K.Ravindranathan Nair, Kollam V. DCIT, Kollam

ITA 164/COCH/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64969 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 10-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 26-02-2007
• Court: TRIBUNAL
• Department Lawyers: SRINIVASU KOLLIPAKA
• Assessee Lawyers: T V HARIHARAN
• Section: 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 164/COCH/2007 & 284/COCH/2008 ASSESSMENT YEARS : 2003-04 & 2004-05 K. RAVINDRANATHAN NAIR, PROP. VIJAYALAKSHMI CASHEW COMPANY, KOCHUPILAMMOODU, KOLLAM [PAN:AEJPP 9867M] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, KOLLAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) I.T.A. NO. 269/COCH/2007 ASSESSMENT YEAR : 2003-04 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, KOLLAM. VS. K. RAVINDRANATHAN NAIR, PROP. VIJAYALAKSHMI CASHEW COMPANY, KOCHUPILAMMOODU, KOLLAM [PAN:AEJPP 9867M] (REVENUE-APPELLANT) (ASSESSEE - RESPONDENT) ASSESSEE BY SHRI T.V. HARIHARAN, FCA REVENUE BY SHRI SRINIVASU KOLLIPAKA, JR. DR DATE OF HEARING 06/09/2012 DATE OF PRONOUNCEMENT 16/11/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEALS FILED BY THE ASSESSEE FOR THE ASSESSME NT YEARS 2003-04 AND 2004-05 AND THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2003-04 ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A) -I, KOCHI. SINCE THESE APPEALS WERE HEARD TOGETHER, THEY ARE DISPOSED OF B Y THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. I.T.A. NOS.164/COCH/07, 284/COCH/08 & 269/COCH/07 2 2. THE ASSESSEE DID NOT PRESS GROUND NO.6 RAIS ED IN HIS APPEAL FILED FOR THE ASSESSMENT YEAR 2003-04. ACCORDINGLY, THE SAID GRO UND IS DISMISSED AS NOT PRESSED. THE REMAINING GROUNDS URGED BY THE ASSESS EE IN THIS APPEAL GIVE RISE TO THE FOLLOWING ISSUES:- (A) ASSESSMENT OF DEPB BENEFITS. (B) EXCLUSION OF 90% PRIOR YEAR ADJUSTMENT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. (C) ADDITION MADE IN RESPECT OF SALES MADE TO SIS TER CONCERNS. (D) NETTING OF INTEREST FOR THE PURPOSE OF COMPUTA TION OF DEDUCTION U/S 80HHC (E) DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80IB O F THE ACT. 3. IN THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2003-04, THE DECISION OF LD CIT(A) ON ALLOCATION OF INDIRECT COS TS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC IS BEING ASSAILE D. 4. THE FACTS RELATING TO THE CASE ARE SET OUT IN BRIEF. THE ASSESSEE IS A CASHEW EXPORTER. