Commissioner of Income Tax vs Choice Trading Corporation Ltd.

C.N. Ramachandran Nair, J.—This is an appeal filed by the revenue u/s 260A of the Income Tax Act against the order of the Tribunal disposing of the appeal filed by the department against the order of the Commissioner (Appeals) for the assessment year 1993-94.

We heard learned senior Counsel appearing for the revenue and learned Counsel appearing for the assessee.

The question raised is whether the assessing officer was justified in deducting 90 per cent of the profits from the shipping business and construction business under Clause (baa) of Explanation to Section 80HHC(4A) of the Act in the computation of deduction of export profit. Another question raised is whether Clause (baa) of Explanation to Section 80HHC(4A) of the Act has to be made applicable for export house premium by the assessee in the computation of export profit eligible for deduction. The Tribunal allowed the claim against which this appeal is filed by the revenue.

The first question raised is whether 90 per cent of the export house premium should be excluded under Clause (baa) of Explanation to Section 80HHC of the Act for the computation of eligible deduction of export profit is decided by the Supreme Court in favour of the assessee vide decision in Commissioner of Income Tax, Thiruvananthapuram Vs. Baby Marine Exports, Kollam, . Following the said decision, we answer the question in favour of the assessee and against the revenue and consequently, the departmental appeal is dismissed on this issue.

So far as the application of Clause (baa) of Explanation to Section 80HHC in respect of income from shipping business and from construction business, learned senior Counsel for the revenue relied on the decision of the Supreme Court in Commissioner of Income Tax, Coimbatore Vs. Lakshmi Machine Works, and contended that unless the profit is attributable to any turnover in business or in other words the profit does not involve any turnover, then such income will come under Clause (baa) and therefore 90 per cent has to be excluded in the computation of eligible profit u/s 80HHC of the Act. On the other hand, learned Counsel for the assessee contended that service charges also form part of turnover by virtue of the decision of the Supreme Court in CIT v. K. Ravindranathan Nair (2007) 295 ITR 228 (SC) and the officer himself has reckoned the turnover from shipping division and so much so, Clause (baa) has no application. He further contended that income from construction division also does not call for any exclusion under Clause (baa) because turnover is adopted by the assessing officer in the computation also. The Supreme Court has clearly stated in Lakshmi Machine Works case (supra) and Ravindranathan Nair''s case (supra) referred to above, that the formula provided u/s 80HHC is to find out the profit attributable to export business. Even though we find from the order of the Tribunal that the Tribunal has only considered whether the disputed item falls within the description of rent, commission, interest or brokerage and they have not considered whether the item falls within the description of any other receipts of a similar nature which are also covered by Clause (baa) of Explanation to Section 80HHC(4A). So far as the shipping business is concerned, we find that the assessee has accounted it as revenue. It is not known what is the true nature of the receipt. Similarly, consultancy fees are also counted under the head income from shipping business. In fact, the Tribunal should have examined as to what is the true nature of the receipt and whether such receipt is attributable to any turnover for application of Clause (baa). The position is not different in respect of the income from construction division also. This court has, in the assessee''s own case reported in Commissioner of Income Tax Vs. Jose Thomas, , has explained the scope of turnover in the computation of eligible deduction u/s 80HHC(3) of the Act.

The Tribunal has not considered whether the disputed income falls within the residuary part of Clause (baa) of Explanation of Section 80HHC(4A) of the Act. We should, in the normal course, remand the case to the Tribunal. However, we find that the Supreme Court has, in Janatha Cashew Exporting Co. v. CIT (2008) 214 CTR 11 (SC) remanded the matter to the assessing officer for reconsidering the issue with reference to the facts and figures and after verifying the availability of disclaimer certificate.

We therefore set aside the order of the Tribunal and remand the matter to the assessing officer for fresh consideration as to whether 90 per cent of income from shipping business and construction business has to be excluded. The assessing officer should give an opportunity to the assessee and consider the matter afresh in the light of the decisions of the Supreme Court in Lakshmi Machine Works'' case (supra), Ravindranathan Nair''s case (supra) and Janatha Cashew Exporting Co. case (supra), referred to above.

The appeal is disposed of as above.