M/s.Kerala Nut Food Co., Kollam V. DCIT, Kollam

MA 72/COCH/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9347 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-11-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 23-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: A S NARAYANAMURTHY
• Section: 80HHC

Judgement Text

1 MA NO.72/COCH/2012 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) M.A. NO.72/COCH/2012 (ARISING OUT OF I.T.A NO. 99/COCH/2010) (ASSESSMENT YEAR 2003-04) M/S KERALA NUT FOOD CO VS THE A.C.I.T., CIR.1 PARAMESHWAR NAGAR, KOLLAM 1. KOLLAM PAN : AADFK5087C (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI A.S. NARAYANAMURTHY RESPONDENT BY : SMT. S. VIJAYAPRABHA DATE OF HEARING : 16-11-2012 DATE OF PRONOUNCEMENT : 30-11-2012 O R D E R PER N.R.S. GANESAN (JM) THE TAXPAYER HAS FILED THE PRESENT MISCELLANEOUS A PPLICATION ON THE GROUND THAT THERE IS AN ERROR IN THE ORDER OF THE T RIBUNAL. 2. SHRI A.S. NARAYANAMURTHY, THE LD.REPRESENTATIVE FOR THE TAXPAYER SUBMITTED THAT THIS TRIBUNAL, ON THE BASIS OF THE JU DGMENT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS K RAVINDRAN NAIR 295 ITR 228 (SC) FOUND 2 MA NO.72/COCH/2012 THAT 90% OF THE GROSS PROCESSING CHARGES RECEIVED B Y THE TAXPAYER SHOULD BE DEDUCTED FROM THE BUSINESS PROFIT. THE TRIBUNAL FURTHER FOUND THAT THE GROSS PROCESSING CHARGES SHALL ALSO BE INCLUDED IN THE TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S 80HHC OF THE ACT. REFERRIN G TO THE JUDGMENT OF THE APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSUL ES PVT LTD VS COMMISSIONER OF INCOME-TAX (SC) 343 ITR 89 (SC), TH E LD.REPRESENTATIVE SUBMITTED THAT WHAT CAN BE EXCLUDED FROM THE EXPORT PROFIT IN TERMS OF EXPLANATION (BAA) TO SECTION 80HHC IS ONLY 90% OF T HE NET INCOME FROM THE PROCESSING CHARGES WHICH HAS BEEN CREDITED TO THE P ROFIT & LOSS ACCOUNT AND NOT 90% OF THE GROSS PROCESSING CHARGES RECEIVE D BY AN EXPORTER. IN VIEW OF THE LATEST JUDGMENT OF THE APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT LTD (SUPRA), ACCORDING TO THE LD.REPRE SENTATIVE, THE JUDGMENT IN THE CASE OF K RAVINDRAN NAIR (SUPRA) MAY NOT BE APPLICABLE TO THE CASE OF THE TAXPAYER AND THEREFORE, THERE IS AN ERROR IN TH E ORDER OF THE TRIBUNAL TO THAT EXTENT. 3. ON THE CONTRARY, SMT. S VIJAYAPRABHA, THE LD.DR S UBMITTED THAT IN THE CASE OF K RAVINDRAN NAIR (SUPRA), THE APEX COURT IN CATEGORICAL TERMS HELD THAT PROCESSING CHARGES HAS TO BE INCLUDED IN THE G ROSS TOTAL INCOME FROM 3 MA NO.72/COCH/2012 THE CASHEW BUSINESS AND HENCE IN TERMS OF EXPLANATI ON (BAA) TO SECTION 80HHC, 90% OF THE GROSS TOTAL INCOME ARISING FROM P ROCESSING ACTIVITIES HAS TO BE DEDUCTED. ACCORDING TO THE LD.DR, THE JUDGMEN T OF THE APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT LTD (SUPRA) MAY NOT BE APPLICABLE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE C ASE OF K RAVINDRAN NAIR (SUPRA), THE APEX COURT FOUND THAT PROCESSING CHARG ES WAS INCLUDED IN THE GROSS TOTAL