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS.3,43,7 0,090/-. HOWEVER, THE AO DETERMINED THE TOTAL INCOME AT RS.6,85,83,610/- BY MAKING VARIOUS TYPES OF ADDITIONS. THE APPEAL FILED BY THE ASSESSEE BEFORE LD CIT(A) WAS PARTLY ALLOWED. HENCE BOTH THE PARTIES ARE IN APPEAL BEFORE US ON T HE POINTS DECIDED AGAINST EACH OF THEM. 5. WE SHALL FIRST TAKE UP THE APPEAL FILED BY T HE ASSESSEE. THE FIRST ISSUE RELATES TO THE ASSESSMENT OF DEPB BENEFITS. THIS IS SUE HAS SINCE BEEN SETTLED BY HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT REPORTED IN (2012)(247 CTR (SC) 353)(342 ITR 49) AND ACCORDINGL Y THE LD A.R PRAYED THAT THIS ISSUE MAY BE SET ASIDE TO THE FILE OF AO FOR F RESH CONSIDERATION IN TERMS OF I.T.A. NOS.164/COCH/07, 284/COCH/08 & 269/COCH/07 3 THE DECISION OF HONBLE SUPREME COURT REFERRED SUPR A. THE LD D.R ALSO DID NOT OBJECT TO THE SAID PLEA MADE BY LD A.R. ACCORDINGL Y, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF AO WITH THE DIRECTION TO EXAMINE THE ISSUE OF TAXABILITY OF DEPB IN ACCORD ANCE WITH THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS REFERRED SUPRA. 6. THE NEXT ISSUE RELATES TO THE EXCLUSION OF 90% OF RECEIPTS SHOWN AS PRIOR YEAR ADJUSTMENTS RS.12,58,156/- AND ALSO THE RECE IPTS SHOWN UNDER THE HEAD OVERHEAD ALLOCATION RS.18,00,000/- FROM THE PR OFITS OF BUSINESS UNDER EXPLANATION (BAA) TO SEC. 80HHC. BOTH THE AO AND LD CIT(A) HELD THAT BOTH TYPE OF RECEIPTS HAVE TO BE EXCLUDED UNDER EXPLANATION ( BAA) OF SEC. 80HHC. ACCORDING TO LD A.R, THE INCOME SHOWN UNDER PRIOR Y EAR ADJUSTMENTS AND ALSO OVERHEAD ALLOCATION REPRESENT INCOME DERIVED IN THE COURSE OF CARRYING ON ORDINARY BUSINESS ACTIVITY AND HENCE THEY SHOULD NO T EXCLUDED UNDER EXPLANATION (BAA) OF SEC. 80HHC OF THE ACT. ON THE OTHER HAND, THE LD D.R CONTENDED THAT THE DEDUCTION UNDER SECTION 80HHC OF THE ACT IS ALL OWED ONLY IN RESPECT OF CURRENT YEARS ELIGIBLE PROFIT. THE PRIOR YEARS A DJUSTMENT RELATES TO AND ALSO RESULTS FROM THE ACTIVITIES OF EARLIER YEARS AND HE NCE IT CANNOT BE CONSIDERED AS CURRENT YEARS PROFITS. LD D.R FURTHER SUBMITTED T HAT THE NATURE OF RECEIPT OF RS.18.00 LAKHS AS OVERHEAD ALLOCATION IS NOT AVAILA BLE ON RECORD AND HENCE IT IS ALSO REQUIRED TO BE EXCLUDED. 7. WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSU E. AS POINTED OUT BY LD D.R, THE PRIOR YEAR ADJUSTMENT IS THE INCOME RELATING TO THE EARLIER YEARS AND HENCE IN OUR VIEW, THE ASSESSEE CANNOT CLAIM THE SAME AS THE INCOME OF THE CURRENT YEAR. THE ASSESSEE HAS FAILED TO FURNISH THE DETAILS OF R ECEIPTS AS OVERHEAD ALLOCATION EITHER TO THE TAX AUTHORITIES OR TO US. HENCE, THE TAX AUTHORITIES HAVE TREATED THE SAME AS A SEPARATE SOURCE OF INCOME. IN THE ABSENC E OF ANY DETAIL, WE ARE ALSO UNABLE TO INTERFERE WITH THE SAID DECISION OF LOWER AUTHORITIES. ACCORDINGLY, WE I.T.A. NOS.164/COCH/07, 284/COCH/08 & 269/COCH/07 4 UPHOLD THE ORDER