THECOMMISSIONER OF INCOMETAX vs. M/S.BABY MARINE EXPORTS

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ITR/107/1999HC KeralaKLHC01014075199918 January 2007Bench: HONOURABLE MR.JUSTICE K.S.RADHAKRISHNAN,HONOURABLE MR.JUSTICE M.N.KRISHNAN5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court answered the first question in favour of the Revenue and against the assessee, holding that the Tribunal was not right in allowing the deduction under Section 80 HHC. This decision was based on the Apex Court's judgment in Sea Pearl Industries v. C.I.T. (SC) (247 ITR 578). Regarding the second question concerning the reopening of assessments under Section 147, the High Court found it unnecessary to answer. Instead, the Court set aside the orders of the Tribunal and the Commissioner of Income Tax (Appeals) to that extent. The Commissioner (Appeals) was directed to consider the issue afresh after hearing both parties. The operative direction was to remand the matter to the Commissioner (Appeals) for fresh consideration, with an interim stay of recovery of tax and a direction to pass final orders within three months. The principle established for the first issue is that deduction under Section 80 HHC is not permissible if goods are exported through an agent, even if foreign exchange is received by the assessee in its name, as per the Supreme Court's precedent.

What were the facts?

These are tax revision petitions filed by the Commissioner of Income-tax, Trivandrum, against M/s. Baby Marine Exports, Kollam. The petitions pertain to assessment years 1987-88 and 1988-89. The challenge is to the orders of the Income-tax Appellate Tribunal (ITAT), Cochin Bench, which had passed orders in RA Nos. 251, 252, 253 & 254/COCH/97, arising from ITAs 648, 649, 650 & 657/COCH//1991. The High Court heard counsel for both sides and noted that the tax revisions could be disposed of based on the questions of law referred for consideration.

What were the issues?

The High Court was asked to decide two questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled to the deduction under Section 80 HHC on the goods exported through an agent (export house) by receiving foreign exchange by itself and in its name? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in interfering with the reopening of the assessments and holding it as bad in the eye of law under Section 147 of the I.T. Act within the meaning of Explanation 7(c)(ii) and (iii) when the assessment had been reopened within a period of 4 years from the end of the assessment year which is permissible even if there is no failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Section 142(1) or under Section 148 or to disclose fully and truly all material facts necessary for the assessment for that assessment year? The Revenue contended that the Tribunal erred in allowing deduction under Section 80 HHC. The judgment does not record specific contentions for the Revenue on the second issue, nor does it record any contentions for the assessee.

Which sections of the Income-tax Act were involved?

Section 80 HHC,Section 147,Section 139,Section 142(1),Section 148

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.S.RADHAKRISHNAN & THE HONOURABLE MR. JUSTICE M.N.KRISHNAN THURSDAY, THE 18TH JANUARY 2007 / 28TH PAUSHA 1928 ITR.No. 107 to 110 of 1999 -------------------------------------- AGAINST THE ORDER IN RA NOS.251, 252, 253 & 254/COCH/97 IN ITA.648/649/650 & 657/COCH//1991 -Asst.Years 1987-88, 1988-89, 1987-88 and 1988-89 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPLICANT: ----------------- THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENT: ------------------------ M/S. BABY MARINE EXPORTS, KALLUVILA, THANGASSERY, KOLLAM. BY ADV. SRI.C.KOCHUNNY NAIR SRI.S.ARUN RAJ SRI.ANTONY DOMINIC SRI.E.K.NANDAKUMAR SRI.A.K.JAYASANKAR NAMBIAR SRI.ANIL D. NAIR SMT.PRIYA MAHESH SMT.PRIYA MANJOORAN THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 18/01/2007 ALONG WITH ITR NO. 108 OF 1999, ITR NO.109 OF 1999 AND ITR NO. 110 OF 1999, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

K.S. RADHAKRISHNAN & M.N. KRISHNAN, JJ. = = = = = == = = = = = = = = = = = = = = = I.T.R. 107 TO 110 OF 1999 = = = = = = = = = = = = = = = = = = = = = Dated this the 18th day of January, 2007.

J U D G M E N T Radhakrishnan, J. Heard counsel on both sides. Counsel appearing on either side submitted that these tax revisions can be disposed of in the following manner. Following are the questions of law referred for consideration. "(1)

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled to the deduction under Section 80 HHC on the goods exported through an agent (export house) by receiving foreign exchange by itself and in its name? (2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in interfering with the reopening of the assessments and holding it as bad in the eye of law under Section 147 of the I.T. Act within the meaning of Explanation 7(c)(ii) and (iii) when the assessment had been reopened within a period of 4 years from the end

I.T.R. 107 TO 110 OF 1999 -:Page numbers:- of the assessment year which is permissible even if there is no failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Section 142(1) or under Section 148 or to disclose fully and truly all material facts necessary for the assessment for that assessment year?" The first question is already covered in favour of the Revenue by the decision of the Apex Court in Sea Pearl Industries v. C.I.T. (SC) (247 ITR 578). Hence, we answer the first question in favour of the Revenue and against the assessee. 2. We find it unnecessary to answer the second question, since we propose to direct the Commissioner(Appeals) to consider the issue afresh. Consequently, the order passed by the Tribunal and the Commissioner of Income Tax (Appeals) to that extend is set aside and the Commissioner (Appeals) is directed to pass fresh orders after hearing both the parties. In the meanwhile, there will be an interim stay of recovery of tax. Considering the fact that the assessment relates to the years 1987-88 and 1988-89, the

I.T.R. 107 TO 110 OF 1999 -:Page numbers:- Commissioner of Appeals will pass final orders within a period of three months from the date of receipt of a copy of this judgment. Reference is answered accordingly. Registry to communicate this order to the Commissioner of Appeals as well as to the Tribunal. K.S. RADHAKRISHNAN, JUDGE. M.N. KRISHNAN, JUDGE. ul/-

I.T.R. 107 TO 110 OF 1999 -:Page numbers:-

K.S. RADHAKRISHNAN & M.N. KRISHNAN, JJ. = = = = = = = = = = = I.T.R.107 TO 110 OF1999 = = = = = = = = = = = J U D G M E N T 18th January, 2007.

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