2022 (6) TMI 1025 - HC - Income Tax

Deduction u/s 80HHC - Income from storage and handling and other receipts was to form part of total turnover or not? - HELD THAT - As from the reading of the orders of the Assessing Officer, Commissioner of Income Tax (Appeals) and the Tribunal, what emerges is that the income from storage and handling which form major component was independent of the export of leather and molasses which the Appellant undertook as an export business. Further, in the appeal the Appellant has made a statement on oath, which is not controverted that it is engaged in the business of export of leather and molasses and storage and handling of liquid cargo at major ports. Not only that nothing contrary as regard this assertion is shown, in fact, the authorities have proceeded on the basis that the storage and handling of liquid cargo at major ports was a different business of leather and molasses. That being the position, in the light of law laid down in the case of Punjab Stainless Steel 2014 (5) TMI 238 - SUPREME COURT , the Appellant is entitled to succeed on second component and accordingly, the question of law framed will have to be answered in favour of the Appellant.

Summary

Issues:
Challenge to the Judgment and Order dated 14 February 2003 passed by the Income Tax Appellate Tribunal in ITA No. 228 of 1996 for the Assessment Year 1990-91.

Analysis:
The Appellant, engaged in the export of leather and molasses and storage and handling of liquid cargo, challenged the Tribunal's decision on the substantial question of law regarding the inclusion of income from storage and handling in the total turnover for the purpose of availing benefits under Section 80HHC of the Income Tax Act. The Tribunal's decision was based on the retrospective operation of certain clauses of Section 80HHC, which was later overruled by the Supreme Court in a different case. The Appellant argued that the Tribunal's inclusion of various charges in the total turnover, reducing the benefit under Section 80HHC, was no longer valid law based on a Supreme Court decision in Commissioner of Income Tax v/s. Punjab Stainless Steel Industries. The Supreme Court in the latter case emphasized the distinction between turnover and incidental income, stating that receipts without a nexus to export turnover should not be considered part of the total turnover for deduction purposes under Section 80HHC.

The Appellant successfully demonstrated that the income from storage and handling, being a major component, was independent of the export business of leather and molasses. The Appellant's engagement in storage and handling of liquid cargo at major ports was considered a separate business activity from the export operations. Relying on the principles laid down in the Punjab Stainless Steel case, the Appellant's argument was upheld, and it was concluded that the receipts without a nexus to export turnover should not be included in the total turnover for the purpose of claiming deductions under Section 80HHC. The Tribunal's decision was set aside, and the Appeal was allowed in favor of the Appellant.