OF LD CIT(A) IN HOLDING THAT THE A BOVE SAID RECEIPTS ARE REQUIRED TO BE EXCLUDED UNDER EXPLANATION (BAA) OF SEC.80HHC OF THE ACT. 8. THE NEXT ISSUE RELATES TO THE ADDITION MADE ON ACCOUNT OF UNDER PRICING MADE IN RESPECT OF SALES EFFECTED TO THE SISTER CON CERNS. THE AO NOTICED THAT THE AVERAGE SALE PRICE OF CASHEW KERNEL SOLD TO THE SIS TER CONCERNS WORKED OUT TO RS.154.30 PER KG, WHERE AS THE AVERAGE COST OF PROD UCTION FOR THE ASSESSEE WORKED OUT TO RS.163.10 PER KG. THUS THE ASSESSEE INCURRED A LOSS OF RS.8.80 PER KG OF CASHEW KERNEL SOLD TO HIS SISTER CONCERNS . THE AO TOOK THE VIEW THAT NOBODY WILL SELL HIS PRODUCTS AT A PRICE WHICH IS L ESS THAN THE COST OF PRODUCTION, EVEN IF THE SALE WAS MADE TO THE SISTER CONCERNS. THE ASSESSEE HAD SOLD 23,73,241.400 KGS OF CASHEWS TO ITS SISTER CONCERN S DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE AO WORKED OUT THE A GGREGATE AMOUNT OF UNDER PRICING AT RS.2,08,84,524/- AND ADDED THE SAME TO T HE TOTAL INCOME OF THE ASSESSEE. THE LD CIT(A) CONFIRMED THE SAID ADDITIO N WITH THE FOLLOWING OBSERVATIONS:- I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. FIRST OF ALL, I AM OF THE VIEW THAT THE CONTENTION OF THE APPELLANT THAT THE COST OF PRODUCTION COULD BE KNOWN ONLY AT THE YEAR END CANNOT BE ACCEPTED. IF THAT IS THE CASE NO MANUFACTURER WOULD BE ABLE TO FIX THE EXPORT PRICE FOR A PRICE SENSITIVE PRODUCT LIKE CASHEW. FOR THE PURPOSE OF ASSESSMENT UNDER THE INCOME TAX ACT, EACH BUSINESS ENTITY, EVEN IF THAT BE A SISTER CONCERN, IS TREATE D AS A SEPARATE UNIT OF ASSESSMENT, THE PROFIT OR LOSS OF WHICH IS TO BE IN DEPENDENTLY ARRIVED AT AND ASSESSED. THEREFORE THE CONTENTION OF THE APPE LLANT THAT IT IS NOT NECESSARY THAT THE TRANSFER PRICE HAS TO BE ABOVE T HE COST OF PRODUCTION ESPECIALLY WHERE SUCH SALE IS TO A SISTER CONCERN C ANNOT BE ACCEPTED. ALSO THE ASSESSING OFFICER WAS FORCED TO ADOPT THE AVERA GE COST BECAUSE THE APPELLANT WAS UNABLE TO FURNISH DETAILS OF DIFFEREN T GRADES AND THEIR INDEPENDENT COST OF PRODUCTION. IT HAS BEEN HELD IN THE CASE OF PATEL CHEMICAL WORK S VS. CIT REPORTED IN 265 ITR 273 THAT A SALE TO A SISTER CONCERN AT PRIC ES MUCH BELOW THE MARKET RATES WAS A DEVICE FOR TAX AVOIDANCE. THERE FORE, THE APPELLANTS I.T.A. NOS.164/COCH/07, 284/COCH/08 & 269/COCH/07 5 CASE, WHEREIN THE SALE TO A SISTER CONCERN IS EVEN BELOW THE COST PRICE, HAS TO BE VIEWED MORE SERIOUSLY. IN VIEW OF THE ABOVE, I HOLD THAT THE ASSESSING OFF ICER IS PERFECTLY IN ORDER IN HIS ACTION AND THEREFORE THE ADDITION OF RS.23,4 1,202/- MADE BY HIM IS SUSTAINED. 