IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER MONDAY, THE 3RD NOVEMBER 2008 / 12TH KARTHIKA 1930 I.T.A.No. 120 of 2008 ----------------------------------- ORDER DATED 18.8.2003 IN ITA.268/COCH/2000 OF THE INCOME TAXES APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN .................... APPELLANT/APPELLANT: ------------------------------------ THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOVERNMENT OF INDIA (TAXES) SRI.GEORGE K. GEORGE, SC FOR IT SRI.JOSE JOSEPH, STANDING COUNSEL FOR INCOME TAX RESPONDENT/RESPONDENT: ------------------------------------------- SRI.A.A. SALAM, KOLLAM. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 03/11/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------- I.T.A.No.120 of 2008 ------------------------------------------ Dated, this the 3rd day of November, 2008 JUDGMENT H.L.Dattu, C.J. The assessee is engaged in the business of cashew export. The assessee has received damages in lieu of inferior quality of raw cashew nuts imported by him. The assessing officer while completing the assessments for the assessment year 1997-98, has included the same in the turnover for the purpose of computation of deduction under Section 80HHC of the Income Tax Act, 1961 ('the Act' for short). (2) In the appeal filed against the orders of assessment passed, the Commissioner of Income Tax (Appeals) has directed the assessing authority to exclude the quality claims from the total turnover as the amount received would reduce the purchase cost of the assessee and therefore would not form part of the total turnover. (3) The order so passed by the first appellate authority was carried in second appeal by the Revenue before the Tribunal. The Tribunal by its orders dated 18th August, 2003 has agreed with the view expressed by the first appellate authority. (4) The Revenue calls in question the correctness or otherwise of the orders passed by the Tribunal in I.T.A.No.268 of 2000 for I.T.A.No.120 of 2008 2 the assessment year 1997-98. (5) The Revenue has framed the following questions of law for consideration and decision by this Court. They are as under: “1. Whether, on the facts and in the circumstances of the case will not the amount received by the assessee towards quality claim form part of the total turnover of the assessee and the Tribunal is right in law in excluding the amounts from the total turnover for the purpose of computing the deduction under section 80HHC of the Income-tax Act? 2. Whether, on the facts and in the circumstances of the case and in view of Explanation (ba) to Section 80HHC and clauses (iiia), (iiib) and (iiic) of section 28, will not turnover take into account all other receipts other than the excluded items of receipts.” (6) In our opinion, the question of law framed by the Revenue is no more debatable in view of the observations made by this Court in the case of Commissioner of Income-Tax v. T.C.Usha [(2003) 264 ITR 368]. In the said decision the Court has observed as under: “Held, dismissing the appeal, that the amounts of Rs.10,045 and Rs.1,17,483 received by the assessee towards quality claim and raw nut claim did not form part of the total turnover and the Tribunal was right in law in I.T.A.No.120 of 2008 3 excluding the two amounts from the total turnover for the purpose of computing the deduction under section 80HHC.” (7) In view of the law declared by this Court in the aforesaid case, the question of law framed by the Revenue requires to be answered against the Revenue and in favour of the assessee. Accordingly the Income Tax Appeal is disposed of. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE vns