The Commissioner Of Income Tax v. M/S Shiv Shakti Rice Mills

ITA No. 426 of 2007 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH The Commissioner of Income Tax Versus M/s Shiv Shakti Rice Mills ITA No. 426 of 2007 Date of Decision: 9.12.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. Ms. Monisha Gandhi, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 426 of 2007, 35 and 36of 2008 as common question of law and facts are involved therein. Forbrevity, the facts are being extracted from ITA No. 426 of 2007. 2.ITA No. 426 of 2007 has been preferred by the revenueunder Section 260A of the Income Tax Act, 1961 (in short “the Act”)against the order dated 15.2.2007 passed by the Income Tax AppellateTribunal, Delhi Bench “E”, New Delhi (hereinafter referred to as “theTribunal”) in ITA No. 5148/Del/2004 for the assessment year 2002-03,raising the following substantial question of law:- “Whether on the facts and in the circumstances ofthe case the Hon'ble ITAT was right in law in excluding the paddy husking charges received by theassessee from the total turnover, much against thedefinition of the term 'total turnover' as given inclause (ba) of the Explanation given below sub-section (4C) of Section 80HHC?” 3.Briefly stated the facts of the case, as narrated in theinstant appeal, are that the assessee is a partnership firm and isrunning a rice sheller. It derives income from export, domestic sale ofrice and job charges received from husking of rice. The assessee filedits return on 7.10.2002 for the assessment year 2003-04 declaring anincome of Rs.19,00,320/-. The Assessing Officer held that paddyhusking charges were received in the nature of its usual businessactivity and, therefore, there was no justification in excluding thosereceipts from the total turnover of the business. The Assessing Officerassessed the total turnover at Rs.15,68,48,450/-, including job workreceipts of Rs.79,75,862/-, for calculating the deduction under Section80HHC of the Act and also disallowed 90% of interest received onFDRs for the said purpose. Accordingly, the Assessing Officer alloweddeduction under Section 80HHC of the Act at Rs.36,63,285/- as againstRs.46,68,106/-. Feeling aggrieved, the assessee filed an appeal beforethe Commissioner of Income Tax (Appeal) [in short the “CIT(A)”] whovide order dated 20.10.2004 dismissed the appeal upholding the orderof the Assessing Officer. On further appeal by the assessee, theTribunal vide order dated 15.2.2007 while partly allowing the appealheld that processing charges cannot be included in the total turnover forthe purpose of computing deduction under Section 80HHC. As regards the issue of disallowance of 90% of interest received on FDRS for thecalculation of deduction under Section 80HHC, the Tribunal affirmed theorder of the CIT(A). Hence, the present appeal by the revenue. 4.We have heard learned counsel for the parties. 5.The point for determination in the present appeal relates towhether the paddy husking charges or processing charges received bythe assessee would form part of total turnover as given in clause (ba) ofthe Explanation to Section 80HHC of the Act. 6.The Tribunal while adjudicating the aforesaid issue againstthe revenue had relied upon the decision of the Kerala High Court inCIT v. K. Rajendranathan Nair, [2004] 265 ITR 335. It is not disputedthat the aforesaid decision of Kerala High Court was subject matter ofappeal before the Apex Court in Commissioner of Income-Tax v. K.Ravindranathan Nair, [2007] 295 ITR 228 (SC) and the Hon'bleSupreme Court while reversing the decision of Kerala High Court inRajendranathan Nair's case (supra) had held that processing chargesare to be included in the total turnover in the formula in Section 80HHC(3) while computing deduction under Section 80HHC of the Act. 6.The Tribunal while adjudicating the aforesaid issue againstthe revenue had relied upon the decision of the Kerala High Court inCIT v. K. Rajendranathan Nair, [2004] 265 ITR 335. It is not disputedthat the aforesaid decision of Kerala High Court was subject matter ofappeal before the Apex Court in Commissioner of Income-Tax v. K.Ravindranathan Nair, [2007] 295 ITR 228 (SC) and the Hon'bleSupreme Court while reversing the decision of Kerala High Court inRajendranathan Nair's case (supra) had held that processing chargesare to be included in the total turnover in the formula in Section 80HHC(3) while computing deduction under Section 80HHC of the Act. 6.In view of the above, the question of law is answered infavour of the revenue and against the assessee. The appeal standsallowed. (AJAY KUMAR MITTAL) JUDGE December 9, 2010gbs (ADARSH KUMAR GOEL) JUDGE ITA No. 426 of 2007 -4- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH The Commissioner of Income Tax Versus M/s Shiv Shakti Rice Mills ITA No. 35 of 2008 Date of Decision: 9.12.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. Ms. Monisha Gandhi, Advocate for the respondent. AJAY KUMAR MITTAL, J. The appeal is allowed. For reasons, see the order of even date recorded in ITA No. 426 of 2007 (The Commissioner of Income Tax v. M/s ShivShakti Rice Mills). (AJAY KUMAR MITTAL) JUDGE December 9, 2010gbs (ADARSH KUMAR GOEL) JUDGE ITA No. 426 of 2007 -5- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH The Commissioner of Income Tax Versus M/s Shiv Shakti Rice Mills ITA No. 36 of 2008 Date of Decision: 9.12.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. Ms. Monisha Gandhi, Advocate for the respondent. AJAY KUMAR MITTAL, J. The appeal is allowed. For reasons, see the order of even date recorded in ITA No. 426 of 2007 (The Commissioner of Income Tax v. M/s ShivShakti Rice Mills). (AJAY KUMAR MITTAL) JUDGE December 9, 2010gbs (ADARSH KUMAR GOEL) JUDGE