Commissioner, Income ... vs K. Ravindranathan Nair

2. This is a batch of civil appeals filed by the Department. For the sake of convenience we state the facts occurring in Civil Appeal No. of 2007 arising out of S.L.P.(C) No.24617 of 2003 - Commissioner, Income Tax, Thiruvananthapuram v. K. Ravindranathan Nair. Assessee-respondent has a factory in which he processes cashew nuts which are grown in his farm. Thereafter he exports the cashew nuts as an exporter. For processing, the assessee has complete infrastructure. He has plant and machinery in his factory. At the same time, the assessee processes cashew nuts which are supplied to him by the exporters on job-work basis. After processing, the assessee returns the processed cashew nuts to the exporters. He earns processing charges. Therefore, the assessee is an exporter and a job worker.

4. The assessee made a claim for Export Incentive under Section 80HHC(3) in his returns filed for the assessment year 1993-94. The assessee did not include processing charges (receipts) in his total turnover. In his return, he indicated his business profits at Rs.1,94,08,220. The figure of Rs.1,94,08,220 included the processing charges (receipts) amounting to Rs.1,54,68,811. However, the assessee did not include the processing charges amounting to Rs.1,54,68,811 in his total turnover. He contended that although the processing charges(receipts) amounting to Rs.1,54,68,811 constituted part of business profits as computed under Section 28 of the I.T. Act, since Section 80HHC (3) was the formula to work out export incentive, the said figure of Rs.1,54,68,811 was not includible in the total turnover in the formula under the said Section 80HHC(3) of the I.T. Act. According to assessee, Section 80HHC(3) provided for computation of export incentive/concession to be computed by allocating business profits in the ratio of export turnover w by total turnover. This argument was not accepted by the Department.

(d) 'direct costs' means costs directly attributable to the trading goods exported out of India including the purchase price of such goods;

(e) 'indirect costs' means costs, not being direct costs, allocated in the ratio of the export turnover in respect of trading goods to the total turnover;

14. This batch of civil appeals pertains to assessment year 1993-94, therefore, we have quoted the said section at it stood on the material date.

24. Accordingly, the impugned judgments of the High Court and the Tribunal are set aside and the above civil appeals filed by the Department are accordingly allowed with no order as to costs.

Loss (Negative Profits) Civil Appeal No. of 2007 arising out of S.L.P.(C) No.13747 of 2004, Civil Appeal No. of 2007 arising out of S.L.P.(C) No.13748 of 2004 , Civil Appeal No.3687 of 2005.

25. Leave granted.

28. Accordingly, civil appeals filed by the Department stand allowed, the impugned judgments of the High Court are set aside and the matters are remitted to A.O. for fresh disposal of the cases in accordance with the judgment of this Court in A.M. Moosa (supra). No order as to costs.

Processing and Negative Profits (loss) Civil Appeal No. of 2007 arising out of S.L.P.(C) No.12609 of 2004.

29. Leave granted.

30. Assessee is a company engaged in cashew business.

31. For the assessment year 1993-94 assessee did not include processing charges in its total turnover for computing deduction under Section 80HHC of the I.T. Act.

32. Assessee adjusted its losses from export of trading goods against profits from export of manufacturing goods for determining its export profits.

33. Therefore, two following questions arise for determination:

34. For the reasons given hereinabove, we answer both the above questions in favour of the Department and against assessee. Accordingly civil appeal filed by the Department is allowed, the impugned judgment of the High Court is set aside and the matter is remitted to A.O. for fresh disposal of the case in accordance with law declared hereinabove on both the points. No order as to costs.

35. In view of the Judgment in Commissioner of Income Tax, Coimbatore v. M/s. Lakshmi Machine Works - 2007(6) Scale 168, Civil Appeal No.3167 of 2006 filed by the Department is accordingly dismissed with no order as to costs.