2000 (3) TMI 174 - AT - Income Tax

Summary

Issues Involved:
1. Denial of benefit under section 80HHC of the Income-tax Act, 1961.
2. Treatment of export house premium as part of total turnover.
3. Applicability of Explanation (baa) to section 80HHC(4A).
4. Interpretation of section 80AB in relation to section 80HHC.
5. Treatment of receipts like brokerage, commission, interest, rent, charges, etc.

Issue-wise Analysis:

1. Denial of benefit under section 80HHC of the Income-tax Act, 1961:
The assessee firm, engaged in the export of marine products, was denied the benefit under section 80HHC by the CIT (Appeals). The Assessing Officer noticed that the deduction claimed under section 80HHC was excessive and formed the opinion that income chargeable to tax had escaped assessment. Consequently, notices under section 148 were issued, and revised returns were filed by the assessee. The Assessing Officer disallowed the claim for deduction under section 80HHC, relying on the decision of the Cochin Bench of the Income-tax Appellate Tribunal in the case of A.M. Moosa.

2. Treatment of export house premium as part of total turnover:
The assessee contended that the export house premium should be treated as part of the consideration and not as brokerage, commission, interest, rent, or charges. The CIT (Appeals) held that the decision in A.M. Moosa was reversed by the Kerala High Court, and the decision in Smt. Subhadra Ravi Karunakaran was against the assessee. The CIT (Appeals) concluded that the export house premium should be excluded from the total turnover for the purpose of computation of deduction under section 80HHC.

3. Applicability of Explanation (baa) to section 80HHC(4A):
The CIT (Appeals) observed that Explanation (baa) to section 80HHC(4A) was inserted by the Finance Act, 1991, with effect from 1-4-1992. The Explanation specifies the items to be reduced from the profits of the business, including brokerage, commission, interest, rent, charges, or any other receipt of a similar nature. The CIT (Appeals) held that the export house premium falls under these categories and should be excluded from the profits of the business.

4. Interpretation of section 80AB in relation to section 80HHC:
The CIT (Appeals) relied on the decision of the Kerala High Court in the case of V.T. Joseph, which held that section 80HHC is subject to the provisions of section 80AB. The CIT (Appeals) concluded that the income derived directly from export can only be considered for the deduction envisaged under section 80HHC, and the export house premium cannot be treated as part of the profit of exports directly.

5. Treatment of receipts like brokerage, commission, interest, rent, charges, etc.:
The CIT (Appeals) held that items like brokerage, commission, interest, rent, charges, or any other receipt of a similar nature should be excluded from the profits of the business as per Explanation (baa) to section 80HHC. The CIT (Appeals) further held that the export house premium is to be deducted from the profits of the business and excluded from the total turnover for the purpose of computation of the deduction under section 80HHC.

Tribunal's Decision:
The Tribunal considered the arguments and submissions made by both parties. It noted that the decision in the case of A.M. Moosa was in favor of the assessee and that the decision in the case of Sri G. Gangadharan Nair was set aside by the Kerala High Court. The Tribunal also considered the decisions of the Kerala High Court in V.T. Joseph and A.V. Thomas & Co. Ltd., and concluded that the later decision should prevail.

The Tribunal held that the export house premium is a benefit arising from the business of export and should not be excluded while computing the profits of the business under section 80HHC. The Tribunal concluded that the receipts which have a direct bearing on the export cannot be excluded while applying section 80AB. The Tribunal allowed the appeals by the assessee and directed the Assessing Officer to recompute the deduction available under section 80HHC in light of the Tribunal's findings.

Conclusion:
The Tribunal allowed the appeals by the assessee, holding that the export house premium should be included in the profits of the business for the purpose of deduction under section 80HHC. The Tribunal directed the Assessing Officer to recompute the deduction available to the assessee in accordance with the Tribunal's findings.