Mercantile And Marine Services v. Itamissioner Of Income Tax, Cochin

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN TUESDAY, THE 24TH DAY OF JULY 2012/2ND SRAVANA 1934 I.T.A.No.203 of 2000 ------------------------------------ [AGAINST THE ORDER IN I.T.A.NO.694 (COCH)/1995 (A.Y.1990-91)DATED 24.9.1999 OF THE INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH. ----------------------- APPELLANT/RESPONDENT IN I.T.A.:- ---------------------------------------------------- M/S.ASPINWALL & CO. (TRAVANCORE) LTD.,COCHIN. BY ADVS.SRI.A.K.JAYASANKAR NAMBIAR (SENIOR ADVOCATE) SRI.ANIL D. NAIR. RESPONDENT/APPELLANT IN I.T.A.:- ----------------------------------------------------- COMMISSIONER OF INCOME TAX,COCHIN. BY SENIOR COUNSEL FOR GOVERNMENT OF INDIA (TAXES) SRI.P.K.R.MENON STANDING COUNSEL FOR I.T. SRI.JOSE JOSEPH. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 24-07-2012, ALONG WITH I.T.A.NO.210 OF 2000, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING:- Thottathil B.Radhakrishnan & K.Vinod Chandran, JJ. ------------------------------------------- I.T.A.Nos.203 of 2000 & 210 of 2000 -------------------------------------------Dated this, the 24[th] day of July, 2012JUDGMENT K.Vinod Chandran,J: The assessee is in appeal, challenging the orders of the Tribunal for the assessment years 1990-91 and 1992-93.In both the years, the assessee had claimed deduction ofinterest income received from the sister company as alsofrom two banks and godown rent as export profit forcomputation of deduction under Section 80HHC of theIncome Tax Act, 1961 (hereinafter referred to as “the Act”).Though the said claims were rejected by the assessingofficer, the first appellate authority allowed it, against whichthe Revenue was in appeal before the Tribunal. Before theTribunal, for both the years, the assessee conceded thatinterest income could not be included in the computation ofincome under Section 80HHC and confined the arguments tothe rent on godown. The appellate Tribunal found the saidissue also against the assessee. 2. While admitting the above appeals, this Court has raised the following two questions of law in both the appeals, whichare identical: i) Whether on the facts and circumstances of the casewas the Income tax tribunal justified in confirming theexclusion of interest income referred above forcomputation of eligible relief under Section 80HHC ofthe Income Tax Act?was the Income tax tribunal justified in confirming theexclusion of interest income referred above forcomputation of eligible relief under Section 80HHC ofthe Income Tax Act? ii) Whether on the facts and circumstances of the casewas the Income tax Tribunal justified in confirming theexclusion of rent referred above in the computation ofeligible deduction under Section 80HHC of the IncomeTax Act?was the Income tax Tribunal justified in confirming theexclusion of rent referred above in the computation ofeligible deduction under Section 80HHC of the IncomeTax Act? 3. The first question regarding the exclusion of interestincome for computation of eligible income under Section 80HHC, ashas been noticed above, was not an issue before the Tribunal, theassessee having conceded to it specifically. Since the same was notan issue before the Tribunal, we refuse to answer question No.(i). 4. The only issue argued before the Tribunal was withrespect to the eligibility of the godown rent received by the assesseeto be treated as export profit for computing the relief under Section80HHC. The assessee relied upon the decision of this Court in 3. The first question regarding the exclusion of interestincome for computation of eligible income under Section 80HHC, ashas been noticed above, was not an issue before the Tribunal, theassessee having conceded to it specifically. Since the same was notan issue before the Tribunal, we refuse to answer question No.(i). 4. The only issue argued before the Tribunal was withrespect to the eligibility of the godown rent received by the assesseeto be treated as export profit for computing the relief under Section80HHC. The assessee relied upon the decision of this Court in Mercantile and Marine Services v. CIT (233 ITR 257), to contendthat godown rent paid by the assessee has to be held to be incomeeligible for deduction under Section 80HHC. The Tribunal rightlyfound that the said case was one in which the godown rent paid bythe assessee therein for storage of goods pending despatch by aclearing and forwarding agent handling exports and imports ofGovernment Bodies is business income; and it was not a case inwhich computation of relief under Section 80HHC, meaning exportprofit, arose. Section 80HHC is a deduction in respect of profitsderived from export business. Where an assessee, being an Indiancompany or a person, is engaged in the business of export out ofIndia of any goods or merchandise to which the section applies, adeduction was allowed to the extent of profits referred thereunder forcomputing the total income of the assessee. The computationprovided thereunder though subject to certain amendments,essentially it stood as, being that proportion; the export turnover inrespect of such goods bears to the total turnover of the businesscarried on by the assessee as applied to the total business profits ofthe assessee disclosed under the head “profits and gains of businessor profession”. The export profit to be taken into account is that derived by the assessee from the export of such goods ormerchandise. The assessee's claim relates to the use of its godownby other exporters for storing goods till despatch. This cannot at all betermed to be a profit derived by the assessee from the export of suchgoods or merchandise coming within Section 80HHC. We are of theopinion that the Tribunal has correctly decided the issue and the 2[nd]question of law raised by the assessee is answered against theassessee and in favour of the Revenue. Accordingly, both the appeals are rejected. Sd/- Thottathil B.Radhakrishnan Judge vku/ Sd/- K.Vinod Chandran Judge. - true copy -