COMMISSIONER OF INCOME TAX Vs. KADRI MILLS LTD.

JUDGEMENT

(1.) The Revenue is on appeal as against the order of Income Tax Appellate Tribunal, Chennai 'A' Bench dated 09.09.2008 in ITA.No.744/Mds/2007 relating to the assessment year 1997-98 raising the following question of law:

(2.) The assessee herein is a manufacturer of yarn out of purchase of cotton and cotton waste on its own and it had also done conversion, on job work basis by converting the raw materials into yarn. The Assessing Officer excluded such conversion charges from the profits of the business for arriving at the adjustable book profits as per clause (baa) of Explanation to Section 80HHC of the Income Tax Act, 1961.

(3.) Aggrieved by the same, the assessee unsuccessfully canvassed the issue before the Commissioner of Income Tax (Appeals) and thereafter before the Income Tax Appellate Tribunal, which remitted the matter back to the Assessing Officer with a direction to examine the aspect as to whether the conversion charges could be construed to be part of the operational income of the assessee, in the light of the decision of the Bombay High Court Commissioner of Income Tax vs. Bangalore Clothing Company, 2003 260 ITR 371. On remand, the Assessing Officer made a fresh assessment and confirmed the original assessment order. Aggrieved by the same, the assessee once again preferred the appeal before the Commissioner of Income Tax (Appeals), who relying on the earlier decision of the Income Tax Appellate Tribunal in the assessee's own case for earlier years decided the issue in favour of the assessee. Aggrieved by the same, the Revenue preferred appeal before the Income Tax Appellate Tribunal, which confirmed the findings of the Commissioner of Income Tax (Appeals).