COMMISSIONER OF INCOME-TAX,TVM. vs. JACOB C LUKE

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ITA/55/2008HC KeralaKLHC01026960200805 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 due to the significant delay in its prosecution. The Revenue filed the appeal in January 2004, but defects were cured only in 2008, nearly five years after the Tribunal's order. The Court found that issuing notice to the respondent after such a delay, due to the Revenue's lack of diligence, would cause great prejudice and injustice to the assessee. Therefore, the appeal was dismissed on procedural grounds without deciding the substantial questions of law. The Court granted liberty to the Revenue to make an appropriate application or review petition before the Tribunal for appropriate orders. The specific questions of law regarding the exclusion of processing charges from profits and turnover under Section 80HHC were not adjudicated on merits by the High Court.

What were the facts?

The Revenue is in appeal before the High Court challenging the order of the Income Tax Appellate Tribunal (Tribunal) dated August 25, 2003, for assessment year 1994-1995. The assessee, engaged in cashew nut processing and export, had its assessment completed by the Assessing Officer who included processing charges in the total turnover for computing deduction under Section 80HHC. The first appellate authority excluded these processing charges, following a Tribunal decision. The Revenue appealed to the Tribunal, which upheld the first appellate authority's order and dismissed the Revenue's appeal. The High Court noted that the Revenue filed the appeal in January 2004 but defects were cured only in 2008, leading to a significant delay in prosecution.

What were the issues?

1. 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 profits of the business as also from the turnover of the business? 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? Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, the earlier authorities (first appellate authority and Tribunal) had excluded processing charges from profits and turnover based on their understanding of the law. Revenue's Contention: The Revenue contended that the issues raised in the appeal are covered by a recent decision of the Apex Court and requested the admission of the appeal and issuance of notice to the respondent. The Revenue argued that processing charges should be included in the turnover for the purpose of Section 80HHC computation.

Which sections of the Income-tax Act were involved?

Section 260A,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 TUESDAY, THE 5TH AUGUST 2008 / 14TH SRAVANA 1930 ITA.No. 55 of 2008 ------------------------------- (ORDER DATED 25-8-2003 IN I.T.A.No.290/COCH/2000 OF THE INCOME TAX

APPELLATE TRIBUNAL, COCHIN BENCH (ASSESSMENT YEAR 1994-95) APPELLANT/APPELLANT: ------------------------------------ THE COMMISSIONER OF INCOME TAX THIRUVANANTHAPURAM. BY STANDING COUNSEL SRI.GEORGE K. GEORGE. RESPONDENT/RESPONDENT: ------------------------------------------ SHRI.JACOB C.LUKE, NOBLE CASHEW INDUSTRIES KOTTARAKKARA.

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.55 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.290/2000 dated 25.8.2003. 2. The assessee is engaged in the business of processing of cashew nuts and export of cashew kernels. While completing the assessment for the assessment year 1994-1995, the assessing officer has included the processing charges in the total turnover while computing deduction under section 80 HHC of the Income Tax Act. This was challenged before the first appellate authority. The first appellate authority following the decision of the Tribunal in ITA No.172/96 dated 29.2.2000 was of the view that the profit by way of processing charges are in the nature of charges and deserve to be excluded from profits of the business. 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.

ITA 56/2008 -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 while computing the relief under section 80 HHC of the Income Tax Act, the processing charges could be excluded from the profits of the business as also from the turnover of the business? 2. 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 3rd day of January, 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

ITA 56/2008 -3- the learned counsel for the Revenue. 6. The Tribunal had dismissed the Revenue's appeal by an order passed in the month of August, 2003. Nearly after five 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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