Sri.R. Pratap, Kollam V. The ACIT, Kollam

ITA 17/COCH/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8482 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-06-2016
• Assessment Year: 1992-1993
• Appeal Filed On: 18-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: T V HARIHARAN
• Section: 80HHC

Judgement Text

ITA NO 17/C/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN (SMC) BEFORE SHRI B P JAIN , ACCOUNTANT MEMBER ITA NO 17/COCH/2016 (A SST YEAR 1992 - 92 ) SHRI R PRATAP SUNFOOD CORPORATION KOCHUPILAMMOODU KOLLAM VS THE ASST COMMR OF INCOME TAX CIRCLE 1 KOLLAM ( APPELLANT) (RESPONDENT) PAN NO. ABFPN4423L ASSESSEE BY SH T V HARIHARAN REVENUE BY SH A DHANARAJ, SR DR DATE OF HEARING 20 TH JUNE 2016 DATE OF PRONOUNCEMENT 20 TH JUNE 2016 ORDER PER B P JAIN, AM : THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF THE CIT (A)S ORDER DATED 18 TH NOV 2015 FOR THE ASSESSMENT YEAR 1992 - 93. 2 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1) THE ORDER OF THE COMM I SSIONER OF INCOME TA X ( APPEALS) T R I V A ND R U M , IS AGAINST LAW, OPPOSED TO FACTS AND THE WEIG HT OF EV I DENCE . 2) LEARNED COMMISSIONER OF INCOME TAX (APPEALS) , TRIVANDRUM ERRED I N CONFIRMING THE PROCEEDINGS OF THE AS S ESSING OFFICER GIVING EFF E CT TO ORD ER OF ITA NO 17/C/2016 2 HON'BLE HIGH COURT OF KERALA . 3(A) ORIGINALLY THE DEPARTMENT APPEAL WAS DISMISSED BY THE HO N ' BL E ITAT , COCHIN BENCH RELYING ON ITS EARLIER D E CISION IN T . C . USHA (ITA 637/COCH/ 9 8) WHICH WAS LATER CONFIRMED BY JURISDICTIONAL HIGH COURT IN ITA NO . 96 / 1999 . (B) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE OBSERVED THAT THE ONLY ISS UE RA I SED BY THE DEPARTM EN T BEFORE THE H IG H COURT WAS WHETHER PROCESSING CHARGES RECEI VED BY THE APPELLANT WAS TO BE EXCLUDED FROM THE TOTAL TURNOVER U/S . 80HHE . THE HIGH COURT INSTEAD OF RESPECTING THE CO - ORDINATE BENCH DECISION IN T . C . USHA IN ITA/96 TOOK A CONTRARY VIEW BY ALLOWING REVENUE ' S APPEAL RELYING ON SUPREME COURT DECI SI ON IN CIT VS K. RAVINDRANATHAN NAIR IN (2007) 295 ITR 228 , PRONOUNCED ON 13 TH NOVEMBER 2007. 4( A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE BEEN C ONVINCED THAT THE LIMITED ISSUE BEFORE SUPREME COURT IN 295 ITR 228 WAS ON TH E QUESTION OF INCLUSION OR OTHERWISE OF RAW CASHEW NUT (RCN) PROCESSING CH ARGES IN THE TOTAL TURNOVER FOR COMPUTING 80 HHC BENEFIT . THE OPERAT I VE P ART OF JUDGMENT BY SUPREME COURT CONFIRMED TH AT IT FORMS PART OF TOTAL TUR NOVER FOR PURPOSE OF 80HHC THIS W AS FOLLO WE D B Y H IG H CO UR T . ( B ) THERE WAS NO FURTHER DIRECTION IN THE ORDER OF HIGH COURT THAT 90 % OF PROCESSING CHARGES ALSO TO BE EXCLUDED INVOKING EXPLANATION (BAA) TO SECTION 80 HHC ACCORDIN GLY THE CIT (A) WAS NOT JUSTIFIED IN CONFIRMING TH E AC T I ON TAKEN BY ASSESSING OFFICER TO INCLUDE PROCESSING C HAR GES IN TOT A L T U RN O VE R A ND ALSO TO EXCLUDE 90 % THEREOF FROM PROFITS OF BUSINESS FOR 80 H HC ( C) THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT T O HAVE NOTED THAT 8 0HHC WAS AN INCENTIVE PROVISION I N THE ACT TO ENCOURAGE E X PORT S AND EA RN V AL UABLE FOREIGN EXCHANGE FOR THE NAT I ON AND SO HA S TO BE LIBERALLY CONST R UED. 5 ) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT 9 0 % OF GRO SS VALUE OF LICENSES TO BE EXCLUDED FROM PROFITS FOR 80 H HC IN TOTAI DISREGARD TO SUPREME COURT DECISIONS IN (2012) 342 ITR 49 , 343 ITR 89 & 345 ITR 557 THAT MANDATE EXCLUSION OF 90% NET VALUE OF LICENSES . FOR THE ABOVE AND OTHER ADDITIONAL GROUNDS THAT MAY BE A DV A N CE D AND F U RTHER EVIDENCE OR RECORDS THAT MAY BE P R ODUC E D A T THE TIME OF H EARING, TH E APPELLANT PRAYS THAT THE APPEAL BE ALLOWED . ITA NO 17/C/2016 3 3 IT IS ARGUED BY THE LD COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE IS A MANUFACTURE OF CASHEW NUTS FROM RAW CAS HEW NUTS AND MAKE EXPORT OF THE SAME. AT THE SAME TIME, HE UNDERTAKES PROCESSING ON BEHALF OF THE OTHERS FOR WHICH HE GETS PROCESSING CHARGES AS OTHER INCOME. IN THE ORIGINAL ASSESSMENT THE AO INCLUDED THE SAID PROCESSING CHARGES IN THE TOTAL TURNOVER FO R THE PURPOSE OF DEDUCTION U/S 80 HHC OF THE ACT. 4 THE LD CIT(A) HELD THAT PROCESSING CHARGES FORM PART OF THE TOTAL TURNOVER AND THE APPEAL OF THE REVENUE WAS DISMISSED BY THE TRIBUNAL WHERE AS THE HONBLE HIGH COURT OF KERALA DECIDED THAT THE SAID PRO CESSING CHARGES SHOULD BE PART OF THE TOTAL TURNOVER AND SENT THE MATTER BACK TO THE AO FOR TAKING UP THE ASSESSMENT FOR REVISION. 5 THE LD COUNSEL FOR THE ASSESSEE ARGUED THAT THE AO HAS PROCEEDED TO MAKE DISALLOWANCE ON THE OTHER ASPECT WHEREAS HE SH OULD HAVE BEEN RESTRICTED HIMSELF AS PER THE DECISION OF THE HONBLE HIGH COURT OF KERALA IN ITA NO. 433 OF 2009 DATED 10 TH JULY 2009. 5.1 THE LD DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. ITA NO 17/C/2016 4 6 I HAVE HEARD THE RIVAL SUBMISSIONS A ND PERUSED THE MATERIAL ON RECORD. I FULLY AGREE WITH THE CONTENTIONS RAISED BY THE LD COUNSEL FOR THE ASSESSEE AND REPRODUCE BELOW THE DECISION OF THE HONBLE KERALA HIGH COURT IN ITA NO.433 OF 2009 DATED 10 TH JULY 2009: SINCE THE ISSUE RAISED THAT IS W HETHER THE PROCESSING CHARGE HAS TO BE EXCLUDED FROM THE TURN OVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC OF THE I T ACT IS COVERED BY THE ALTER DECISION OF THE SUPREME COURT IN COMMISSIONER OF INCOME TAX VS K RAVINDRANATHAN NAIR (2007) 295 ITR 228(SC), WE ALLOW THE APPEAL FILED BY THE REVENUE REVISING THE ORDER OF THE TRIBUNAL AND THAT OF THE FIRST APPELLATE AUTHORITY AND REMAND THE CASE TO THE ASSESSING OFFICER FOR MAKING FRESH ASSESSMENT AFTER ISSUING NOTICE BASED ON THE DECISION OF TH E SUPREME COURT ABOVE REFERRED TO THE ASSESSEE AND AFTER GIVING OPPORTUNITY TO THE ASSESSEE, WE HAVE DISPOSED OF THIS CASE WITH O UT ISSUING NOTICE TO THE ASSESSEE BECAUSE THE ISSUE IS COVERED BY THE JUDGMENT OF THE SUPREME COURT AND ISSUING NOTICE TO THE ASSESSEE WILL ONLY LEAD TO ADDITIONAL EXPENDITURE TO THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER SHOULD FORWARD A COPY OF THIS JUDGMENT TO THE ASSESSEE FOR INFORMATION BEFORE TAKING UP THE ASSESSMENT FOR REVISION. ~. . ; . 7 ON PLAIN READING OF TH E JUDGMENT OF THE HONBLE KERALA HIGH COURT, IT IS EVIDENT THAT THE HONBLE HIGH COURT HAS FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS K RAVINDRANATHAN NAIR (2007) 295 ITR 228(SC) AND ACCORDINGLY, THE APPEAL OF THE ASSESSEE W AS ALLOWED. I AM OF THE VIEW THAT THE AO SHOULD HAVE RESTRICTED HIMSELF TO THE FOUR CORNERS OF THE JUDGMENT DATED 10 TH JULY 2009 OF THE HONBLE KERALA HIGH COURT IN ASSESSEES OWN CASE , AND SHOULD NOT MAKE ANY OTHER ADDITION. AO IS DIRECTED ACCORDING LY. FOR THE SAKE OF CONVENIENCE, THE DECISION OF THE HONBLE KERALA HIGH COURT IS ITA NO 17/C/2016 5 REPRODUCED HEREINABOVE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING I.E 20 TH JUNE 2016 . SD/ - ( B P JAIN ) ACCOUNTANT MEMBER COCHIN: DATED 20 TH UNE 2 016 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN