appeal before this Court. Five questions are raised before us, which are as under :

“(1) Whether, the Tribunal is right in law and on facts in allowing the deduction under s. 80L to the assessee-trust treating the status as individual?

(2) Whether, the Tribunal is right in law and on facts in deleting the addition of Rs. 1,99,12,300 being interest paid by the assesseetrust to its beneficiaries?

(3) Whether, the Tribunal is right in law and on facts in deleting the addition of Rs. 8,40,000 made on account of estimate of earned interest at the rate of 12 per cent, on bank fixed deposits of Rs. 70 lakhs existing in the name of the beneficiaries?

(4) Whether the Tribunal is right in law and on facts in deleting the addition of Rs. 6,49,726 made on account of interest on deposits amount to Rs. 1.70 crores made by the assessee-trust with Norma Detergent (P) Ltd., and on behalf of the beneficiaries ?

(5) Whether the Tribunal is right in law and on facts in allowing the deduction under s. 80-I of the Act on the following items of income treating it as income of industrial undertakings : Rs. So far as question No. 1 is concerned, the same is covered by the decision of this Court in the case of CIT vs. Deepak Family Trust (No. 1) (1995) 211 ITR 575. Hence, no substantial question of law arises, and question No. 1 need not be referred. So far as question No. 2 is concerned, the same is covered by the decision in the case of CIT vs. Tanvi Sajni Family Trust (1994) 209 ITR 497 (Guj). Therefore, qua this question also, no substantial question of law arises, and the question need not be referred.So far as questions Nos. 3 and 4 are concerned, the Tribunal, considering the material placed before it, arrived at a conclusion that the amount of interest was receivable by the beneficiaries, and considering the decision, the Tribunal has opined in favour of the assessee. No substantial question of law arises.

The Tribunal relied on its earlier decision which has been accepted by the Revenue, and we would not like to refer these questions. So far as question No. 5 is concerned, learned counsel, Mr. Soparkar, drew our attention to s. 80-I of the Act and submitted that this section is meant for deduction in respect of profits and gains from industrial undertakings. With regard to the question raised by the Revenue that the amount received on sale of jute bags, barrels, etc., ought to have been deducted from the cost of the material, Mr. Soparkar, the learned advocate for the assessee, submitted that it would not make any difference if the amount received by the sale of empty barrel or “bardan” (jute bags) is deducted from the cost of the raw material. He submitted that if the cost is reduced by deducting the sum so received, the profit will increase and, ultimately, the total would be the same. He submitted that the CIT(A) and the Tribunal have rightly come to the conclusion that the items covered by question No. 5 are covered by section 80-I of the Act inasmuch as the amount received can be said to have been received from the activities undertaken by the assessee. He submitted that no question of law is raised, more particularly, when a Division Bench of this Court in Income-tax Application No. 70 of 1997 (CIT vs. Norma Detergent (P) Ltd.) had considered a similar question and held that “it was, however, found that the items of kasar and sale of empty soda ash “bardans, are directly connected with the manufacturing activities of the assessee and should be allowed”. It is required to be noted that if the assessee was not engaged in industrial activities, there was no question of empty barrels or bardans. Instead of manufacturing if the assessee was doing trading activities, i.e., dealing in raw material, and if the assessee had sold the material on retail basis and earned amount by sale of bardans, then obviously this section will not apply. In view of what we have stated hereinabove, we find that there is no merit in the appeal, and the appeal stands dismissed. Notice is discharged with no order as to costs.

[Citation : 258 ITR 785]

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