THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM vs. OLAM EXPORTS (INDIA) LTD.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MRS. JUSTICE SHIRCY V. THURSDAY, THE 3RD DAY OF AUGUST 2017/12TH SRAVANA, 1939 ITA.No. 165 of 2012 ----------------------- AGAINST THE ORDER IN ITA 412/2009 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 25-11-2011 APPELLANT/APPELLANT: -------------------------------- THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM

BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENT: ------------------------- OLAM EXPORTS (INDIA) LTD. BISHOP JEROME NAGAR, KOLLAM - 691 001.

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03-08- 2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ANTONY DOMINIC & SHIRCY V.,JJ. ============================== I.T.Appeal No. 165 of 2012 ============================== Dated this the 3rd day of August, 2017 JUDGMENT Antony Dominic, J. This Appeal is filed by the Revenue against the order passed by the Income Tax Appellate Tribunal in I.T.A. No. 412/2009 concerning the assessment year 2000-2001. While completing the assessment, the assessee was allowed deductions under Section 80HHC amounting to Rs.85,47,974/- and subsequently the Assessing Officer found that in computing deductions under Section 80HHC, 90% of Miscellaneous receipts of Rs.33,45,844/-, Written back of provisions/credits of Rs.60,646/- and Liabilities written back of Rs.28,84,535/-, were omitted to be deducted from the business income for the purpose of arriving at the profits of the business. Accordingly, rectification under Section 154 of the Income Tax Act was effected by Annexure-A

ITA 165/2012 2 proceedings and deduction under Section 80HHC was re- quantified at Rs.36,53,949/-. The assessee filed an appeal and by Annexure-B order, the Commissioner of Income Tax held that the Assessing Officer was not justified in excluding 90% of the provision and liability written back, amounting to Rs.60,646/- and Rs.28,84,535/-, for the purpose of computing the deduction under Section 80HHC. The Revenue filed appeal before the Tribunal and the Tribunal upheld the order of the Commissioner. It is this order which is challenged before us and the questions of law framed for consideration of this Court read as under: 1. Whether on the facts and in the circumstances of the case has not the Tribunal erred in confirming the CIT(A)'s decision in directing the Assessing Officer to recompute the deduction u/s. 80HHC including 90% of the written back provisions and liabilities written back as business income and not as income from other sources. 2. Whether on the facts and in the circumstances of the case the liabilities and provisions written back which have no direct nexus with the business profits of the current year is not to be excluded from the profit of the business in accordance with clause (1) of explanation (baa) to section 80HHC?

ITA 165/2012 3 3.Whether on the facts and in the circumstances of the case the Commissioner of Income Tax (Appeals) and the Tribunal are right and with jurisdiction in considering the issue of rectification on merits? 2. We heard the counsel appearing for the Revenue. Though notice was served, there was no appearance or representation for the assessee. 3. After hearing the counsel for the Revenue, we find that the contention of the Revenue is that to qualify for deductions under Section 80HHC, the profit must have been derived by the assessee from the export of goods on merchandise. It is on this basis that the Revenue contends that the written back provision of Rs.60,646/- and liabilities written back of Rs.28,84,535/- do not qualify for deduction. 4. However, on materials we find that, as rightly found by the Tribunal, the credits aggregating to Rs.29.45 lakhs, represents the write back of expenditure debited to the profit and loss account for an earlier year/years claimed as business expenditure, and written back on being found as having been provided for (and claimed) in excess, i.e. to that extent. In other

ITA 165/2012 4 words, these are amounts which were expenditure debited from the profits earned by the assessee from the export of goods on merchandise. When such amounts are written back, it still should retain the character of profit derived by the assessee from export. If that be so, the assessee would be entitled to deduction under Section 80HHC as held by the Tribunal. Therefore, we do not find any merit in the contentions. 5. In the above circumstances, answering the questions of law are in favour of the assessee and against the revenue. This Appeal is dismissed. Sd/- ANTONY DOMINIC

JUDGE Sd/- SHIRCY V. JUDGE ks. True copy P.S. To Judge

ITA 165/2012 5