COMMISSIONER OF INCOME TAX vs. SMT.K.R.USHASREE

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ITA/100/2008HC KeralaKLHC01027005200815 October 2008Bench: HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU,HONOURABLE MR.JUSTICE A.K.BASHEER4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the questions of law raised by the Revenue were no longer debatable in view of its earlier decision in Commissioner of Income Tax v. T.C.Usha [(2003) 264 ITR 368]. In that decision, the Court had observed that the purpose of the formula under Section 80HHC is to find the profit attributable to export turnover, which means profit on export sales. Business income is reckoned for eligible deduction, and business income in the context of total turnover refers only to income generated on purchases and sales. Therefore, total turnover in the context of Section 80HHC includes only sales turnover and purchase turnover, not receipts in the nature of income not attributable to sales. Consequently, the High Court answered the questions of law against the Revenue and in favour of the assessee. The operative direction was to decide accordingly, implying the dismissal of the Revenue's appeal.

What were the facts?

The assessee, an exporter of cashew, is the respondent in this Income Tax Appeal filed by the Commissioner of Income-Tax, Thiruvananthapuram. The assessment year in question is 1997-98. The assessing authority had included amounts received as quality claims for imported and local raw nuts in the assessee's total turnover. The first appellate authority found this quantification unacceptable and allowed the assessee's appeal, directing the assessing authority to grant the claim. The Revenue appealed this decision to the Income Tax Appellate Tribunal, which rejected the Revenue's appeal, confirming the first appellate authority's order. The Tribunal followed a High Court decision in Commissioner of Income Tax v. T.C.Usha. The Revenue is now before the High Court challenging the Tribunal's order.

What were the issues?

The Tribunal had to decide the following questions of law raised by the Revenue: 1. Whether the amount received by the assessee towards quality claim and raw nut claim forms part of the total turnover of the assessee, and if the Tribunal was right in excluding these amounts from the total turnover for computing the relief under Section 80HHC of the Income Tax Act. 2. Whether, in view of Explanation (ba) to Section 80HHC and clauses (iiia), (iiib), and (iiic) of Section 28, turnover should take into account all other receipts other than the excluded items of receipts. The Revenue contended that these claims should be included in the total turnover for the purpose of Section 80HHC. The assessee's contentions are not explicitly recorded in the judgment, but their position is implied by the fact that they are defending the lower authorities' decisions. The Tribunal relied on the decision of the High Court in Commissioner of Income Tax v. T.C.Usha [(2003) 264 ITR 368].

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 28

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU

& THE HONOURABLE MR. JUSTICE A.K.BASHEER WEDNESDAY, THE 15TH OCTOBER 2008 / 23RD ASWINA 1930

I.T.A.No. 100 of 2008

- ---------------------------------- ORDER DATED 25.2.2004 IN ITA.61/2002 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN

.................... APPELLANT/APPELLANT/RESPONDENT: --------------------------------------------------------- THE COMMISSIONER OF INCOME-TAX, THIRUVANANTHAPURAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOVERNMENT OF INDIA (TAXES) SRI.GEORGE K. GEORGE, SC FOR INCOME TAX SRI.JOSE JOSEPH, SC FOR INCOME TAX RESPONDENT/RESPONDENT/APPELLANT: ------------------------------------------------------------- SMT.K.R.USHASREE, KOLLAM.

THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 15/10/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

H.L.DATTU, C.J. & A.K.BASHEER, J.

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I.T.A.No.100 of 2008 ------------------------------------------ Dated, this the 15th day of October, 2008 JUDGMENT H.L.Dattu, C.J. This Income Tax Appeal under Section 260A of the Income Tax Act is filed against the orders passed by the Income Tax Appellate Tribunal, Cochin Bench, Cochin in I.T.A.No.61 of 2002 dated 25.2.2004. (2) The facts in nutshell are:- The assessee is an exporter of cashew. During the relevant assessment year 1997-98 the assessing authority had included in the total turnover the amount received as quality claim for imported raw nuts and local raw nuts purchased by the assessee. (3) Aggrieved by the said quantification made by the assessing authority, the assessee was before the first appellate authority. The first appellate authority has found that the quantification done by the assessing authority is unacceptable and, therefore, had allowed the assessee's appeal and had issued a further direction to the assessing authority to grant the claim made by the assessee. (4) The Revenue, being aggrieved by the orders passed by the first appellate authority, had carried the matter by way of second appeal before the Income Tax Appellate Tribunal in I.T.A.No.61 of 2002.

I.T.A.No.100 of 2008 2 The Tribunal has rejected the Revenue's appeal and thereby has confirmed the orders passed by the first appellate authority and while doing so, the Tribunal has followed the decision of this Court in the case of Commissioner of Income Tax v. T.C.Usha [(2003) 264 ITR 368].

(5) The Revenue, being aggrieved by the aforesaid order passed by the Tribunal is before us in this Income Tax Appeal. (6) The Revenue has framed 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 will not the amount received by the assessee towards quality claim and raw nut claim form part of the total turnover of the assessee and the Tribunal is right in law in excluding the amounts from the total turnover for the purpose of computing the relief under section 80HHC of the Income Tax Act? 2. Whether, on the facts and in the circumstances of the case and in view of Explanation (ba) to section 80HHC and clauses (iiia), (iiib) and (iiic) of Section 28, will not turnover take into account all other receipts other than the excluded items of receipts?” (7) The question of law raised by the Revenue, in our opinion, is no more debatable in view of the decision of this Court in T.C.Usha's case [(2003) 264 ITR 368].

I.T.A.No.100 of 2008 3 (8) In the aforesaid decision, this Court was pleased to observe as under: “The purpose of the formula provided under section 80HHC of the Income-tax Act, 1961, is to find out the profit attributable to export turnover, that is the profit on export sales. Business income is only reckoned for the purpose of computation of eligible deduction and the business income in the context of total turnover is only the income generated on purchases and sales. Therefore, the total turnover in the context of section 80HHC is only sales turnover and purchase turnover and not the receipts in the nature of income, which are not attributable to sales.” (9) Following the observations made in the aforesaid decision, the questions of law framed by the Revenue require to be answered against the Revenue and in favour of the assessee. Ordered accordingly.

(H.L.DATTU) CHIEF JUSTICE

(A.K.BASHEER)

JUDGE vns

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