9. BEFORE US, THE ASSESSEE HAS MADE GENERAL SUB MISSIONS FINDING FAULT WITH THE WORKINGS MADE BY THE AO. THE ASSESSEE HAS MISE RABLY FAILED TO OFFER CONVINCING EXPLANATIONS AS TO THE REASONS THAT COMP ELLED HIM TO UNDER PRICE THE SALE PRICE IN RESPECT OF SALES MADE TO THE SISTER C ONCERNS. IN THE ABSENCE OF PROPER EXPLANATIONS, THE TAX AUTHORITIES DO NOT HAV E ANY OTHER OPTION, BUT TO PRESUME THAT THE ASSESSEE HAS ADOPTED COLOURABLE DE VICE TO SHIFT HIS PROFIT TO HIS SISTER CONCERNS. THOUGH THE ASSESSEE HAS PLACED REL IANCE ON CERTAIN CASE LAWS, YET IN THE ABSENCE OF PROPER EXPLANATIONS ON FACTS OF THE ISSUE, WE ARE OF THE VIEW THAT THEY CANNOT SUPPORT ASSESSEES CASE. HENC E, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) IN CONFIRMIN G THIS ADDITION. 10. THE NEXT ISSUE RELATES TO THE NETTING OF IN TEREST RECEIPTS AGAINST THE INTEREST PAYMENTS FOR THE PURPOSE OF EXCLUSION OF 9 0% OF INTEREST INCOME UNDER EXPLANATION (BAA) TO SEC. 80HHC OF THE ACT. THIS IS SUE IS ALSO SINCE SETTLED BY HONBLE SUPREME COURT IN THE CASE OF M/S ACG ASSOCI ATED CAPSULES P LTD VS. CIT REPORTED IN 343 ITR 89. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF AO WITH T HE DIRECTION TO EXAMINE THIS ISSUE AFRESH IN ACCORDANCE WITH THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF ASSOCIATED CAPSULES P LTD, REFERRED SUPRA. 11. THE LAST ISSUE RELATES TO THE DISALLOWANCE OF C LAIM OF DEDUCTION U/S 80IB OF THE ACT ON THE GROUND THAT THE ASSESSEE DID NOT MAI NTAIN SEPARATE BOOKS OF ACCOUNT FOR THE ELIGIBLE UNIT. IT IS STATED THAT T HIS ISSUE IS COVERED BY THE DECISION OF CO-ORDINATE BENCH OF COCHIN ITAT IN THE CASE OF T.C. USHA VS.ACIT IN ITA NOS. 1268 TO 1270. IT WAS NOT SHOWN TO US THAT THE ABOV E SAID DECISION OF THE I.T.A. NOS.164/COCH/07, 284/COCH/08 & 269/COCH/07 6 TRIBUNAL HAS BEEN REVERSED. ACCORDINGLY WE SET ASI DE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THIS ISSUE IN THE LIGHT OF PRINCIPLES GIVEN IN THE CASE OF T.C.USHA REFERRED SUPRA. 12. NOW WE SHALL TAKE UP THE APPEAL FILED BY THE R EVENUE FOR THE ASSESSMENT YEAR 2003-04. THE SOLITARY ISSUE URGED RELATES TO THE COMPUTATION OF INDIRECT COSTS ATTRIBUTABLE TO EXPORT OF TRADING GOODS. AN IDENTICAL ISSUE WAS CONSIDERED BY THIS BENCH IN THE CASE OF MOHANACHANDRAN NAIR IN ITA NO. 158/COCH/2007, WHEREIN THE TRIBUNAL HELD AS UNDER IN ITS ORDER DAT ED 06.01.2002. 