IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN WEDNESDAY, THE 22ND SEPTEMBER 2010 / 31ST BHADRA 1932 ITA.No. 177 of 2009(T) -------------------------------- ITA.844/COCH/1995 of INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT ------------------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENT: -------------------------------------------- M/S.UNITED CATALYSTS INDIA LTD., BINANIPURAM, EDAYAR. ADV. SRI.P.BALAKRISHNAN. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 22/09/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: rs. C.N.RAMACHANDRAN NAIR & K.SURENDRA MOHAN, JJ. ------------------------------------------- I.T. Appeal No.177 of 2009 ------------------------------------------- Dated this the 22nd September, 2010 JUDGMENT Ramachandran Nair, J. Heard the Standing Counsel appearing for the appellant and Adv.Sri.P.Balakrishnan appearing for the respondent-assessee. The only question raised in the departmental appeal is whether the Tribunal was justified in holding that the commission received by the respondent-assessee from a foreign company for marketing the products of the foreign company is to be treated as business income for the purpose of computation of deduction on export profits under Section 80HHC of the Income Tax Act. 2. After hearing both sides, we find that the Tribunal as well as the Commissioner of Income Tax (Appeals) has followed their orders for earlier years which have become final. However, the standing counsel submitted that the department has not contested the earlier orders on I.T.No.177/2009 2 account of the small amount involved. The counsel for the assessee, however, opposed the same stating that from 1991-1992 onwards, the assessee has been getting commission and there is reference of the same at least for two assessment years 1991-1992 and 1994-1995. In this case, the orders produced are for the assessment year 1992-1993. The standing counsel has relied on the decision of the Supreme Court in Commissioner of Income Tax v K.Ravindranathan Nair (2007) 295 ITR 228, wherein the Supreme Court has held that processing charges received for cashew exporters cannot be reckoned as business income in the computation for deduction on export profit under Section 80HHC. 90% of the commission, brokerage etc. has to be excluded from the scope of business income under explanation-(b(aa) of Section 80HHC(4C) of the Income Tax Act. Since the Supreme Court judgment is rendered after the Tribunal decided the matter, these issues should be considered by the Assessing Officer in the light of the above referred judgment of the Supreme Court. The distinction drawn by the assessee's counsel that the amount involved in the I.T.No.177/2009 3 above judgment is processing charges and not the income received by the assessee as commission in this case and the standing counsel's contention that the commission is specifically excluded under explanation above referred will be considered by the Assessing Officer. The Assessing Officer is directed to reconsider the issue in the light of the judgment of the Supreme Court referred to above after giving an opportunity to the assessee. The appeal is disposed of as above. C.N.RAMACHANDRAN NAIR JUDGE K.SURENDRA MOHAN JUDGE css/