CIT Vs. PLANT LIPIDS LTD

JUDGEMENT

(1.) These are appeals filed by the department challenging the orders of the Tribunal passed in the case of the Respondent-Assessee for the assessment years 1994-95 and 1995-96. Original assessments for these two years were completed granting deduction on export profit in terms of the claim made by the Assessee under Section 80HHC of the Income Tax Act. The Assessee is engaged in export of spices extracts produced by them in their factory. Besides production and marketing of spices extracts, spices, etc., the Assessee was doing contract work of "distillation" for others for which Assessee got charges accounted under the head "Distillation charges". While claiming exemption on export profit under Section 80HHC of the Act, Assessee did not exclude 90 per cent of the "distillation charges" in terms of Expln. (baa) to Section 80HHC of the Act. Even though the claim was originally allowed, the assessing authority later rectified the assessment under Section 154 of the Act thereby excluding 90 per cent of the distillation charges and allowed eligible deduction on export profit. The first appeal filed by rue Assessee was allowed which was confirmed by the Tribunal on second appeal filed by the department. The Tribunal ipheld the Assessees claim that rectification under Section 154 itself is illegal and on the merits also the Tribunal held that distillation charges received by the Assessee form part of business profits on which Assessee is entitled to deduction under Section 80HHC of the Act.

(2.) We have heard standing counsel appearing for the Appellant and Sri Bechu Kurian Thomas appearing for the Respondent-Assessee.

(3.) Standing counsel for the Appellant submitted that orders relied on by the Tribunal for dismissing the appeals were reversed by this Court vide judgment in IT Appeal Nos. 824 and 1447 of 2009. Besides this, standing counsel submitted that the issue now stands squarely covered against the Assessee vide decision of the Supreme Court in CIT v. K. Ravindranathan Nair, 2007 295 ITR 228. The question that arose for consideration by the Supreme Court in the above case was whether processing charges received by cashew exporter who was engaged in manufacture and export of cashew kernels, are eligible for deduction under Section 80HHC of the Act. The Supreme Court held that income received by the Assessee which has no nexus to the export profits should not be included in the total income of the Assessee for the purpose of deduction under Section 80HHC of the Act. Following is the finding of the Supreme Court: