2010 (12) TMI 371 - HC - Income Tax

Computation - Deduction u/s 80HHC - paddy husking charges - Hence, the Hon ble Supreme Court while reversing the decision of Kerala High Court in Rajendranathan Nair s case had held that processing charges are to be included in the total turnover in the formula in Section 80HHC(3) while computing deduction under Section 80HHC of the Act - The question of law is answered in favour of the revenue and against the assessee

Summary

Issues:
1. Interpretation of the term 'total turnover' under Section 80HHC of the Income Tax Act, 1961.
2. Inclusion of paddy husking charges in the total turnover for computing deduction under Section 80HHC.

Analysis:

Issue 1: Interpretation of the term 'total turnover' under Section 80HHC:
The judgment involved the interpretation of the term 'total turnover' under Section 80HHC of the Income Tax Act, 1961. The Tribunal considered whether paddy husking charges or processing charges received by the assessee should form part of the total turnover as per the definition in clause (ba) of the Explanation to Section 80HHC of the Act.

Issue 2: Inclusion of paddy husking charges in total turnover for deduction under Section 80HHC:
The assessee, a partnership firm running a rice sheller, derived income from various sources, including export, domestic sale of rice, and job charges received from husking of rice. The Assessing Officer assessed the total turnover, including job work receipts, for calculating the deduction under Section 80HHC. However, the Assessing Officer excluded paddy husking charges from the total turnover, leading to a dispute. The CIT(A) upheld the Assessing Officer's decision, but the Tribunal partly allowed the appeal, excluding processing charges from the total turnover for the purpose of computing deduction under Section 80HHC.

The Tribunal relied on the decision of the Kerala High Court in a similar case, which was later appealed to the Supreme Court. The Supreme Court, in Commissioner of Income-Tax v. K. Ravindranathan Nair, held that processing charges are to be included in the total turnover for computing deduction under Section 80HHC. Consequently, the question of law was answered in favor of the revenue, and the appeal was allowed, overturning the Tribunal's decision.

In conclusion, the judgment clarified the interpretation of 'total turnover' under Section 80HHC and established that processing charges, including paddy husking charges, should be included in the total turnover for computing deductions under the Act.