M/S.ASPINWALL & CO.(TRAV) LTD., KOCHI vs. ITAMISSIONER OF INCOME TAX, COCHIN

While admitting the above appeals, this Court has raised the following two questions of law in both the appeals, which are identical: i) Whether on the facts and circumstances of the case was the Income tax tribunal justified in confirming the exclusion of interest income referred above for computation of eligible relief under Section 80HHC of the Income Tax Act? ii) Whether on the facts and circumstances of the case was the Income tax Tribunal justified in confirming the exclusion of rent referred above in the computation of eligible deduction under Section 80HHC of the Income Tax Act?

The first question regarding the exclusion of interest income for computation of eligible income under Section 80HHC, as has been noticed above, was not an issue before the Tribunal, the assessee having conceded to it specifically. Since the same was not an issue before the Tribunal, we refuse to answer question No.(i).

The only issue argued before the Tribunal was with respect to the eligibility of the godown rent received by the assessee to be treated as export profit for computing the relief under Section 80HHC. The assessee relied upon the decision of this Court in - 3 - Mercantile and Marine Services v. CIT (233 ITR 257), to contend that godown rent paid by the assessee has to be held to be income eligible for deduction under Section 80HHC. The Tribunal rightly found that the said case was one in which the godown rent paid by the assessee therein for storage of goods pending despatch by a clearing and forwarding agent handling exports and imports of Government Bodies is business income; and it was not a case in which computation of relief under Section 80HHC, meaning export profit, arose. Section 80HHC is a deduction in respect of profits derived from export business. Where an assessee, being an Indian company or a person, is engaged in the business of export out of India of any goods or merchandise to which the section applies, a deduction was allowed to the extent of profits referred thereunder for computing the total income of the assessee. The computation provided thereunder though subject to certain amendments, essentially it stood as, being that proportion; the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee as applied to the total business profits of the assessee disclosed under the head “profits and gains of business or profession”. The export profit to be taken into account is that - 4 - derived by the assessee from the export of such goods or merchandise. The assessee's claim relates to the use of its godown by other exporters for storing goods till despatch. This cannot at all be termed to be a profit derived by the assessee from the export of such goods or merchandise coming within Section 80HHC. We are of the opinion that the Tribunal has correctly decided the issue and the 2nd question of law raised by the assessee is answered against the assessee and in favour of the Revenue. Accordingly, both the appeals are rejected. Thottathil B.Radhakrishnan Judge K.Vinod Chandran vku/ Judge. --