Commissioner of Income-tax, Kolkata - IV, Kolkata v. M/s. Carbon Corporation Ltd
[Citation -2015-LL-0309-11]

Citation 2015-LL-0309-11
Appellant Name Commissioner of Income-tax, Kolkata - IV, Kolkata
Respondent Name M/s. Carbon Corporation Ltd.
Court HIGH COURT OF CALCUTTA
Relevant Act Income-tax
Date of Order 09/03/2015
Judgment View Judgment
Keyword Tags deduction under section 80hhc • business or profession • processing charges • gross total income • total turnover • sale of scrap • scrap sale
Bot Summary: Ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in allowing deduction under section 80HHC of the Income- tax Act, 1961, without reducing the profits of the business by 90 of the miscellaneous receipts amounting to Rs.11,48,584 in terms of clause(1) of the Explanation to the section. Of any sum referred to in clauses, , and of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India; Mr. Bose, learned Advocate appearing for the respondent- assessee drew our attention to a judgment of the Kerala High Court in the case of CIT-Vs-KAR MOBILES LTD, reported in 333 ITR 478 wherein the following view was taken:- We therefore hold that income from scrap sale is part of the business income from which exclusion of 90 per cent thereof is not called for by operation of Expln. No elaborate reasoning is required to demonstrate that the aforesaid five types of receipts are receipts to be credited to a nominal account whereas sale of scrap is a receipt to be credited to a real account which in this case is sales account. We are for the aforesaid reasons inclined to think that the receipt from out of sale of scrap does not come within the mischief of Explanation. The judgment of the Supreme Court in the case of CIT-Vs- K.Ravindranathan Nair does not help the revenue because the receipt in that case was on account of processing charges which again is to be credited to a nominal account. 6 There is no indication as to whether the receipt from sale of scrap was added to the total turnover. In case, the receipt from out of scraps which has been indicated as miscellaneous receipts are not included in the total turnover, the Tribunal shall include it in the total turnover and thereafter shall apply the formula.


ITA No. 650 of 2004 IN HIGH COURT AT CALCUTTA SPECIAL JURISDICTION (INCOME TAX) ORIGINAL SIDE COMMISSIONER OF INCOME TAX, KOLKATA-IV, KOLKATA VERSUS M/S. CARBON CORPORATION LTD. B E F O R E: Hon ble Justice GIRISH CHANDRA GUPTA And Hon ble Justice ARINDAM SINHA Dated: 9th March, 2015. Appearance: Mr. M.P.Agarwal, Adv. For Appellant. Mr. Somak Basu, Adv. For Respondent. Court: subject matter of challenge in this appeal is judgement and order dated March 10, 2004 passed by learned Income Tax Appellate Tribunal. Aggrieved by order, Revenue has come up in appeal. following two questions have been suggested by appellant: i) Whether, on facts and in circumstances of case, Income-tax Appellate Tribunal erred in 2 deleting disallowance of Rs.1,54,245, being presentation articles, under Rule 6B of Income-tax Rules, 1962. ii) Whether, on facts and in circumstances of case, Income-tax Appellate Tribunal was correct in allowing deduction under section 80HHC of Income- tax Act, 1961, without reducing profits of business by 90% of miscellaneous receipts amounting to Rs.11,48,584 in terms of clause (baa)(1) of Explanation to section. Mr. Agarwal, learned Counsel appearing for appellant/revenue, did not dispute that question no.1 is already covered by judgment of Bombay High Court in case of CIT-Vs-Allana Sons Pvt. Ltd. (216 ITR 690) which as matter of fact was considered by learned Tribunal. Mr. Agarwal did not also dispute that before learned Tribunal correctness of views expressed by Bombay High Court in aforesaid judgment was not assailed. Therefore, we are not inclined to allow revenue to raise new point for first time before this Court. We, therefore, refuse to answer question no.1. In so far as question no.2 is concerned, it appears that miscellaneous receipts in this case consists of income from sale of scrap and 3 empty oil drums, gunny bags etc. as would appear from impugned judgment. Mr. Agarwal submitted that question came up for consideration before Supreme Court in case of CIT Vs- K.Ravindranathan Nair reported in (2007) 295 ITR 228 (SC) wherein following view was taken:- Therefore, in terms of clause (baa), 90 per cent of independent income had to be deducted from gross total income to arrive at business profits to which fraction had to be applied. Since, processing charges constituted independent income similar to rent, commission, etc., which formed part of gross total income, same had to be reduced by 90 per cent as contemplated in clause (baa) to arrive at business profit. Therefore, said processing charges were includible in total turnover in formula under section 80HHC(3) of Income-tax Act. He contended that income from sale of scrap or empty oil drums or gunny bags is independent income and, therefore, is squarely within mischief of explanation (baa) under sub-Section (4C) of Section 80HHC which provides as follows:- (4C) . . . . . . . . .. (baa) 4 Profits of business means profits of business as computed under head Profits and gains of business or profession as reduced by- (1) ninety per cent. of any sum referred to in clauses (iiia), (iiib) [(iiic), (iiid) and (iiie)] of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of similar nature included in such profits; and (2) profits of any branch, office, warehouse or any other establishment of assessee situate outside India;] Mr. Bose, learned Advocate appearing for respondent- assessee drew our attention to judgment of Kerala High Court in case of CIT-Vs-KAR MOBILES LTD, reported in (2011) 333 ITR 478 wherein following view was taken:- We therefore hold that income from scrap sale is part of business income from which exclusion of 90 per cent thereof is not called for by operation of Expln. (baa) to S.80HHC of Act, but at same time, scrap sales turnover, if not included in total turnover, should be added to total turnover as denominator in computation of eligible relief under s. 80HHC(3) of Act. 5 We have carefully considered rival submissions and are of opinion that expression any other receipt of similar nature appearing in sub-clause 1 of Explanation (baa) quoted above has to be interpreted in light of words brokerage, commission, interest, rent, charges. No elaborate reasoning is required to demonstrate that aforesaid five types of receipts are receipts to be credited to nominal account whereas sale of scrap is receipt to be credited to real account which in this case is sales account. When legislature provided to include receipts of similar nature, we are inclined to think, legislature intended receipts creditable to nominal account and not receipts crerditable to real account. We are for aforesaid reasons inclined to think that receipt from out of sale of scrap does not come within mischief of Explanation (baa). judgment of Supreme Court in case of CIT-Vs- K.Ravindranathan Nair (supra) does not help revenue because receipt in that case was on account of processing charges which again is to be credited to nominal account. Moreover Apex Court dealing with processing charge held that income was independent income. same cannot be true about income from sale of scrap. Scrap is generated from principal activity of assessee. Therefore, it is not independent income. 6 There is, however, no indication as to whether receipt from sale of scrap was added to total turnover. For that limited purpose matter is remitted to Tribunal. In case, receipt from out of scraps which has been indicated as miscellaneous receipts are not included in total turnover, Tribunal shall include it in total turnover and thereafter shall apply formula. second question is answered in affirmative and in favour of assessee. appeal is, thus, disposed of. [GIRISH CHANDRA GUPTA, J.] [ARINDAM SINHA, J.] CS. Commissioner of Income-tax, Kolkata - IV, Kolkata v. M/s. Carbon Corporation Ltd
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