Ita/177/2009 Of The Commissioner Of Income Tax Cochin v. M/S. United Catalysts India Ltd. Edayar

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 22[nd] September, 2010 JUDGMENT Ramachandran Nair, J. Heard the Standing Counsel appearing for theappellant and Adv.Sri.P.Balakrishnan appearing for therespondent-assessee. The only question raised in thedepartmental appeal is whether the Tribunal was justifiedin holding that the commission received by therespondent-assessee from a foreign company formarketing the products of the foreign company is to betreated as business income for the purpose of computationof deduction on export profits under Section 80HHC of theIncome Tax Act. 2. After hearing both sides, we find that the Tribunalas well as the Commissioner of Income Tax (Appeals) hasfollowed their orders for earlier years which have becomefinal. However, the standing counsel submitted that thedepartment has not contested the earlier orders on I.T.No.177/2009 2 account of the small amount involved. The counsel for theassessee, however, opposed the same stating that from1991-1992 onwards, the assessee has been gettingcommission and there is reference of the same at least fortwo assessment years 1991-1992 and 1994-1995. In thiscase, the orders produced are for the assessment year1992-1993. The standing counsel has relied on thedecision of the Supreme Court in Commissioner ofIncome Taxv K.Ravindranathan Nair(2007) 295 ITR228, wherein the Supreme Court has held that processingcharges received for cashew exporters cannot be reckonedas business income in the computation for deduction onexport profit under Section 80HHC. 90% of thecommission, brokerage etc. has to be excluded from thescope of business income under explanation-(b(aa) ofSection 80HHC(4C) of the Income Tax Act. Since theSupreme Court judgment is rendered after the Tribunaldecided the matter, these issues should be considered bythe Assessing Officer in the light of the above referredjudgment of the Supreme Court. The distinction drawn bythe assessee's counsel that the amount involved in the I.T.No.177/2009 3 above judgment is processing charges and not the incomereceived by the assessee as commission in this case andthe standing counsel's contention that the commission isspecifically excluded under explanation above referredwill be considered by the Assessing Officer. The AssessingOfficer is directed to reconsider the issue in the light ofthe judgment of the Supreme Court referred to aboveafter giving an opportunity to the assessee. The appeal isdisposed of as above. C.N.RAMACHANDRAN NAIR JUDGE K.SURENDRA MOHAN JUDGE css/