COMMISSIONER OF INCOME TAX vs. K.R.USHASREE,MANGAD,KOLLAM

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ITA/46/2008HC KeralaKLHC01026951200805 August 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 declined to entertain the appeal. The Court noted that the Revenue filed the appeal in 2004, but defects were cured only in 2008, leading to a significant delay of nearly four years. The Court reasoned that issuing notice to the respondent after such a long delay, due to the Revenue's lack of diligence in prosecuting the appeal, would cause great prejudice and injustice to the assessee. Therefore, the Court dismissed the appeal. However, liberty was granted to the Revenue to make an appropriate application or review petition before the Tribunal for appropriate orders. The Court did not decide on the merits of the questions of law framed.

What were the facts?

The assessee, an exporter of cashew, had their assessment for the Assessment Year 1993-1994 completed by the Assessing Officer. The AO computed the profit for deduction under Section 80HHC by deducting 90% of processing charges from business profits and including them in the total turnover. The first appellate authority directed that 90% of processing charges should not be excluded from business profits, considering them as business income, and also directed their exclusion from total turnover. The Revenue appealed this decision to the Income Tax Appellate Tribunal (Tribunal), which upheld the first appellate authority's order. The Revenue then filed an appeal before the High Court under Section 260A of the Income Tax Act, challenging the Tribunal's order.

What were the issues?

The High Court had to decide the following questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that processing charges formed part of the business income and could not be reduced from profits and gains to arrive at business profits for Section 80HHC computation? 2. Whether, on the facts and in the circumstances of the case, processing charges could be excluded from the total turnover of the business while computing relief under Section 80HHC? 3. 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, turnover should take into account all receipts other than excluded items? The Revenue contended that the issues raised were covered by a recent Supreme Court decision and sought admission of the appeal and issuance of notice. The judgment does not record any specific arguments from the assessee.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 260A,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 TUESDAY, THE 5TH AUGUST 2008 / 14TH SRAVANA 1930 ITA.No. 46 of 2008 -------------------------------- (ORDER DATED 25-2-2004 IN I.T.A.No.58/COCH/2003 OF THE INCOME TAX

APPELLATE TRIBUNAL, COCHIN BENCH (ASSESSMENT YEAR 1993-94) ................. APPELLANT/APPELLANT: ------------------------------------ THE COMMISSIONER OF INCOME - TAX, THIRUVANANTHAPURAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENT/ RESPONDENT: -------------------------------------------- SMT. K.R. USHASREE, KOLLAM

THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 05/08/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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

I.T.A.No.46 of 2008 ------------------------------------------ Dated, this the 5th day of August, 2008 JUDGMENT H.L.Dattu, C.J. The Revenue is before us in this appeal filed under Section 260A of the Income-tax Act, inter alia, questioning the correctness or otherwise of the orders passed by the Income Tax Appellate Tribunal in ITA No.58/2003 dated 25.2.2004. 2. The assessee is an exporter of cashew. While completing the assessment for the assessment year 1993-1994, the Assessing Officer, for computing deduction under section 80 HHC computed the profit of the business after deducting 90% of the processing charges from the profits and gains of the business and including the same in the total turnover. This was challenged before the first appellate authority. The first appellate authority directed not to exclude 90% of processing charges from the profits and gains of the business to compute profits of the business stating that processing charges is business income. The first appellate authority has also directed to exclude the processing charges from the total turnover. This was challenged by the Revenue before the Tribunal. The Tribunal upheld the order of the first appellate authority and dismissed the appeal filed by the Revenue.

I.T.A.No.46 of 2008 2 3. The Revenue has framed the following questions of law for our consideration and consequent decision. They are:- “1. Whether, on the facts and in the circumstances of the case the Tribunal is right in law and fact in holding that the processing charges formed part of the business income and it cannot be reduced from the profits and gains to arrive at the profits of the business for the purpose of computation under section 80 HHC? 2. Whether on the facts and in the circumstances of the case while computing the relief under section 80HHC of the Income Tax Act, the processing charges could be excluded from the total turnover of the business? 3. Whether, on the facts and in the circumstances of the case, and in view of Explanation (ba) to Section 80 HHC 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? 4. The appeal was filed as early as on 13th day of July, 2004 and since the Registry had pointed out certain defects in filing the appeal and since they were cured only in the year 2008, the appeal is now posted before us for admission. 5. The learned counsel for the appellant would submit that the issues raised in this appeal is now covered by a recent decision of the Apex Court and therefore, we should admit this appeal and issue notice to the respondent. We are not inclined to accept the submission made by the

I.T.A.No.46 of 2008 3 learned counsel for the Revenue. 6. The Tribunal had dismissed the Revenue's appeal by an order passed in the month of February, 2004. Nearly after four years from the date of the order, if we have to issue notice to the respondent only because, the Revenue was not diligent in prosecuting the appeal filed in the year 2004, in our view, it could cause great prejudice and injustice to the assessee/respondent. 7. In that view of the matter, we decline to entertain this appeal. Accordingly, the appeal is disposed of. However, we grant liberty to the Revenue to make an appropriate application/review petition before the tribunal for appropriate orders.. Ordered accordingly.

(H.L.DATTU) CHIEF JUSTICE

(A.K.BASHEER) JUDGE MS

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