Ita/170/2002 Of The Commissioner Of Income Tax v. Shri.k.ganapathy

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR THURSDAY, THE 28TH FEBRUARY 2008 / 9TH PHALGUNA 1929 ITA.No. 170 of 2002() --------------------- ITA No.230/Coch/1998 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT: ---------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT RESPONDENTS: RESPONDENT/APPELLANT: ---------------------------------- SHRI.R. GANAPATHY, GANESH EDIBLE NUTS COMPANY, PERUMBAVOOR. BY ADV.SRI.JOSEPH MARKOSE SRI.THOMAS VELLAPPALLY THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 28/02/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & T.R.RAMACHANDRAN NAIR JJ. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~I.T.A No.170 of 2002~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Dated this the 28[th] day of February, 2008 J U D G M E N T C.N.RAMACHANDRAN NAIR, J. Question raised is whether the processing charge received bythe assessee from M/s.I.T.C Ltd. for processing and supply ofcashew nut is to be treated as turnover for the purpose ofcomputation of deduction in respect of eligible export profit underSection 80 HHC. 2.On going through the order of the Tribunal and afterhearing the parties, we find that the tribunal has given a clearfinding that the assessee has entered into contract with M/s.I.T.CLtd. for the processing of cashew nuts and the execution of thecontract was, in turn, given on sub contract by the assessee toanother party. In fact, the amount received is credited by theassessee and the amounts simultaneously given to the sub-contractors towards processing charges is debited in the accounts.Since the tribunal found that it is an independent transaction andthat the assessee has not processed any cashew nuts but haddirectly purchased cashew kernels and exported the same,assessee was rightly treated as merchant-exporter. We find from the order of the Tribunal that the entire transaction is not relatedto the export business but to be excluded from the computation ofdeduction in respect of eligible export profit under Section 80 HHCof the IT Act. 3. However, the learned Standing Counsel pointed outthat it is clear from the assessment order that the assessee hastaken the contract amount towards business income of assessee inthe computation of eligible export profit. If the contract receiptdoes not constitute turnover as claimed by the assessee in thecomputation of eligible deduction under Section 80HHC, then theprofit from that contract also cannot be reckoned at all. We do notthink that the Tribunal's order entitles the assessee to reckon,either the profit or the turnover in respect of the contract businessundertaken for processing of cashew for M/s.I.T.C Ltd. Wetherefore dismiss this appeal with this clarification and leavingfreedom to the officer to revise assessment in line with the aboveobservation about the tribunals order. C.N.RAMACHANDRAN NAIR,Judge T.R.RAMACHANDRAN NAIR,Judge