THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6 vs. B. SURESHKUMAR & CO (RF)

Facts

The assessee, B. Suresh Kumar & Co (RF), a registered partnership firm engaged in diamond export, filed its return for AY 2003-04 declaring Rs. 50,13,903/-. The Assessing Officer (AO) determined the total income at Rs. 77,89,970/-. The Commissioner of Income Tax (Appeals) [CIT(A)] partly allowed the assessee's appeal, directing the AO to consider the value of rejected diamonds for Section 80HHC deduction by including them in export turnover. The Income Tax Appellate Tribunal (ITAT) dismissed the Revenue's appeal and partly allowed the assessee's appeal. The Revenue has filed the present Tax Appeal against the ITAT's order dated 29.06.2007.

Held

The High Court noted that the issue raised in the appeal was concluded by its prior decision in Tax Appeal No. 62/2006, decided on 28.09.2006. In that decision, the Court had considered a similar question (Question E) concerning the eligibility of export of rejected and rough diamonds for deduction under Section 80HHC. The Court had held that when admitted facts are that they are exported, they are eligible for deduction under Section 80HHC. Therefore, the High Court found no case for admission of the appeal on this ground. The Court answered the question of law in favour of the assessee and against the Revenue, disposing of the appeal accordingly.

Key Issues

1. Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right in coming to the conclusion that the sale proceeds of the rejected diamonds is required to be treated as part of export turnover for the purpose of working out deduction available under Section 80HHC of the Income Tax Act? The Revenue contended that the ITAT erred in its decision. The judgment does not record specific arguments from the assessee's side regarding this issue. However, the High Court's admission order indicates that the Revenue is challenging the ITAT's finding that rejected diamonds should be included in export turnover for Section 80HHC deduction.