INCOME FROM CASHEW BUSINESS AND HENCE 9 0% OF THE GROSS INCOME ARISING FROM THE PROCESSING CHARGES HAS TO B E DEDUCTED UNDER EXPLANATION (BAA) TO SECTION 80HHC(3) OF THE ACT. THIS JUDGMENT OF THE APEX COURT IN K RAVINDRAN NAIR (SUPRA) WAS RENDERED BY THE DIVISION BENCH OF THE APEX COURT CONSISTING OF TWO HONBLE JUDGES. THE APEX COURT HAD AN OCCASION IN ANOTHER CASE IN THE CASE OF ACG ASSOCIA TED CAPSULES PVT LTD (SUPRA). IN THIS CASE, AFTER REFERRING TO THEIR OW N JUDGMENT IN THE CASE OF K RAVINDRAN NAIR (SUPRA), THE APEX COURT FOUND THAT T HE ISSUE WHETHER 90% DEDUCTION IS TO BE MADE FROM GROSS RECEIPT OR NET R ECEIPT IN RESPECT OF ITEMS MENTIONED IN CLAUSE (I) OF EXPLANATION (BAA) WAS NOT DECIDED IN THE CASE OF K RAVINDRAN NAIR (SUPRA). THIS JUDGMENT OF THE APEX COURT IN ACG 4 MA NO.72/COCH/2012 ASSOCIATED CAPSULES PVT LTD (SUPRA) WAS DELIVERED B Y THREE HONBLE JUDGES OF THE APEX COURT. IN FACT, THE APEX COURT, AFTER CONSIDERING THE JUDGMENT IN K RAVINDRAN NAIR (SUPRA) HAS OBSERVED AS FOLLOWS AT PAGES 99 & 100: ON A PERUSAL OF THE JUDGMENT OF THE HIGH COURT IN CIT VS ASIAN STAR CO LTD. [2010] 326 ITR 56 (BOM), WE FIND THAT THE REASON WHICH WEIGHED WITH THE HIGH COURT FOR TAKING A DIFFERENT VIEW, IS THAT RENT, COMMISSION, INTEREST AND BROKERAGE DO NOT POSSESS ANY NEXUS WITH EXPORT TURNOVER AND, THEREFORE, THE INCLUSION OF SUCH ITEMS IN THE PROFITS OF THE B USINESS WOULD RESULT IN A DISTORTION OF THE FIGURE OF EXPORT PROF ITS. THE HIGH COURT HAS RELIED ON A DECISION OF THIS COURT IN CIT VS K RAVINDRAN NAIR [2007] 295 ITR 228 (SC) IN WHICH THE ISSUE RAISED BEFORE THIS COURT WAS ENTIRELY DIFFERENT FRO M THE ISSUE RAISED IN THIS CASE. IN THAT CASE, THE ASSESSEE OW NED A FACTORY IN WHICH HE PROCESSED CASHEW NUTS GROWN IN HIS FARM AND HE EXPORTED THE CASHEW NUTS AS AN EXPORTER. AT THE TI ME, THE ASSESSEE PROCESSED CASHEW NUTS WHICH WERE SUPPLIED TO HIM BY EXPORTERS ON JOB WORK BASIS AND HE COLLECTED PROC ESSING CHARGES FOR THE SAME. HE, HOWEVER, DID NOT INCLUDE SUCH PROCESSING CHARGES COLLECTED ON JOB WORK BASIS IN HI S TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 80HHC(3) OF THE ACT AND AS A RESULT THIS TU RNOVER OF COLLECTION CHARGES WAS LEFT OUT IN THE COMPUTATION OF PROFITS 5 MA NO.72/COCH/2012 AND GAINS OF BUSINESS OF THE ASSESSEE AND AS A RESU LT NINETY PER CENT OF THE PROFITS OF THE ASSESSEE ARISING OUT OF THE RECEIPT OF PROCESSING CHARGES WAS NOT DEDUCTED UNDER CLAUSES ( 1) OF EXPLANATION (BAA) TO SECTION 80HHC. THIS COURT HEL D THAT THE PROCESSING CHARGES WAS INCLUDED IN THE GROSS TOTAL INCOME FROM CASHEW BUSINESS AND HENCE IN TERMS OF EXPLANATION ( BAA), NINETY PER CENT. OF THE GROSS TOTAL INCOME ARISING FROM PROCESSING CHARGES HAD TO BE DEDUCTED UNDER EXPLANA TION (BAA) TO ARRIVE AT THE PROFITS OF THE BUSINESS. IN THIS CASE, THIS COURT HELD THAT THE PROCESSING CHARGES RECEIVED BY THE ASSESSEE WERE PART OF THE BUSINESS TURNOVER AND ACC ORDINGLY THE INCOME ARISING THEREFROM SHOULD HAVE BEEN INCLU DED