5. THE FIRST ISSUE PERTAINS TO THE COMPUTATION OF INDIRECT COST RELATING TO EXPORT OF TRADING GOODS. U/S 80HHC(3)(C) OF TH E ACT, THE PROFIT DERIVED FROM THE EXPORT OF TRADING GOODS SHALL BE T HE EXPORT TURNOVER IN RESPECT OF SUCH TRADING GOODS AS REDUCED BY THE DIR ECT AND INDIRECT COSTS ATTRIBUTABLE TO EXPORT OF SUCH TRADING GOODS. THE DISPUTE IS WITH REGARD TO THE QUANTUM OF INDIRECT COSTS ATTRIBUTABLE TO THE TRADING GOODS. THE ASSESSEE HAS TAKEN THE TOTAL AMOUNT OF INDIRECT CO ST AT RS.1,74,53,650/-, WHILE THE ASSESSING OFFICER HAS TAKEN THE SAME AT R S.4,71,01,876/-. THOUGH IT IS NOT CLEARLY BORNE OUT OF RECORD, THERE APPEARS TO BE NO DISPUTE WITH REGARD TO THE ALLOCATION OF INDIRECT C OSTS BETWEEN PROCESS EXPORT AND TRADING EXPORT, WHICH ARE TO BE CARRI ED OUT IN ACCORDANCE WITH THE FOLLOWING FORMULA AS PER CLAUSE (E) OF EXP LANATION TO 80HHC(3) INDIRECT COSTS X EXPORT TURNOVER/TOTAL TURNOVER. THE ASSESSING OFFICER HAS TAKEN ALL THE EXPENSES DE BITED TO THE PROFIT AND LOSS ACCOUNT AS INDIRECT COST AND ACCORDINGLY ARR IVED AT THE FIGURE OF RS.4,71,01,876/-. HOWEVER, ACCORDING TO THE ASSESS EE, HE HAS TAKEN ONLY THOSE INDIRECT EXPENSES, WHICH ARE ATTRIBUTABLE T O THE EXPORT TURNOVER. ACCORDING TO THE ASSESSEE, HE HAS FOLLOWED THE SIMI LAR METHOD OF COMPUTATION IN THE EARLIER YEARS ALSO AND THE SAID METHOD WAS ALSO ACCEPTED BY THE ASSESSING OFFICER. ACCORDINGLY, IT WAS CONTENDED, BY PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT REPORTED IN 193 ITR 321, THAT THE ASSESSING OFFICER WAS NOT CORRECT IN DEVIATING FROM THE VIEW TAKEN CONSISTENTLY IN EARLIER YEARS, IN THE ABSENCE OF ANY MATERIAL WHICH JUSTIFIES THE SAID CHANGE. THE LD A.R ALSO PLACED RELIANCE ON THE FOL LOWING DECISION IN SUPPORT OF THE COMPUTATIONS MADE BY THE ASSESSEE. (A) GLAXO SMITHKLINE ASIA (P) LTD VS. ACIT (97 TT J (DEL) 108) (B) SURENDRA ENGINEERING CORPN. VS. ACIT (78 TTJ ( MUM)(SB)347) I.T.A. NOS.164/COCH/07, 284/COCH/08 & 269/COCH/07 7 (C) ORDER DATED 31-01-2007 PASSED BY SMC BENCH OF COCHIN ITAT IN THE CASE OF M/S POYILAKADA TRUST VS. DCIT. 5.1 WE NOTICE THAT THE SMC BENCH OF THE COCHIN TRIBUNAL HAS CONSIDERED THE OTHER TWO DECISIONS REFERRED SUPRA AND HAS DECI DED AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. IN THE CASE OF SURENDRA ENG INEERING CORPORATION, SUPRA, THE SPECIAL BENCH OF THE TRIBUNAL HAS OBSERV ED AS UNDER: THE COMMISSIONER (APPEALS) VIEW THAT AS PER THE DE FINITION OF INDIRECT COSTS IN EXPLANATION (E) BELOW SUB SECTIO N (3), EXCEPT FOR THE ALLOCATION BETWEEN EXPORT TURNOVER IN RESPECT O F TRADING GOODS AND TOTAL TURNOVER IN A CASE WHERE THE ASSESSEE HAV E BOTH EXPORTS AND LOCAL SALES, NO OTHER APPORTIONMENT IS CONTEMPL ATED, APPEARED TO OVER LOOK THE IMPORT OF THE WORDS ATTRIBUTABLE TO SUCH EXPORT APPEARING IN CLAUSE (B) OF SUB-SECTION (3). THE DEF INITION OF INDIRECT COSTS MUST BE GOVERNED OR CONTROLLED BY THE WORDS ATTRIBUTABLE TO SUCH EXPORT APPEARING IN CLAUSE (B ) OF SUB-SECTION (3) SINCE THE ATTEMPT IS TO FIND OUT, IN A REASONAB LE MANNER, THE PROFITS DERIVED FROM THE