Dichotomy between gross and net amount - Analysis of Vijay Industries Judgment
by Mahendra Singh
Section 80HH of Income Tax Act provides for deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas. In a recent judgment in the case of Vijay Industries, a three-judge bench of the Supreme Court has held that deduction under said section is to be allowed on the gross amount and not on net amount. It was held that insofar as Section 80HH is concerned, deduction must be on gross profits and gains. The article in this issue of Direct Tax Amicus tries to analyse the legal position existing prior to Vijay Industries judgment, and the change in position brought by this judgment. Considering various Supreme Court judgements, the article also traces the history of Section 80AB. Section 80AB inserted with effect from 1st April, 1981 seems to make it clear that deductions specified in Chapter VIA will be calculated with reference to net income and not gross amount. Therefore, this recent judgment may not impact Chapter VIA deductions for the period post insertion of Section 80AB…
Notification
- Receipt of share premium by start-ups from certain resident investors not to attract Section 56(2) (vii b)
Ratio decidendi
- Non-compete fee received by persons associated with transferor of business taxable as business income, not as capital gain – ITAT Ahmedabad
- Assessee must have filed return in previous year in order to claim carry forward of loss - Bombay High Court
- Option price paid for right of first refusal is not taxable as business income – ITAT Delhi
- Appeal proceedings against defunct company not infructuous – Supreme Court
- Retrenchment expenses paid to the out-going workmen on closure of one out of the three manufacturing units is an allowable expense - Kerala High Court
- Increase in general reserve post amalgamation is not taxable as income – ITAT Mumbai
- Section 56(2) (viia) does not apply to transfer of shares in amalgamation – ITAT Mumbai
- Amendment to Section 47(vii) is retrospective – ITAT Mumbai
- Transfer of cases under Section 127 does not affect jurisdiction of High Court – Bombay High Court
- Case not adjourned at the instance of assessee - Ratio in Asian Resurfacing (P) Ltd. not applicable – ITAT Delhi
- Receipt from surrender of sub-tenancy rights would be a capital receipt – ITAT Mumbai
- Primary onus on assessee to establish genuineness of transaction and credit worthiness of the investor under Section 68 - Supreme Court
- Price paid to sugarcane growers in excess of the minimum cane price fixed as per Sugarcane Control Order (1966) not allowable as a deduction – Supreme Court
- Deduction under Section 80-IC available at 100% from 6th year onwards if substantial expansion is undertaken by the assessee – Supreme Court
- Provisions of Section 92BA would not apply in case of indirect shareholding – Bombay High Court
- Transit mixture enabling RMC to be kept wet during transportation is ‘plant’ – ITAT Ahmedabad
- Expenses pertaining to previous year should be claimed at least on approximate basis: Assessee cannot plead impossibility on determining expenditure – ITAT Delhi