IN THE PROFITS AND GAINS OF BUSINESS OF THE ASSESSEE AND N INETY PER CENT. OF THIS INCOME ALSO WOULD HAVE TO BE DEDUCTED UNDER EXPLANATION (BAA) UNDER SECTION 80HHC OF THE ACT. IN THIS CASE, THIS COURT WAS NOT DECIDING THE ISSUE WHETHER NINET Y PER CENT. DEDUCTION IS TO BE MADE FROM THE GROSS OR NET INCOM E OF ANY OF THE RECEIPTS MENTIONED IN CLAUSE (1) OF EXPLANATION (BAA). (EMPHASIS OURS) 5. IN VIEW OF THE ABOVE CLARIFICATION OF THE MATTER BY THE SUBSEQUENT APEX COURT JUDGMENT, IT IS OBVIOUS THAT THE ISSUE, W HETHER 90% DEDUCTION IS TO BE MADE FROM GROSS OR NET INCOME OF ANY OF THE R ECEIPTS MENTIONED IN CLAUSE (I) OF EXPLANATION (BAA) OF SECTION 80HHC(3) , WAS NOT DECIDED BY THE 6 MA NO.72/COCH/2012 APEX COURT IN THE CASE OF K RAVINDRAN NAIR (SUPRA). THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS AN ERROR IN THE ORDER OF THIS TRIBUNAL WHICH FOLLOWED THE JUDGMENT OF THE APEX COU RT IN THE CASE OF K RAVINDRAN NAIR (SUPRA). IN VIEW OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT LTD (SUPRA), T HIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ERROR IN THE ORDER OF T HE TRIBUNAL NEEDS TO BE RECTIFIED AND THAT THE ISSUE RAISED BY THE DEPARTME NT IN THE APPEAL NEEDS TO BE CONSIDERED IN THE LIGHT OF JUDGMENT OF THE APEX C OURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT LTD (SUPRA). THEREFORE, TH IS TRIBUNAL IS OF THE OPINION THAT THE ORDER DATED 24-08-2011 NEEDS TO BE RECALLED. BY RECALLING THE ORDER FOR THE PURPOSE OF CONSIDERING THE GROUND RAISED BY THE DEPARTMENT IN THE LIGHT OF JUDGMENT OF THE APEX COUR T IN THE CASE OF ACG ASSOCIATED CAPSULES PVT LTD (SUPRA), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT NO PREJUDICE WOULD CAUSE TO ANY OF THE PARTIES. IN FACT, THIS WILL PROMOTE THE CAUSE OF JUSTICE. THEREFORE, FOR T HE PURPOSE OF HEARING THE APPEAL IN THE LIGHT OF THE SUBSEQUENT JUDGMENT OF TH E APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT LTD (SUPRA), TH E ORDER DATED 24-08- 2011 PASSED BY THIS TRIBUNAL IS HEREBY RECALLED. 7 MA NO.72/COCH/2012 6. NOW THE APPEAL OF THE REVENUE IN ITA NO.99/COCH/ 2010 STANDS RESTORED TO THE FILE OF THE TRIBUNAL. THE REGISTR Y IS DIRECTED TO POST THE APPEAL FOR HEARING ON 10-12-2012. 7. IN THE RESULT, THE MISCELLANEOUS APPLICATION FIL ED BY THE TAXPAYER IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH NOVEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 30 TH NOVEMBER, 2012 PK/- COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH 8 MA NO.72/COCH/2012 1. DATE OF DICTATION : 19-11 2. DATE OF PLACING THE DRAFT ORDER BEFORE THE MEMBER : 20-11 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.PS : 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER: 5. DATE OF RETURN OF THE ORDER TO PS AFTER APPROVAL : 6. DATE OF PRONOUNCEMENT : 7. DATE ON WHICH THE FILE ALONG WITH THE ORDER SENT TO BC : 8. NO. OF PAGES OF DICTATION PADS ATTACHED TO THE FILE : 09 9. NO. OF PAGES OF DRAFT COPY OF THE ORDER ATTACHED TO THE FILE :