THE COMMISSIONER OF INCOME TAX vs. SMT.PREETHA S.NAIR,KOLLAM

H.L.Dattu, C.J. This appeal arises out of an order passed by the Income Tax Appellate Tribunal, Cochin Bench in I.T.A.No.278 of 2000 dated 11.2.2003. By the impugned order, the Tribunal has granted the relief to the assessee under the provisions of Section 80IA of the Income Tax Act ('the Act' for short). (2) The facts in brief are: The assessee is engaged in the processing of raw cashew nuts and export of cashew kernels. (3) In the returns filed before the assessment authority for the assessment year 1995-96, the assessee had claimed deductions under Section 80IA of the Act in a sum of Rs.10,27,545/- in respect of profits derived from the processing of raw cashew nuts in their two factories situated at Palugal and Sreeramapuram. (4) The assessing authority while completing the assessments has restricted the deductions under Section 80IA of the Act to 25% of the profit from the processing done from Sreeramapuram factory; since the same was not owned by the assessee, but was taken on a lease basis. (5) In the first appeal filed, the first appellate authority has confirmed the orders passed by the assessing authority.

(6) The assessee carried the matter by way of second appeal before the Tribunal in I.T.A.No.278 of 2000. The Tribunal following the decision of this Court in Court in Commissioner of Income Tax vs. Indian Resins and Polymers [(1999) 235 ITR page 5] and also the decision of the Tribunal in I.T.A.No.763 of 1995, has held that the assessee is entitled to deduction even though the undertaking (factory) is not owned by the assessee, but is carried on in the premises, on lease basis. (7) Aggrieved by the findings of the Tribunal, the Department is before us in this appeal. (8) The Department has raised the following questions of law for our consideration and decision. They are as under:

“1. Whether, on the facts and in the circumstances of the case, assessee is entitled to claim deduction under section 80IA in respect of the profits derived by the assessee from processing of cashew in the factories owned by outsiders?

“On a reference held, affirming the decision of the Tribunal, that the conversion of raw cashew nuts into cashew kernels would be a manufacturing or processing activity and that the assessee was an industrial undertaking entitled to deduction under sections 80HH and 80J of the Act.” (10) Since the Tribunal has followed the decision of the juri ictional High Court which has attained the finality, in our opinion, the Tribunal is justified in allowing the assessee's appeal and granting deductions under Section 80IA of the Act. (11) We do not see any error in the orders passed by the Tribunal which would require for our interference. Therefore, while confirming the orders passed by the Tribunal, we reject the Revenue's appeal. Ordered accordingly.

(H.L.DATTU) CHIEF JUSTICE

(THOMAS P.JOSEPH)

JUDGE vns