THE COMMISSIONER OF INCOME-TAX, TVM. vs. M/S.POYILAKADA TRUST

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ITA/43/2009HC KeralaKLHC01024804200914 December 2010Author: HONOURABLE MR.JUSTICE B.P.RAY,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the ITAT had not properly considered or decided the issue concerning the computation of indirect costs for working out export profit. The Tribunal's order was found to be deficient as it relied on other decisions without independent analysis. Consequently, the High Court set aside the ITAT's order and restored the appeal to the Tribunal's file for a fresh decision after hearing both sides. Regarding the second issue of interest under Section 234D, the High Court directed the Tribunal to follow its own judgment in CIT v. Kerala Proteins and Chemicals, 323 ITR 584, and decide the issue afresh. The ratio decidendi for the first issue is that an appellate tribunal must independently consider and decide issues before it, rather than merely quoting or relying on other decisions without applying them to the facts of the case. The operative direction is to remand the appeal to the ITAT for fresh adjudication on the first issue and to decide the second issue in line with the precedent.

What were the facts?

The appeal concerns the assessment year(s) not explicitly stated but implied to be related to the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated 2006. The Commissioner of Income Tax (Revenue) is the appellant, and M/s. Poyilakkada Trust (Assessee) is the respondent. The appeal challenges the ITAT's order which, according to the High Court, failed to properly consider and decide the issue of computing indirect costs for export profit. The High Court noted that the ITAT quoted a Special Bench decision and a Delhi Bench decision but did not independently analyze the facts or draw its own conclusion. The procedural history involves the assessment order, the order of the Commissioner of Income Tax (Appeals), and the subsequent ITAT order under challenge.

What were the issues?

1. Whether the Tribunal properly considered and decided the issue of computing indirect costs for working out export profit attributable to trading of goods, as required by Section 80HHC(3) of the Income Tax Act, 1961. Assessee's contentions: Not recorded. Revenue's contentions: The Tribunal failed to properly consider and decide the issue of indirect cost computation. It merely quoted other decisions without independent analysis, making its finding that the appeal was allowed unsustainable. 2. Whether the issue of interest under Section 234D of the Income Tax Act, 1961, was correctly decided by the Tribunal. Assessee's contentions: Not recorded. Revenue's contentions: The Tribunal should follow the High Court's judgment in CIT v. Kerala Proteins and Chemicals, 323 ITR 584, for this issue.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 234D

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY TUESDAY, THE 14TH DECEMBER 2010 / 23RD AGRAHAYANA 1932 ITA.No. 43 of 2009() ----------------------------- ITA.609/COCH/2006 of INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY RI.P.K.R.MENON,SR.COUNSEL, GOI (TAXES), ADV. SRI.JOSE JOSEPH, SC FOR INCOME TAX. RESPONDENT/APPELLANT ----------------------------------------- M/S. POYILAKKADA TRUST, KOLLAM. BY ADV. SRI.P.BALAKRISHNAN, SRI.MOHAN PULIKKAL, SRI.K.C.KIRAN. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 14/12/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: rs C .N. RAMACHANDRAN NAIR, & BHABANI PRASAD RAY, JJ. -------------------------------------------- I. T. A. No. 43 of 2009 -------------------------------------------- Dated this the 14th day of December, 2010

JUDGMENT Ramachandran Nair, J. After hearing both sides and after going through the Tribunal's order we notice that the Tribunal besides quoting the Special Bench decision of the Bombay Tribunal, has not considered or decided the issue raised in the appeal. The question raised is on the computation of indirect cost for working out the export profit attributable to trading of goods. This Court has in the decision in CIT V. PARRY AGRO INDUSTRIES LTD., 257 I.T.R. 41 held that the formula provided under Section 80HHC (3) has to be applied for working out indirect cost which is defined in clause (b) of Section 80HHC(3). All what we notice is that Tribunal has extracted the assessment order and order of the CIT (Appeals) and ultimately after referring to Delhi Bench decision, the Tribunal declared that the appeal is allowed. It was the duty of the Tribunal to consider whether the indirect cost worked out by the assessing officer as modified by the CIT (Appeals) is correct or 2 not. Since Tribunal has not considered the issue properly or has not drawn any conclusion of it's own, we allow the appeal by setting aside the order of the Tribunal and restore the appeal back to the file of the Tribunal for fresh decision after hearing both sides. So far as the second question is concerned, that is interest under Section 234D of the Act, the issue is covered by our judgment in CIT V. KERALA PROTEINS AND CHEMICALS, 323 ITR 584. The Tribunal will follow the said judgment and decide that issue also afresh.

(C.N.RAMACHANDRAN NAIR) Judge. (BHABANI PRASAD RAY) Judge.

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