EXPORT OF TRADING GOODS, A ND THEREFORE, WHATEVER EXPENDITURE IS NOT RELEVANT OR CANNOT BE R EASONABLY STATED TO HAVE BEEN INCURRED IN CONNECTION WITH THE EXPORTS OR CAN BE REASONABLY SAID TO HAVE BEEN INCURRED IN CONNECT ION WITH OTHER ACTIVITIES OR RECEIPTS WOULD HAVE TO BE EXCLUDED. IN THE CASE OF SMITHKLINE ASIA (P) LTD. VS. ACIT, S UPRA, THE DELHI BENCH HAS HELD THAT THE INDIRECT COST ATTRIBUTABLE TO THE EXPORT IS TO BE REDUCED FOR COMPUTING DEDUCTION U/S 80HHC IN RESPECT OF EXP ORT OF TRADING GOODS AND NOT ALL COSTS OTHER THAN DIRECT COSTS. WHILE C OMING TO THIS CONCLUSION, THE DELHI BENCH HAS FOLLOWED THE DECISION OF MUMBAI SPECIAL BENCH IN THE CASE OF SURENDRA ENGG. CORPORATION, REFERRED SUPRA. 5.2 ON A CAREFUL READING OF THE DECISIONS REFER RED SUPRA, WE NOTICE THAT THE INDIRECT COSTS NOT RELATABLE TO THE EXPORT TURN OVER (BOTH PROCESSING EXPORT AND TRADING EXPORT) HAVE TO BE EXCLUDED FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC. FROM THE EXPLA NATIONS FURNISHED BY THE ASSESSEE BEFORE LD CIT(A), WHICH ARE PLACED IN PAGES 14 TO 18 OF THE ASSESSEES PAPER BOOK, CERTAIN EXPENSES EXCLUSIVELY PERTAIN TO THE MANUFACTURING/PROCESSING UNIT. IN OUR VIEW, THE QU ESTION OF ALLOCATION OF INDIRECT COSTS SHALL ARISE ONLY IN RESPECT OF THO SE EXPENSES WHICH HAVE BEEN INCURRED COMMONLY BOTH FOR PROCESS EXPORT AND TRADING EXPORT. IN THE EXPLANATIONS FILED BEFORE LD CIT(A), THE ASSESS EE HAS POINTED OUT THAT CERTAIN TYPES OF INDIRECT EXPENSES HAVE BEEN INCURR ED EXCLUSIVELY FOR PROCESS EXPORT. AS PER SEC. 80HHC(3), THE PROFITS DERIVED FROM TRADING I.T.A. NOS.164/COCH/07, 284/COCH/08 & 269/COCH/07 8 GOODS SHALL BE THE EXPORT TURNOVER IN RESPECT OF SU CH TRADING GOODS AS REDUCED BY THE DIRECT AND INDIRECT COSTS ATTRIBUTABLE TO EXPORT OF SUCH TRADING GOODS . IF A PARTICULAR TYPE OF INDIRECT EXPENSE IS PROV ED TO HAVE BEEN INCURRED ONLY IN RESPECT OF PROCESSED EXP ORTS, IN OUR VIEW, THE SAME COULD NOT BE ALLOCATED TO TRADING EXPORTS. H ENCE, IN OUR VIEW, THE QUESTION OF DETERMINATION OF SUCH TYPES OF INDIRECT COSTS REQUIRES RE- EXAMINATION. ACCORDINGLY, WE SET ASIDE THE ORDER O F LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSES SING OFFICER WITH A DIRECTION TO DETERMINE THE QUANTUM OF INDIRECT COS TS AS PER THE DECISIONS RELIED UPON BY THE ASSESSEE AND ALSO BY DULY CONSID ERING THE DISCUSSIONS MADE ABOVE AND THERE AFTER ASCERTAIN THE AMOUNT OF INDIRECT COSTS ATTRIBUTABLE TO THE TRADING EXPORTS AS PER THE FORM ULA GIVEN IN SEC. 80HHC OF THE ACT. BY FOLLOWING THE DECISION CITED ABOVE, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WI TH THE DIRECTION TO EXAMINE THE SAME AFRESH IN ACCORDANCE WITH THE DECISION RENDERE D IN THE CASE OF B. MOHANACHANDRAN NAIR, REFERRED SUPRA. 