Commissioner of Income Tax-I vs Coimbatore Twisters Pvt. Ltd.

K. Raviraja Pandian, J.—The revenue is on appeal against the order of the Income Tax Appellate Tribunal, ''D'' Bench, Chennai dated 13.10.2004 made in ITA No. 2458/Mds/1994 for the assessment year 1991-92.

The assessing officer, while completing the assessment of the assessee company for the assessment year 1991-92, found that the assessee has not taken into account the conversion charges received to the figure of the total turnover. The assessee''s objection was that the conversion charges were only job work receipts which could not be considered as a turnover. The assessing officer has rejected the contention of the assessee and included the conversion charges received in the total turnover for the purpose of computation of deduction u/s 80HHC of the Act. On appeal, the Commissioner of Income Tax (Appeals) affirmed the order of the assessing officer by holding that the major part of the assessee''s turnover was from twisting and weaving, conversion, doubling and reeling charges and therefore held that those receipts should also be included in the total turnover. However, the said order of Commissioner of Income Tax (Appeals) was reversed when the matter was carried on appeal before the Tribunal by following the assessee''s own case in respect of proceedings u/s 154 of the Act in ITA. No. 1544/Mds/97 dated 28.06.2004. The correctness of the same is canvassed before this Court.

Learned Counsel for the revenue submitted that the issue is already decided by this Court against the revenue in the case of Commissioner of Income Tax Vs. Metal Power Co. Ltd., .

We heard the learned Counsel on either side and perused the materials available on record and gone through the Division Bench judgment in the case of Metal Powder Co. Ltd., referred to above, in which it was held that with regard to the includibility of conversion charges in the turnover for the purpose of calculation of deduction u/s 80HHC of the Act, the Bombay High Court in Commissioner of Income Tax Vs. Bangalore Clothing Co., held that Explanation (baa) to Section 80HHC of the Income Tax Act, 1961, was inserted by the Finance (No. 2) Act, 1991, with effect from April 1, 1992 and under that Explanation, "profits of the business", for the purposes of Section 80HHC does not include receipts which do not have an element of turnover like rent, commission, interest, etc. This court in The Commissioner of Income Tax Vs. Sundaram Clayton Ltd., also held that the charges of miscellaneous income and commission do not form part of the turnover for the purpose of calculation of deduction u/s 80HHC of the Act. Applying the above ratio to the facts of the case, we are of the view that the conversion charges has to be excluded from the business profit for the purpose of calculation of deduction u/s 80HHC of the Act.

The issue involved in the present case is covered by the decision of the Division Bench in the above said case. Hence, following the Division Bench judgment, conversion charges has to be excluded from the turnover for the purpose of calculation of deduction u/s 80HHC of the Act. The issue has necessarily to be answered in favour of the assessee and against the revenue. The appeal is dismissed. No costs.