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TMI Blog2012 (4) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt of India] - The apex court per the same has abundantly clarified that the 'processing charges' is an 'independent income' like brokerage, commission, rent, charges, etc. forming part of the gross total income (GTI), being business profit, though having no nexus with the export and, accordingly, is to be deducted at 90% thereof The assessee has, however, raised an alternative plea, claiming that even if so, it is only the income from the processing charges, and not the gross receipt by way of processing charges, that has to be excluded under Explanation (baa) - once 'processing charges' has been held to be an 'independent income', i.e., as rent, commission, brokerage, etc., like treatment in its respect would follow - Held that: The o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is inconsistent with a subsequent judgment by the apex court. The tribunal, vide its order in M.P. No. 85/Coch/2008 dated 04.3.2009, recalled its earlier order in full, i.e., including the assessee's appeal and cross objection. The Revenue before the tribunal in the M.P. proceedings cited two decisions by the apex court, i.e., IPCA Laboratory Ltd. v. Dy. CIT [2004] 266 ITR 521/135 Taxman 594 and CIT v. K. Ravindranathan Nair [2007] 295 ITR 228/165 Taxman 282 (SC), which observed that the impugned order is to be recalled for applying the correct law as stated in the subsequent judgment/s by the Supreme Court. The instant appeals, thus, are before us for adjudication by way of applying the correct law as explained by the apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the necessary particulars for arriving at the figure for profit and, in absence thereof, the AO would adopt a percentage at 10% of the gross charges toward the same. 4. Before us, the assessee contended that the decision in the case of K. Ravindranathan Nair ( supra ) had no direct application to its case, wherein the issue was whether the processing charges has to be excluded in arriving at the figure of 'total turnover' while computing the export profit u/s. 80HHC(3). In the instant case, however, the issue is of the excluding of the processing charges under Explanation (baa). A decision, it is well settled, is only an authority for what it actually decides, so that the said decision may not be considered as impacting the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n directing for the same in the instant case as well. 5.2 The assessee has, however, raised an alternative plea, claiming that even if so, it is only the income from the processing charges, and not the gross receipt by way of processing charges, that has to be excluded under Explanation ( baa ). The business is labour-oriented and the margin of profit is only 10%. Accordingly, only 10% of Rs. 28.47 lakhs, or Rs. 2,84,695/-, would stand to be reduced, as against 90% thereof, as done by the Revenue. 5.3 At the outset, we may clarify that no argument qua this aspect of the matter was raised before the apex court in the said case ( K. Ravindranathan Nair ( supra )), in which case this issue or aspect of the matter would also stand de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the receipt) is only toward adjusting the business profits from the impact of the independent incomes, even as explained by the apex court in K. Ravindranathan Nair ( supra ). As such, once 'processing charges' has been held to be an 'independent income', i.e., as rent, commission, brokerage, etc., like treatment in its respect would follow. So, however, as the same may lead to gross distortion, and thus, gross inequity, as an independent income as the processing charges may have a profit component much below 90% or in some case may even be - as any other business activity - at a loss, a purposive reading of the provision would suggest deduction only to the extent of the profit disclosed thereon and actually determined u/s. 28 (refer: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein. 'Processing charges', however, stand on a different footing, and may well constitute a major source of revenue for the assessee. The apex court has in fact time and again, exhorted the courts and tribunals to accord an interpretation that makes the provision of law workable, and with reference to its legislative intent (refer: CIT v. Baby Marine Exports [2007] 290 ITR 323/160 Taxman 160 (SC)). It accorded a schematic interpretation to the term total turnover' u/s. 80HHC in CIT v. Lakshmi Machine Works [2007] 290 ITR 667/160 Taxman 404 (SC), holding for the exclusion of excise duty and other indirect taxes there-from, which were being pedantically included by the Department in the computation of 'total turnover'. Even in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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