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 TUESDAY, THE 5TH AUGUST 2008 / 14TH SRAVANA 1930 ITA.No. 56 of 2008 ------------------------------- (ORDER DATED 30-6-2003 IN I.T.A.No.52/COCH/2000 & CO.No.14/COCH/2000 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH (ASSESSMENT YEAR 1994-95) .................... APPELLANT/RESPONDENT: --------------------------------------- THE COMMISSIONER OF INCOME - TAX, THIRUVANANTHAPURAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENT/APPELLANT: -------------------------------------- M/S.BABA CASHEW INDUSTRIES, MANGAD, KOLLAM. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 05/08/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------------------ I.T.A.No.56 of 2008 ---------------------------------------------- Dated, this the 5th day of August, 2008 JUDGMENT H.L.Dattu, C.J. The Revenue is before us in this appeal filed under Section 260A of the Income-tax Act, inter alia, questioning the correctness or otherwise of the orders passed by the Income Tax Appellate Tribunal in ITA No.52/2000 and Cross Objection No.14/2000 dated 30-6-2003. 2. The assessee is an exporter of cashew kernels. The return filed by the assessee for the assessment year 1994-1995 was belated. Therefore, notice under section 148 was served to the assessee and assessment was completed determining total income at Rs.10,17,310/- restricting the claim of deduction under section 80 HHC of the Income Tax Act to Rs.7,40,978/- as against Rs.14,69,685/- claimed by the assessee. The assessee's contention that processing charges received by it is non-business in nature was not accepted and also 90% of processing charges was excluded from profits of the business. The negative profit in respect of trading goods was also not allowed to be set off against positive elements in other limbs of I.T.A.No.56 of 2008 -2- computation of deduction under section 80 HHC. 3. Aggrieved by the assessment order the assessee filed appeal before the first appellate authority. The first appellate authority directed to exclude processing charges from total turnover and to deduct 90% of net processing charges from profits of the business. The first appellate authority has also directed that only net profit under export profits after inter limb set off should be considered for deduction. 4. Aggrieved by the order of the first appellate authority, the assessee has filed appeal before the Income Tax Appellate Tribunal. The Revenue has filed cross objection against the direction of the first appellate authority to exclude processing charges from total turnover for the computation of deduction under section 80 HHC. 5. The Tribunal has decided all the issues against the Revenue. Regarding processing charges, the Tribunal relying upon the judgment in the case of CIT Vs. K.Raveendranathan Nair (I.T.A.No.72 of 2000 dated 13-2-2003) has held that the processing of raw nuts is a business income as far as the assessee is concerned and therefore it cannot be segregated from business income. Regarding the issue of set off of negative profits against positive elements while computing I.T.A.No.56 of 2008 -3- deduction under section 80 HHC, the Tribunal relying upon its own decision in Dy.CIT Vs. Shri.B.Mohanachandran Nair (ITA Nos.236,237, 238 of 1998 dated 21-6-2003) has decided the issue in favour of the assessee. Aggrieved by the order of the Tribunal, the Revenue has preferred this appeal. 6. The Revenue has framed the following questions of law for our consideration and consequent decision. They are:- “1. Whether, on the facts and in the circumstances of the case while completing the relief under section 80 HHC of the Income Tax Act, the processing charges could be excluded from the turnover of the business? 2. Whether, on the facts and in the circumstances of the case, and in view of Explanation (ba) to Section 80 HHC 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? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that set off of negative profits against positive elements is permissible in I.T.A.No.56 of 2008 -4- computing deduction under section 80 HHC of the Income Tax Act? 7. The appeal was filed as early as on 10th day of November, 2003 and since the Registry had pointed out certain defects in filing the appeal and since they were cured only in the year 2008, the appeal is now posted before us for admission. 8. The learned counsel for the appellant would submit that the issues raised in this appeal is now covered by a recent decision of the Apex Court and therefore, we should admit this appeal and issue notice to the respondent. We are not inclined to accept the submission made by the learned counsel for the Revenue. 9. The Tribunal had allowed the assessee's appeal and dismissed the Revenue's cross objection by an order passed in the month of June, 2003. Nearly after five years from the date of the order, if we have to issue notice to the respondent only because, the Revenue was not diligent in prosecuting the appeal filed in the year 2003, in our view, it could cause great prejudice and injustice to the assessee/respondent. 10. In that view of the matter, we decline to entertain this appeal. Accordingly, the appeal is disposed of. However, we grant I.T.A.No.56 of 2008 -5- liberty to the Revenue to make an appropriate application/review petition before the tribunal for appropriate orders.. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE MS