13. NOW WE SHALL TAKE UP THE APPEAL FILED BY TH E ASSESSEE FOR THE ASSESSMENT YEAR 2004-05. THE ASSESSEE DID NOT PRESS GROUND NO .6 AND THE SAME IS DISMISSED AS NOT PRESSED. THE REMAINING GROUNDS GI VE RISE TO THE FOLLOWING ISSUES. (A) ASSESSMENT OF DEPB BENEFITS. (B) EXCLUSION OF 90% OF RECEIPTS LIKE TRADE CREDI TORS WRITTEN BACK, REFUND OF SALES TAX AND PRICE DIFFERENCE FOR THE PURPOSE O F COMPUTATION OF DEDUCTION U/S 80HHC. (C) ADDITION MADE IN RESPECT OF SALES MADE TO SIS TER CONCERNS. (D) DISALLOWANCE OF DEDUCTION U/S 80IB. 14. THE ISSUES NUMBERED AS (A), (C) AND (D) IN PARAGRAPH NO.13 SUPRA ARE IDENTICAL WITH SIMILAR ISSUES AGITATED BY THE ASSES SEE IN THE APPEAL FILED BY HIM FOR THE ASSESSMENT YEAR 2003-04. IT WAS SUBMITTED THAT THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES SURROUNDING THESE ISSUE S. ACCORDINGLY, WE HOLD THAT I.T.A. NOS.164/COCH/07, 284/COCH/08 & 269/COCH/07 9 THE DECISION TAKEN BY US IN THE ASSESSMENT YEAR 200 3-04 IN RESPECT OF THE ABOVE SAID ISSUES SHALL APPLY MUTATIS MUTANDIS TO THESE I SSUES IN THIS YEAR ALSO. 15. THE REMAINING ISSUE RELATES TO THE EXCLUSION OF 90% OF RECEIPTS VIZ., TRADE CREDITORS WRITTEN BACK, REFUND OF SALES TAX AND PRI CE DIFFERENCE WHILE COMPUTING PROFITS OF BUSINESS FOR THE PURPOSE OF DEDUCTION U/S 80HHC. THE LD CIT(A) CONFIRMED THE ACTION OF THE AO IN EXCLUDING THE ABO VE ITEMS WHILE COMPUTING PROFITS OF BUSINESS AS THEY ARE IDENTICAL TO THE NATURE OF ITEMS OF INCOME STATED IN THE RELEVANT EXPLANATION IN SEC. 80HHC. BEFORE US THE LD A.R CONTENDED THAT THE ABOVE SAID RECEIPTS FORM PART OF BUSINESS INCOM E. HOWEVER, THE QUESTION TO BE CONSIDERED HERE IS WHETHER THESE ITEMS CAN BE CO NSIDERED AS PROFIT DERIVED BY THE ASSESSEE FROM EXPORT OF GOODS. THE ASSESSEE DI D NOT PLACE ANY MATERIAL TO SUBSTANTIATE ITS CLAIM THAT THESE CREDITS ARE RELAT ABLE TO EXPORT ACTIVITIES. UNDER THESE CIRCUMSTANCES, WE DO NOT HAVE ANY OTHER OPTIO N, BUT TO CONFIRM THE DECISION OF LD CIT(A). 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSE SSEE ARE TREATED AS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 16 -11-2012. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 16 TH NOVEMBER, 2012 GJ COPY TO: 1. K. RAVINDRANATHAN NAIR, PROP. VIJAYALAKSHMI CASH EW COMPANY, KOCHUPILAMMOODU, KOLLAM. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, KOLLAM. I.T.A. NOS.164/COCH/07, 284/COCH/08 & 269/COCH/07 10 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KO CHI. 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI . 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN