C I T vs. M/S SHIV SHAKTI RICE MILLS

ITA No. 426 of 2007 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 426 of 2007 Date of Decision: 9.12.2010 The Commissioner of Income Tax ....Appellant. Versus M/s Shiv Shakti Rice Mills ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. Ms. Monisha Gandhi, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. This order shall dispose of ITA Nos. 426 of 2007, 35 and 36 of 2008 as common question of law and facts are involved therein. For brevity, the facts are being extracted from ITA No. 426 of 2007. 2. ITA No. 426 of 2007 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 15.2.2007 passed by the Income Tax Appellate Tribunal, Delhi Bench “E”, New Delhi (hereinafter referred to as “the Tribunal”) in ITA No. 5148/Del/2004 for the assessment year 2002-03, raising the following substantial question of law:- “Whether on the facts and in the circumstances of the case the Hon'ble ITAT was right in law in

ITA No. 426 of 2007 -2- excluding the paddy husking charges received by the assessee from the total turnover, much against the definition of the term 'total turnover' as given in clause (ba) of the Explanation given below sub- section (4C) of Section 80HHC?” 3. Briefly stated the facts of the case, as narrated in the instant appeal, are that the assessee is a partnership firm and is running a rice sheller. It derives income from export, domestic sale of rice and job charges received from husking of rice. The assessee filed its return on 7.10.2002 for the assessment year 2003-04 declaring an income of Rs.19,00,320/-. The Assessing Officer held that paddy husking charges were received in the nature of its usual business activity and, therefore, there was no justification in excluding those receipts from the total turnover of the business. The Assessing Officer assessed the total turnover at Rs.15,68,48,450/-, including job work receipts of Rs.79,75,862/-, for calculating the deduction under Section 80HHC of the Act and also disallowed 90% of interest received on FDRs for the said purpose. Accordingly, the Assessing Officer allowed deduction under Section 80HHC of the Act at Rs.36,63,285/- as against Rs.46,68,106/-. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeal) [in short the “CIT(A)”] who vide order dated 20.10.2004 dismissed the appeal upholding the order of the Assessing Officer. On further appeal by the assessee, the Tribunal vide order dated 15.2.2007 while partly allowing the appeal held that processing charges cannot be included in the total turnover for the purpose of computing deduction under Section 80HHC. As regards

ITA No. 426 of 2007 -3- the issue of disallowance of 90% of interest received on FDRS for the calculation of deduction under Section 80HHC, the Tribunal affirmed the order of the CIT(A). Hence, the present appeal by the revenue. 4. We have heard learned counsel for the parties. 5. The point for determination in the present appeal relates to whether the paddy husking charges or processing charges received by the assessee would form part of total turnover as given in clause (ba) of the Explanation to Section 80HHC of the Act. 6. The Tribunal while adjudicating the aforesaid issue against the revenue had relied upon the decision of the Kerala High Court in CIT v. K. Rajendranathan Nair, [2004] 265 ITR 335. It is not disputed that the aforesaid decision of Kerala High Court was subject matter of appeal before the Apex Court in Commissioner of Income-Tax v. K. Ravindranathan Nair, [2007] 295 ITR 228 (SC) and the Hon'ble Supreme Court while reversing the decision of Kerala High Court in Rajendranathan Nair's case (supra) had held that processing charges are to be included in the total turnover in the formula in Section 80HHC (3) while computing deduction under Section 80HHC of the Act. 6. In view of the above, the question of law is answered in favour of the revenue and against the assessee. The appeal stands allowed. (AJAY KUMAR MITTAL) JUDGE December 9, 2010 (ADARSH KUMAR GOEL) gbs JUDGE

ITA No. 426 of 2007 -4- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 35 of 2008 Date of Decision: 9.12.2010 The Commissioner of Income Tax ....Appellant. Versus M/s Shiv Shakti Rice Mills ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. Ms. Monisha Gandhi, Advocate for the respondent. AJAY KUMAR MITTAL, J. The appeal is allowed. For reasons, see the order of even date recorded in ITA No. 426 of 2007 (The Commissioner of Income Tax v. M/s Shiv Shakti Rice Mills). (AJAY KUMAR MITTAL) JUDGE December 9, 2010 (ADARSH KUMAR GOEL) gbs JUDGE

ITA No. 426 of 2007 -5- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 36 of 2008 Date of Decision: 9.12.2010 The Commissioner of Income Tax ....Appellant. Versus M/s Shiv Shakti Rice Mills ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. Ms. Monisha Gandhi, Advocate for the respondent. AJAY KUMAR MITTAL, J. The appeal is allowed. For reasons, see the order of even date recorded in ITA No. 426 of 2007 (The Commissioner of Income Tax v. M/s Shiv Shakti Rice Mills). (AJAY KUMAR MITTAL) JUDGE December 9, 2010 (ADARSH KUMAR GOEL) gbs JUDGE